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TMI Blog1978 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the house bearing door No. 4, Singara Mudali Street, T. Nagar, Madras, purchased by the deceased in the name of his wife and subsequently gifted by her to her daughter cannot be included in the estate duty assessment under section 10 of the Estate Duty Act ?" The second question has been referred at the instance of the assessee and the other two questions at the instance of the revenue. One Rangaswami Iyengar, a businessman, who passed away on January 21, 1958, had executed a will dated January 17, 1947, and a settlement deed dated June 30, 1954, in favour of his wife, Kuttiammal alias Alamelu, and a settlement deed dated June 30, 1964, in favour of his then minor married daughter, Rukmani alias Sulochana. In the will he had stated that the house bearing door No. 4, Singara Mudali Street, Thiagarayanagar, Madras, bequeathed to his wife, was in the occupation of a tenant, Ramachandra Naidu, to whom a notice had been issued by the City Civil Court, Madras, and that on his vacating the house both the testator and the legatee shall reside there, as it was with that object he had purchased that property in the name of the legatee. By the settlement deeds he had given 46.93 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and declined to comply with the settlor's request to pay the proportionate rent to the settlees. The Estate Duty Officer was of the opinion that the settlees could not have paid the kist, as claimed by them, when the settlor himself had been collecting the entire rent from the lessee, and he rejected the suggestion that the settlor had paid the proportionate amount to the settlees after initially depositing the entire rent in his bank account. The Estate Duty Officer overruled the objections of the accountable persons and found, on the basis of the above materials, that the deceased had not been entirely excluded from the enjoyment of the properties settled on the ladies and that the value of the settled properties was includible in the principal value of the estate of the deceased. The Estate Duty Officer found that the deceased had lived in the house bearing door No. 4, Singara Mudali Street, settled on his wife, until his death and that from the intention expressed in the will it was clear that the testator purchased the house on July 5, 1946, in the name of the wife with the specific intention of living in the property and he held that the deceased had never been exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise : Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death : Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor's death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition." We find the following passage in Green's Death Duties, 7th edn., at pages 139 and 140 : " The requirements for non-liability, all of which must have been fulfilled outside the statutory period, are thus : (1) The assumption of possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house having regard to the relevant facts and circumstances, including the relationship, manner and customs of the persons concerned, habits of living and the manner of dealing with his or her property. However, the learned judges held that the property in that case passed on the death of the donor, as there was a finding that the husband had used the rents realised from the property for his own purposes and there was no reference on that question. This decision was rendered before the addition of the second proviso to s. 10 of the E.D. Act, 1953. The learned counsel for the revenue invited our attention to the decision of a Division Bench of the Allahabad High Court in Bibi Ahmadi Begum v. CED [1972] 83 ITR 303, which was rendered after the amendment of s. 10 of the Act by the introduction of the second proviso. In that case the donor, who gifted his property to his wife in 1918, continued to live in the house until his death in March, 1958, in the same manner as he was living there before the gift. The wife had transferred the property to a wakf in 1922. It was contended that the donor was only a licensee after the date of the gift in favour of the wife and that the donee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deceased executed a gift deed in respect of the three fixed deposit receipts in favour of her grandson and on the next day she wrote to the bank, enclosing a copy of the gift deed, saying that her grandson was the sole owner of the deposit receipts and that they should remain in the joint names of herself and her grandson until her grandson attained majority. The deceased thereafter presented the receipts from time to time, discharged by herself alone, for renewal when they matured and obtained fresh receipts in the joint names of herself and her grandson. She encashed one of the receipts in August, 1955, and invested the amount in the name of her grandson. The other two fixed deposit receipts were encashed by the grandson himself after the death of the deceased in February, 1956. The question was whether the value of the three fixed deposit receipts could be included in the estate of the deceased. Their Lordships of the Supreme Court have held that bona fide possession and enjoyment of the property gifted was not immediately assumed by the grandson and thenceforward retained by him to the exclusion of the deceased and that the fixed deposit amounts were includible in the estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de clear in the will executed by him in her favour in respect of that property. It would be clear from a reading of the will in the light of the intention with which that property had been purchased by the donor in 1946, that the donor had retained an enforceable right to live in the property until his death and that he was living in the property not only by virtue of his relationship with his wife in whose favour he had gifted the property, but also in exercise of the enforceable right which he had retained in the property. Therefore, we do not find any difficulty in holding that the value of the house property is includible in the principal value of the estate of the deceased under s. 10 of the Act especially having regard to the fact that the property had only been bequeathed by the donor by a will and not by any settlement deed. Though in the earlier decision in George Da Costa v. CED [1967] 63 ITR 497, their Lordships of the Supreme Court have observed : The second part the section has two limbs : the deceased must be entirely excluded, (i) from the property, and (ii) from any benefit by contract or otherwise ...... In the context of the section, the word 'otherwise' shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties had found that the donor himself was paying the kist for the lands and they have rejected the contention put forward on behalf of the accountable persons that the donor had paid the proportionate rents received by him to the donees, though he had initially credited those amounts in his current account in the bank. These facts establish clearly that bona fide possession and enjoyment of the lands was not immediately assumed by the donees and thenceforward retained by them to the entire exclusion of the donor. Therefore, there is no reason to hold that the Tribunal erred in holding that the value of the lands gifted to the wife, Kuttiammal, was includible in the principal value of the estate of the deceased. The reasoning of the Tribunal in holding to the contra in regard to the lands gifted to the daughter, Sulochana is totally not acceptable. The Tribunal had found that the entire rent had been received by the donor and had not been handed over to the daughter, Sulochana, but credited in his own accounts in the bank. It is not possible to see how under these circumstances it could be stated that the daughter had assumed bona fide possession and enjoyment of the lands gifted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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