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TMI Blog1979 (9) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is in this civil appeal, and it has followed the ratio of this decision in the other appeal also. We, however, find it convenient to first discuss the question of law with reference to the facts of Civil Appeal No. 2527 of 1972. Maharaj Mal, the deceased, with whose estate we are concerned in this appeal was a partner in a partnership firm styled as M/s. Maharajmal Hansraj. Maharajmal had a half share in the partnership. The other two partners, namely, Jialal and Hansraj, had each 1/4th share. On the 27th March, 1957, Maharaj Mal made a gift of Rs. 1,00,000 to his son, Lalit Kumar, and of Rs. 50,000 to his wife, Kamlavati. In the books of the partnership firm the sums of Rs. 1,50,000 were debited in the account of Maharaj Mal and credited to the accounts of Lalit Kumar and Kamlavati, Rs. 1,00,000 in the name of Lalit Kumar and Rs. 50,000 in the name of Kamlavati. Almost simultaneously with effect from 28th March, 1957, as per the instrument of partnership dated the 2nd April, 1957, Lalit Kumar was taken as a partner in the firm of M/s. Maharaj Mal Hans Raj by giving him 1/4th share out of the half share of Maharaj Mal. In other words, with effect from the said date there we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicability of s. 102 of the New South Wales Stamp Duties Act, which was in pari materia with s. 10 of our Act. In 1934, the father of Clifford John Chick transferred by way of gift to his son the property in question. The gift was made without reservation or qualification or condition. In 1935, the deceased, his son Clifford John Chick, and another son entered into an agreement to carry on in partnership the business of graziers and stock dealers. The agreement provided, inter alia, that the father should be the manager of the business and that his decision should be final and conclusive in connection with all matters relating to its conduct. Each partner's property including the one gifted was made available as the capital of the business and property of the partnership. The partnership continued for quite a good number of years until the donor died in 1952. In such a situation, the Privy Council held that although the first part of sub-s. 2(d) of s. 102 had been satisfied in that the son had assumed bona fide possession and enjoyment of the property immediately upon the gift to the entire exclusion of the father, he had not thenceforth retained it to the father's entire exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed must be entirely excluded, (i) from the property, and (ii) from any benefit by contract or otherwise, the word 'otherwise' to be construed ejusdem generis ". But it would be noticed that in the opinion of the court the case of the revenue rightly rested upon the first limb as the deceased had not been entirely excluded from the possession and enjoyment of the property gifted. The expression, " by contract or otherwise ", occurring in the second limb of the section, did not control the words " to the entire exclusion of the donor " in the first limb. In the the case of CED v. C. R. Ramachandra Gounder [1973] 88 ITR 448 (SC) the donor who was a partner in a firm owned a property which the firm was occupying as tenant-at-will. He excluded a deed of settlement under which he transferred the property leased out to the firm to his two sons. But the firm continued to be in occupation of the premises paying rent to the donees after the deed of settlement. The deceased had further directed the firm to transfer from his account a sum of Rs. 20,000 to the credit of each of his five sons in the firm's books with effect from April 1, 1953. In the account of each of the sons, the sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, though not explicitly but implicitly, some departure was made from the ratio of the Privy Council in Chick's case [1959] 37 ITR (ED) 89; 3 EDC 915, when the principle of Munro's case [1934] AC 61; 2 EDC 462 (PC) was applied it was on the basis that what was gifted by the donor was the whole of the property minus the rights of the partnership which were shared and enjoyed by the donor also; the donor enjoying the same bundle of rights in the partnership which he was enjoying before the gift did not bring the case within the ambit of s. 10. But the implicit departure from the Chick's case was when it was said that the benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but is unconnected therewith. This departure can be attributed to the very subtle distinction in the facts of the two cases and it is necessary to highlight them. In Chick's case, the donor as a partner came to share the possession and enjoyment of the property by the partnership firm long after the gift, while in Gounder's case [1973] 88 ITR 448 (SC) the benefit which the donor was enjoying as a partner in the property gifted was existing at the time of the gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we would like to clarify and elucidate some of the aspects and facets of the matter a bit further. When a property is gifted by a donor the possession and enjoyment of which is allowed to a partnership firm in which the donor is a partner, then the mere fact of the donor sharing the enjoyment or the benefit in the property is not sufficient for the application of s. 10 of the Act until and unless such enjoyment or benefit is clearly referable to the gift, i.e , to the parting with such enjoyment or benefit by the donee or permitting the donor to share them out of the bundle of rights gifted in the property. If the possession, enjoyment or benefit of the donor in the property is consistent with the other facts and circumstances of the case, other than those of the factum of gift, then it cannot be said that the donee had not retained the possession and enjoyment of the property to the entire exclusion of the donor, or, to the entire exclusion of the donor in any benefit to him by contract or otherwise. It makes no difference whether the donee is a partner in the firm from before or is taken as such at the time of the gift or he becomes a creditor of the partnership firm by allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by gift and their investing the same in the partnership firm. So was it possible in regard to the sum of Rs. 1,99,500. However, a different view was taken by the High Court. But in the instant case it is clear that the ratio of the decisions of this court referred to above is squarely applicable and the Tribunal as well as the High Court was right in holding that no estate duty could be charged in respect of the two sums of money, viz., Rs. 1,00,000 and Rs. 50,000. Similarly in the application of the ratio some difference of opinion will appear to have been expressed by the High Courts in the case of CED v. Chaman Lal Bery [1977] 106 ITR 865 (All), CED v. S. V. Kapadia [1977] 108 ITR 1008 (Cal), CED v. S. A. Rahman Beevi [1978] 111 ITR 422 (Mad) and CED v. V. S. Suryanarayanan [1978] 114 ITR 599 (Mad). It is not necessary for us to enter into the fine distinction drawn by the High Courts in each of the cases referred to above. But we want to emphasise that the principles of law laid down by this court in several decisions which we have reviewed in this judgment with some further clarification and elucidation should be carefully and broadly applied to the facts of each case withou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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