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Controller of Estate Duty, Bombay City-i Vs. Sharangadhar Shamji - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberEstate Duty Reference No. 13 of 1965
Judge
Reported in[1977]109ITR320(Bom)
ActsEstate Duty Act, 1953 - Sections 10
AppellantController of Estate Duty, Bombay City-i
RespondentSharangadhar Shamji
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateJ. Pandit, Adv.
Excerpt:
.....was enjoyed by the deceased, inasmuch as there was no evidence on record to show that interest on gifted securities was drawn by the deceased either for private consumption or for investment in his own name and the interest remained in the bank account and accountable person fully accounted for it in his books. in other words, the tribunal has found as a fact that neither the corpus nor the usufruct of the gift was enjoyed by the deceased......or for investment in his own name. in fact, the tribunal further found that a month prior to his death the deceased had withdrawn part of the moneys and had deposited them with certain outside firms to the credit of the donees. in other words, the tribunal has found as a fact that neither the corpus nor the usufruct of the gift was enjoyed by the deceased. simply because the interest was credited by the deceased in his own bank account, but which interest was shown to have remained with the deceased in fact, it could not be said that the deceased had used such interest for his benefit. in other words, a clear finding has been recorded by the tribunal that not only had the donees assumed bona fine possession and enjoyment of the property but it also thenceforward was retained to the.....
Judgment:

Tulzapurkar, J.

1. At the instance of the Controller of Estate Duty, Bombay City-I, Bombay, the following question has been referred to us for our determination by the Tribunal under section 64(1) of the Estate Duty Act :

'Whether, on the facts and in the circumstance of the case, the value of the Government securities of Rs. 1 lakh, bona fide gifted by Govind Shamji to his wife and sons more than two years before his death, could be included in the dutiable estate under section 10 of the Estate Duty Act ?'

2. The facts giving rise to the question may be stated : One Govind Shamji, who carried on money-lending business at Bombay, purchased on July 25, 1951, and January 14, 1953, Government securities of the face value of Rs. 50,000 in the joint names of himself and his wife. On October 24, 1951, and June 26, 1952, he also purchased Government securities of the face value of Rs. 50,000 in the names of his two minor sons by himself as their guardian. On March 22, 1954, he made a declaration on oath before the Presidency Magistrate that he had purchased those securities with the intention of gifting them to his wife and sons and that in fact he had gifted them to his wife and sons. Govind Shamji died on November 1, 1956. In the statement of account filed by Sharangadhar Shamji, the brother of the deceased as an accountable person before the Assistant Controller of Estate Duty, he (accountable person) claimed that these Government securities of the face value of Rs. 1 lakh had been bona fide gifted by the deceased in favour of his wife and sons more than two years before his death and that they did not, therefore, pass on to his heirs on the death of Govind Shamji and as such no estate duty was payable on the value of those Government securities. The Assistant Controller of Estate Duty accepted the fact that the deceased had bona fide made gifts of the Government securities of the face value of Rs. 1 lakh to his wife and sons more than two years before his death but invoked the provisions of section 10 of the Act; he held that these securities passed on death of the deceased to his heirs. He took the view that until the time of his death of the deceased himself was receiving the income from all the treasury savings deposits certificates, which was being credited in the bank account, and that it formed part and parcel of his assets in his money-lending business and that in the circumstances of the case it could not be said that the deceased received and held the income from the certificates only in a fiduciary capacity because the interest when first received was credited to the personal bank account of the deceased. The Appellate Controller of Estate Duty to whom the accountable person preferred an appeal confirmed the order of the Assistant Controller of Estate Duty and upheld the inclusion of the value of the securities in the dutiable estate. In further appeal that was preferred by the accountable person to the Appellate Tribunal it was argued that the deceased was also doing commission business and that as commission agent he recovered the amount on the securities on behalf of the minors through his bank account and subsequently those amounts were withdrawn before the death of the deceased and part of it was invested with an outside firm. It was further argued that interest that was received was actually credited to the account of the donees and the capital was neither utilised by the deceased nor the interest received thereon was enjoyed by the deceased and as such section 10 was not attracted. The Tribunal on certain facts which it found came to the conclusion that neither the corpus nor the usufruct of the gift was enjoyed by the deceased, inasmuch as there was no evidence on record to show that interest on gifted securities was drawn by the deceased either for private consumption or for investment in his own name and the interest remained in the bank account and accountable person fully accounted for it in his books. The Tribunal accordingly held that the value of the Government securities should be excluded from the total value of the dutiable estate. At the instance of the Controller of Estate Duty, Bombay City-I, Bombay, the aforementioned question has been referred to us for our determination.

3. It was not disputed before us that the deceased had made bona fide gifts of the securities worth Rs. 1 lakh to his wife and minor children prior to two years of his death and, therefore, section 9 was not applicable to the case. The only manner in which the value of the securities was sought to be included in the dutiable estate was by reference to section 10 of the Act. Section 10 contains a deeming provision under which property taken under any gift, whenever made, is 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. In order to avoid the mischief of section 10 it must be established that the donee not only assumed bona fide possession and enjoyment of the property taken under a gift but also thenceforward retained it to the entire exclusion of the donor or of any benefit to him by contract or otherwise.

4. Having regard to the facts that have been found by the Tribunal in this case, it would be difficult to say that the provisions of section 10 are attracted to the facts of the case. It has been found by the Tribunal that the deceased had made bona fide gifts of the securities worth Rs. 1 lakh to his wife and minor children. The corpus was undoubtedly transferred to his wife and children, inasmuch as the securities stand in the name of his wife and minor children. It is true that interest on those securities was realised by the deceased and credited to his own bank account, but the deceased, who was a money-lender and kept detailed books of account, showed in his books of account the interest as having been duly credited to the respective accounts of the donees. The Tribunal has further found as a fact that such interest remained in the bank account and there was no evidence on record to shoe that such interest was drawn by the deceased either for private consumption or for investment in his own name. In fact, the Tribunal further found that a month prior to his death the deceased had withdrawn part of the moneys and had deposited them with certain outside firms to the credit of the donees. In other words, the Tribunal has found as a fact that neither the corpus nor the usufruct of the gift was enjoyed by the deceased. Simply because the interest was credited by the deceased in his own bank account, but which interest was shown to have remained with the deceased in fact, it could not be said that the deceased had used such interest for his benefit. In other words, a clear finding has been recorded by the Tribunal that not only had the donees assumed bona fine possession and enjoyment of the property but it also thenceforward was retained to the entire exclusion of the donor or of any benefit to his by contract or otherwise. In view of this finding which has been recorded by the Tribunal, it is difficult to accept the contention that section 10 of the Act was attracted. In our view, therefore, the Tribunal was right in excluding the value of the Government securities worth Rs. 1 lakh from the principal value of the dutiable estate under section 10 of the Act. The question is, therefore, answered in the negative and against the department.

5. Revenue will pay the costs of the reference to the accountable person.


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