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TMI Blog1973 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... u High Court, which has answered the following two questions referred to it, in favour of the assessee, and against the revenue : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the house property in Avanashi Road ,Coimbatore, is not liable to estate duty as property deemed to pass on the death of the deceased under section 10 of the Estate Duty Act, 1953 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 1 lakh gifted by the decreased to his sons in 1953, is not liable to estate duty as property deemed to pass on the death of the deceased under section 10 of the Estate Duty Act, 1953 ? " These questions arose on the facts set out in the statement of the case which are : one Ramaiah Gounder was a partner in the firm called N. Desai Gounder Co., Coimbatore. He owned property which the firm was occupying as tenant-at-will. In August, 1953, he executed a deed of settlement under which he transferred the property leased out to the firm to his two sons, Lingiah and Krishnan, absolutely and irrevocably. After this transfer, the firm contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one lakh gifted to the sons was given by the sons to the firm which had benefit of the money and that the father could not be said to have enjoyed the benefit of the money as partner of the firm. In this view, the Tribunal excluded the sum of Rs. one lakh from the estate of the deceased. The High Court agreed with these findings. It is contended before us by the learned advocate for the revenue that both the Tribunal and the High Court were in error in holding that the property as well as the sum of Rs. one lakh were enjoyed by the donees to the exclusion of the donor or that the deceased did not derive benefit paying rent thereof at Rs. 300 p. m. to the two donees by crediting each of their accounts in the account books of the firm in equal shares. It may be mentioned that Ramaiah, the father, continued to be a partner of the firm even after the transfer till April 13, 1957, when the firm was dissolved. He had also an account with the firm, Desai Gounder Co., and on March 30, 1953, he requested the firm by a letter to transfer from his account five sums of Rs. 20,000 each with effect from April 1, 1953, to the credit of his five sons in the firm's books. He also wrote to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit therefrom within the meaning of section 10 of the Estate Duty Act, because, firstly, the donor was a partner in the firm which had occupied the property as tenants-at-will even after the gift, and, secondly, the amount of Rs. one lakh, though entered in each of the accounts of the donor's five sons in the books of the firms, was not utilised or enjoyed by them in any manner. Section 10 of the Estate Duty Act, as in force on the date of the death of the deceased, was as follows : " 10. 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 thence forward 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 : ......" The crux of the above sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donor on the date when he gifted the property to his sons which was leased out to the firm, had two rights, namely, of ownership in the property and the right to terminate the tenancy and obtain the possession thereof. There is no dispute that the ownership has been transferred subject to the tenancy at will granted to the firm ; to the donor's two sons because the firm from thence forward had attorned to the donees as their tenant by crediting the rent of Rs. 300 to the respective accounts in equal moiety. The donor could, therefore, only transf expossession of the property which the nature of that property was capable of, which in this case is subject to the tenancy. He could do nothing else to transfer the possession in any other manner unless he was required to effectuate the gift for the purpose of section 10 of the Act by getting the firm to vacate the premises and handing over possession of the same to the donees leaving the donees thereafter to lease it out to the firm. Even then the objection of the learned advocate that since the donor was a partner in the firm which had taken the property on lease, he derived benefit therefrom and was, therefore, not entirely excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the section not to be excluded from possession and enjoyment of that which he has given." In Commissioner of Stamp Duties of New South Wales v. Perpetual Trustee Co. Ltd., the Privy Council further elaborated the concept of the nature of possession required to be given to the donee as not to attract the analogous provisions of the Commonwealth Act. Lord Russell of Killowen observed at page 440 : " The linking of possession with enjoyment as a composite object which has to be assumed by the donee indicates that the possession and enjoyment contemplated is beneficial possession and enjoyment by the object of the donor's bounty ... because the son was (through the medium of the trustees) immediately put in such bona fide beneficial possession and enjoyment of the property comprised in the gift as the nature of the gift and the circumstances permitted. Did he assume it, and thenceforth retain it to the entire exclusion of the donor ? The answer, their Lordships think, must be in the affirmative, and for two reasons : namely, (1) the settlor had no enjoyment and possession such as is contemplated by the section; and (2) such possession and enjoyment as he had from the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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