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TMI Blog1975 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... wife, as early as 1943. The source for the investment had been provided by him. The rents from the immovable properties and the dividends were being credited to a bank account of the deceased in his sole name in the Lloyds Bank till 12th March, 1958. From that date a joint account was opened in the name of the deceased and his wife, into which the rents and the dividends were being credited. Into this joint account there were credits as follows: Rs. Cash and cheque deposits 10,000,00 Pension of Lt. Col. Pandalai 21,200.00 Amount realised by sale of the lands and shares 30,900.00 Income from the property 38,100.00 Dividends from the aforesaid shares 9,600.00 -------------------- 1,09,800.00 -------------------- The withdrawals from this account have been analysed as follows : Rs. Drawings by Mrs. Pandalai 41,200 00 Repairs to the property 32,800.00 Drawings by Lt. Col. Pandalai 5,400.00 Household and miscellaneous expenses 29,900-00 Sundries 100.00 Cash with bank 400.00 -------------------- 1,09,800.00 -------------------- The Assistant Controller of Estate Duty came to consider the applicability of section 10 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven though the amounts collected were deposited in a joint account, the amounts still belonged to the depositor, since there was no presumption of advancement in India. The Tribunal agreed with both these contentions. In paragraph 6 of its order, it observed that definite evidence available was that the rents were collected by the donee and deposited by her in the joint account. It was further observed that the deceased was completely excluded from the properties since they had been leased out by the donee and the rents collected by her and deposited by her into a bank. The inference was that there was no benefit under a contract or under some legal obligation referable to the gifted property. In the result, the Tribunal held that section 10 did not apply; in this view, it did not think it necessary to go into the question of valuation. At the instance of the Controller of Estate Duty, the following question has been referred to this court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the value of the four houses, Vijaya, Vanaja, Vasantha and Ashoka, and the dividends referable to the shares in the Balama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have retained such possession and enjoyment of the property to the entire exclusion of the donor." and the second limb is as follows: "The donee must have retained such possession and enjoyment of the property to the entire exclusion of any benefit to the donor by contract or otherwise." These two limbs are alternative. Though the two conditions set out in the two parts are cumulative, as far as the second part is concerned, it would be enough if the transaction satisfied one of the two limbs. In the present case we have first to see whether the donee has assumed possession and enjoyment of the property, which was the subject-matter of the gift to the exclusion of the donor immediately upon the gift. With reference to the immovable properties, as seen already, they were gifted in 1940 or 1941. Thereafter, the donee has been arranging for the leases of the property. In the stated case, it has been mentioned that the donee was collecting the rent. This is based on an admission. by the authorised representative of the department before the Appellate Tribunal. The learned counsel for the Controller suggested that this admission has been wrongly recorded. If there was such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her absolutely. The rents received by cheques drawn in favour of the deceased were credited to his current account in the State Bank. This current account was converted into a joint account of the deceased and his wife from 1942-43 to 1957-58. The question was whether the collection of rent by the deceased attracted section 10. At page 787 it was observed as follows :" There is...... some force in the contention...... that the deceased, when lie collected the rents and remitted the same into his current account, acted as a trustee or an agent of his wife...... We are of the view that, from that circumstance alone, it cannot be said that the wife did not have exclusive possession and enjoyment of the property." It was further observed that if nothing more happened, then the husband receiving the rents and putting them in his current account, would not be inconsistent with the donee having taken exclusive possession of the subject-matter of the gift. In view of the fact that there was a finding that the deceased had utilised the rental income for his own purposes, it was held that he had not been entirely excluded from the possession and enjoyment of the houses. The same pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew to enable him to continue to reside in the house, it cannot be said that he was entirely excluded from 'possession and enjoyment' within the meaning of the first limb of the section, and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty". It may be seen that there was a case where the donees were the sons. The contention on behalf of the Controller was that the two decisions of the Madras High Court to which we have made a reference would no longer be good law after the decision in George Da Costa v. Controller of Estate Duty and another decision reported in Satyanarayan S. Mody v. Controller of Estate Duty, which we shall notice a little later. But there are decisions rendered after George Da Costa's case, which have considered the question of the applicability of section 10 in the case of a gift of property to the wife and which still are in line with the Madras view. The Andhra Pradesh High Court in Mohammed Bhai v. Controller of Estate Duty 4 had to deal with a case on the following facts. One Fida Ali Mohammed made certain gifts to his sons and to his wife in or about 1952. For our present purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a house property was gifted to the wife in 1918 and the deceased continued to live there till his death. The application of section 10 was upheld by the Allahabad High Court and the learned judges dissented from the decision of the Andhra Pradesh and Calcutta High Courts cited above. We may now notice the decision of the Supreme Court in Satyanarayan S.Mody v. Controller of Estate Duties. That was not a case between a husband and wife but between a grandmother and a grandson. The grandmother had a number of fixed deposits. She adopted one Satyanarayana who had a natural son by name Suryakant. Suryakanta the relevant time was a minor. She executed a gift deed in which it was declared that the fixed deposits as mentioned therein were gifted to Suryakant and that the gift had been accepted by the natural guardian of Suryakant. However, till her death the fixed deposits were getting renewed in her name and she without reference to the guardian if the minor was dealing with the interest and the corpus. One of the contentions was that the bank had notice of the gift and that the bank could not have allowed her to act inconsistently with her fiduciary character and duty. The Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untable person the submission was that as soon as the amounts were received by the donee, they ceased to be referable to the property, as such, and that she was free to do what she liked with her own income. Whether she utilised it for deposits in the bank account of the deceased or whether she dealt with it in any other manner would not bring her application of the income within the scope of the first limb of the second part of section 10. The learned counsel for the department referred us in this context to the decision of the Privy Council in Commissioner of Stamp Duties of New South Wales v. Permanent Trustee Company of New South Wales . That was a case where a testator settled on trust certain investments to apply the whole or such part of the income as the trustee thought fit for the maintenance, education and general support of his daughter until she should attain the age of 30 and on her attaining that age to pay over to her the balance of the trust fund with all accumulations of income for her sole and separate use. The daughter married in 1938 and attained the age of 30 in February, 1940. In December, 1938, she wrote to the trustees authorising them to take instruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the part of Lt. Col. Pandalai. He could not have had any estate duty in mind when he made these gifts, as in those years, i.e., in 1940 and 1943, the enactment of estate duty was not even contemplated. It came into force 10 years later. The bank account up to 12th March, 1958, is not available before us. The summary of the bank account available to us relates to the period subsequent to 12th March, 1958. We do not, therefore, know as to what happened to the income earned out of the gifted properties by the donee prior to 12th March, 1958. The mere existence of the bank account of the deceased and the deposits made therein do not, in our opinion, show that the donee had not retained possession and enjoyment of the properties gifted to the entire exclusion of the deceased. If the revenue authority has to succeed on this aspect, some materials should have been placed before us to show that the deceased enjoyed the said income. The Delhi High Court in a Full Bench decision in Controller of Estate Duty v. Prahlad Rai examined the consequences under section 10 of the Estate Duty Act of the deposit of the income in a firm in which the donor was a partner. It held that accretion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10 and that he was not so excluded during this period at any rate. He further submitted that the Tribunal was not justified in proceeding as if a sum of Rs. 5,400 alone had been drawn by the deceased. It may be mentioned here that the Tribunal has referred to the deposit of Rs. 21,200 being pension drawn by the deceased and to his having utilised by way of withdrawals only a sum of Rs.5,400. The Tribunal proceeded on the basis that so long as the deceased withdrew his own amounts, there could be no question of any benefit coming within the scope of the provisions of section 10. The attempt of the learned counsel for the Controller was to show that a sum of Rs. 29,900 had been withdrawn as and for household and miscellaneous expenses, out of which the deceased donor should certainly have had some benefit. He drew our attention to the order of the Assistant Controller in which the withdrawal of monies for household expenses has been adverted to in support of the application of section 10. There are two answers to this submission. The first is that having regard to the limited jurisdiction of an advisory character we have in the matter of these references it would not be pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his sons, grandsons, daughter and wife. In the gift deeds in favour of the sons there was a provision saying that they had to pay during his lifetime a sum of Rs. 1,000 per year for his domestic expenses. In the gift deed in favour of the wife he had expressed the hope that she would support him during his lifetime. The estate duty authorities sought to apply section 12 and section 10. The Supreme Court found that section 12 was not applicable. We are not concerned here with that question. As regards the application of section 10 and the requirements thereof, the Supreme Court observed at page 257 as follows: "The provisions for annual payments and maintenance made in the deeds as seen earlier are not charged on the properties settled. Hence, the deceased cannot be said to have retained any interest in the properties settled. Therefore, it cannot be said that he retained any benefit either in the properties settled or in respect of their possession." The result of this decision of the Supreme Court is that there must be some kind of charge on the properties which would bring into operation the second limb of the second part of section 10. There is no such charge here. Fart ..... X X X X Extracts X X X X X X X X Extracts X X X X
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