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TMI Blog1974 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,000 S. M. M. Dharma Kanakku (Trust Account) Charity 29-3-1955 l0-6-1954 15,000 Krishnan Grandson 7-4-1955 do. 15,000 Ramanathan do. do. do. 15,000 Venkatachalam do. do. do. 15,000 Sornathan do. do. 6-2-1939 17,587) M. M. Subramanian Son 7-4-1955 10-6-1954 6,250) Chettiar -------------- 96,301 ------------- ----------------------------------------------------------------------------------------------------------------------------------------------- It is not clear as to when the deceased Muthukaruppan Chettiar became a partner in S. M. M. Firm. From the table given above it would be seen that one of the gifts is on April 6, 1938, another on February 6, 1939, a third one on April 12, 1950, and a fourth one on April 13, 1954. The firm was reconstituted with effect from 10th June, 1954. On that date his son joined the firm as a partner. Prior to the son joining the firm the deceased had 12 1/2% share in the firm. As a result of the son joining the firm, his share was reduced to 61 per cent. and the son got 61 1/4 per cent. in the firm. On that day four sums of 15,000 Malayan dollars were gifted to the four grandsons, as mentioned above, and ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal held as follows : "........ by reason of the donor being a partner in the firm in which the amounts gifted by him to the donees are deposited or invested, it cannot be said that the possession and enjoyment of the property taken under gift was not retained to the entire exclusion of the donor ...... the enjoyment contemplated under section 10 of the Estate Duty Act, 1953, is enjoyment of the rights of the donees, and the enjoyment of the money after it was deposited is different from the enjoyment by the firm of the rights of the donees. As far as the donees are concerned, they did not share any of their right--right to income, right to assign, right to pledge--with the deceased partner of the firm. Moreover, a partner in the firm cannot be said to be the owner of any specific share in any partnership property and in that view he can neither transfer nor be the transferee of such specific share in the property. The deceased had no right or interest in and, therefore, could not be said to have enjoyed the deposit made by the donees in a firm in which he was a partner." In coming to this conclusion it cited several decisions and observed that the matter had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis that the declarations of 7th April, 1955, in all cases except one, in any way affected the present position. We may, however, mention that the one document, namely, the one dated 29th March, 1955, in the case of a trust account is item No. 3 in the table. With reference to this trust, there was declaration made on 29th March, 1955. Even that declaration related to what happened earlier on 27th July, 1954, and that was by setting apart monies for performance of several charities. Thus, with reference to none of the transactions, is there any contemporaneous document in writing as contemplated by section 130 of the Transfer of Property Act, to which any reference has been made before us. As the matter has been examined by the estate duty authorities and the Tribunal at a time when they did not have the benefit of several decisions which were rendered subsequently, it is necessary to refer to the decisions so as to find out whether the property gifted was retained by the donee to the entire exclusion of the donor, which is the only point in dispute here. The law on this point has been laid down by the Supreme Court in two decisions which were appeals from this court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10 of the Act, this court observed : " As the funds belonged to the donor, who was a partner, their repayment would be subject to the provisions of the partnership law. It is in this background we have to view what precisely was the subject-matter of the gift ; was it, the two sums, free of any conditions or liabilities or subject to them ? We are inclined to think that, on a consideration of the entire facts, the book entries of the two amounts were made in effecting the transfer, the donor being fully alive to the fact that there would be no handing over of those two sums in cash to the donees and they would be available for the continued use of the partnership in the business and in that contingency, therefore, the amounts, while being used in the firm, would be looked after, managed and controlled by the father in his capacity as the managing partner." The decisions of the Privy Council in Clifford John Chick v. Commissioner of Stamp Duties and Munro v. Commissioner of Stamp Duties were discussed and it was found that the case before this court came within the scope of the principle in Munro's case . This decision was taken on appeal to the Supreme Court and the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction of section 10(4)(b) into the Act of 1922. In Godavari Bai's case the further question was whether the transfer had complied with the provisions of section 130 of the Transfer of Property Act. It was held that, as the transaction had been effected by cheques, section 137 of the Transfer of Property Act took the case out of section 130 of that Act. It was, therefore, held that section 10 was not applicable on the facts there. The only other decision of this court to which reference need be made is not yet reported and it was rendered in T.C. No. 292 of 1968 (Radhabai Ramchand v. Controller of Estate Duty). In that case the question related to a sum of Rs. 85,000. This sum was the total of two sums, viz., Rs. 60,000 and Rs. 25,000. As regards the gifts covered by the sum of Rs. 60,000 it was found that the deceased gifted Rs. 15,000 each to his four sons on 1st April, 1955. They were first invested in a proprietory concern and later withdrawn and invested in a firm in which the deceased was a partner. As the sum of Rs. 60,000 was gifted in cash by the deceased and as it was subsequently invested in a firm in which the deceased was a partner, this court held that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were gifted in cash, then, there will be nothing to show that the gifts are subject to any particular condition of user in the partnership in which the deceased was a partner. The question as to whether the relevant debits were made in the account of the deceased at the time when he was a partner so that what he had could be treated as an "actionable claim" has not been specifically gone into. If the debit was made in the books of the individual there would be no question of any "actionable claim". Therefore, the Tribunal would have first to ascertain in the proceedings to follow under section 64(6) the nature of or the subject-matter of the gift to see if it is an "actionable claim" or if it is a gift of cash. If it is a gift of cash, no further consideration is likely to arise as the authorities are clear on the point that the amount is liable to be taxed by applying section 10. If it was a transfer of "actionable claim", section 10 would not apply. This question has to be considered as at the point of time when the gifts were made. There is one other aspect which has to be examined as contended by the learned counsel for the Controller of Estate Duty. If it was a current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nee would have the same right. In such a case, there would be no condition applicable to the amount subject to which alone the transfer is effected. The transfer would thus be unconditional. We would, therefore, hold that, if the amount was a transfer from a current account as such, then it would stand in a distinct category and the applicability of section 10 would follow. If, however, the transfer was from the capital account or loan account or any other general account to which profits are credited, then section 10 cannot be applied. We would answer the question as indicated above. In passing the orders under section 64(6), the Tribunal would be free to go into all the facts and consider the matter as if it was hearing the appeal by itself. We have in T. C. No. 107 of 1969 (East India Corporation Ltd. v. Commissioner of Income-tax) judgment in which was delivered on 20th November, 1974, indicated the scope of the powers of the Tribunal in a matter which goes back to it as a result of the reference. We have held that the powers of the Tribunal in such a matter are as ample as they were at the time when it dealt with an appeal for the first time. We are making these observations o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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