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TMI Blog1976 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Saliah and Company, carrying on retail business in the purchase and sale of textiles at Mayuram. The firm was reconstituted on April 1, 1964, by which the number of partners was increased from 3 to 8. Two of the partners who became partners by the reconstitution, were Smt. Farita Bivi and Abdul Rasheed. The accounts of these persons in the partnership firm were credited with the following amounts on the respective dates as under : Rs. 1-10-1963 Farita Bivi Credit 7,500 1-10-1963 Abdul Rasheed Credit 7,500 1- 4-1964 Farita Bivi Credit 7,500 1- 4-1964 Abdul Rasheed Credit 5,500 The total of these four amounts was Rs. 28,000. These amounts were credited to these two persons in the partnership accounts by debiting A. M. Saliah in his capital account. After the death of Mr. Saliah on March 9, 1966, when the question of the assessment to the Estate Duty arose, the department took the view that the sum of Rs. 28,000 formed part of the property passing on death and, therefore, assessable and it is this that is covered by the first question extracted already. As we pointed out already, the partnership was carrying on retail business in the purchase and sale of textiles and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Controller is concerned, he pointed out that it was a doubtful question whether a valid gift of money can be made by means of transfer entries in the accounts and, at any rate, the matter was not free from doubt. Notwithstanding this, he took the view that the gift of Rs. 13,000 made on April 1, 1964, would, without having to wait for a decision of the above issue be drawn into the net under section 9 as it is within two years before the death of the donor and the gift of Rs. 15,000 made on October 1, 1963, even if it was considered valid gift and, therefore, not affected by section 9, it would still be drawn into the vortex of dutiability as they cannot escape the mischief of section 10, because in his view the amounts continued to be invested in the firm in which the donor was a partner thereby giving the latter a beneficial control over it. It is in view of this stand taken by these two officials, they held that the entire sum of Rs. 28,000 was liable to be included in the estate. However, the Tribunal took a different view. According to the Tribunal, the transfers from the account of the deceased to the respective donees had to be treated as gifts through an " actionable clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the mischief of section 9 while the latter gift will come within the scope of section 9. Once it is realised that section 9 is applicable to the present case with the words " one year ", both the gifts, viz., the gift made on October 1, 1963, as well as the gift made on April 1, 1964, will fall outside the scope of section 9 and, therefore, the Controller of Estate Duty cannot rely upon section 9 for the purpose of including the sum of Rs. 13,000 in the estate for the purpose of liability of estate duty. Consequently, section 9 is not of any assistance whatever to support the contention of the Controller of Estate Duty, Madras. This leaves out the question of the applicability of section 10. Section 10 without the provisos, states as follows : " Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent 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." With reference to this section, as we pointed out already, there are two decisions of the Supreme Court which are directly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was reduced to Rs. 26,055-15-2. Again, on March 31, 1956, the account of the deceased in the firm showed a credit balance of Rs. 1,15,304-11-9. On April 1, 1956, the deceased transferred Rs. 77,881-11-8 again by adjustment entries to his daughter and three sons. Thus, the two transfers on March 31, 1953, and April 1, 1956, amounted to Rs. 1,29,924. The amounts thus transferred by the deceased to his daughter and sons continued to remain in the partnership business subsequent to the transfer till the death of the deceased and were utilised in the firm's money-lending business. It is against the background of these facts it was contended on behalf of the department that section 10 of the Estate Duty Act covered the case because the deceased had not parted with possession or the benefit of the use of the money and, therefore, the amount should be included in the estate. The Supreme Court negatived this contention. Therefore, we are of the view that these two decisions of the Supreme Court are directly in point and, according to these two decisions, it must be held that the amount of Rs. 28,000 transferred by adjustment entries by the deceased, A. M. Saliah, to the two persons refer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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