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Controller of Estate Duty Vs. Estate of Late Sait Bansilal (by Accountable Person) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberEstate Duty Case No. 7 of 1976
Judge
Reported in[1978]113ITR479(AP)
ActsEstate Duty Act, 1953 - Sections 10
AppellantController of Estate Duty
RespondentEstate of Late Sait Bansilal (by Accountable Person)
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateM.J. Swamy and ;J.V. Srinivasarao, Advs.
Excerpt:
direct taxation - principal value of estate - section 10 of estate duty act, 1953 - deceased made gift of two rice mills by registered deed to his wife accountable person - said two rice mills included in principal value of estate - plea of accountable person that she was in possession and enjoyment of property to entire exclusion of donor - plea supported by facts that she filed income tax return showing these two rice mills - section 10 as invoked by authority not attracted to fact - held, two rice mills cannot be included in principal value of deceased. - - ramaiah sreshti [1976]104itr195(ap) contended that the facts, as presented in this case, clearly come within the mischief of section 10 of the act. the supreme court has laid down that, unless each of these two conditions is..........and in the circumstances of the case, the tribunal was justified in holding that section 10 of the estate duty act (hereinafter referred to as ' the act') is not attracted to the gifts made by the deceased to his wife, who is the accountable person, through a deed dated february 12, 1956.2. the following are the relevant facts : the deceased, sait bansilal, died on march 28, 1958. he made a gift of two rice mills by a registered deed dated february 12, 1956, to his wife, the accountable person. the lease amounts were collected by the deceased under a lease deed executed in his favour earlier to the date of the gift. the method adopted by him for collecting the rents in respect of the two rice mills gifted to his wife was to first enter the rents received by him in his accounts and later.....
Judgment:

S. Obul Reddy, C.J.

1. In this application for reference under Section 64(3) of the Estate Duty Act, the question to be considered is whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 10 of the Estate Duty Act (hereinafter referred to as ' the Act') is not attracted to the gifts made by the deceased to his wife, who is the accountable person, through a deed dated February 12, 1956.

2. The following are the relevant facts : The deceased, Sait Bansilal, died on March 28, 1958. He made a gift of two rice mills by a registered deed dated February 12, 1956, to his wife, the accountable person. The lease amounts were collected by the deceased under a lease deed executed in his favour earlier to the date of the gift. The method adopted by him for collecting the rents in respect of the two rice mills gifted to his wife was to first enter the rents received by him in his accounts and later credit the same to the account of his wife. Even as regards the expenditure incurred, the entries were first made in his accounts and then debited in her account. The income so realised by the wife was shown in the income-tax returns filed by her. The case of the accountable person throughout has been that she was in possession and enjoyment of the property to the entire exclusion of her husband, the donor. The Assistant Controller of Estate Duty was not inclined to accept her plea and valued the two rice mills gifted to her at Rs. 2,25,000 and included the same in the principal value of the estate passing on the death of the deceased invoking Section 10 of the Act. That order of the Assistant Controller of Estate Duty was upheld by the Appellate Controller of Estate Duty. On further appeal to the Appellate Tribunal,the Appellate Tribunal, having regard to its earlier decision in E. D. A. 49/ Hyd/1969-70 dated August 23, 1972, deleted the addition of Rs. 2,25,000 on the ground that the income realised by the deceased from the two rice mills was never appropriated by him.

3. Mr. Rama Rao, the learned counsel for the revenue, relying upon the decision of the Supreme Court in George Da Costa v. Controller of Estate Duty : [1967]63ITR497(SC) and the decision of this court in Controller of Estate Duty v. Estate of Late V. Ramaiah Sreshti : [1976]104ITR195(AP) contended that the facts, as presented in this case, clearly come within the mischief of Section 10 of the Act. In George Da Costa's case : [1967]63ITR497(SC) Section 10 came to be construed by the Supreme Court. Section 10 contemplated that the donee must bona fide have assumed possession and enjoyment of the property, which is the subject-matter of the gift to the exclusion of the donor, immediately upon the gift. The other condition imposed by Section 10 is that the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract or otherwise. The Supreme Court has laid down that, unless each of these two conditions is satisfied, the property would be liable to estate duty under Section 10 of the Act. In George Da Costa's case : [1967]63ITR497(SC) , it was found that the donor was not entirely excluded from possession and enjoyment within the meaning of the first limb of the section. The fact that, on account of filial affection, the sons allowed the father, the donor, to continue to reside in the house gifted to them, attracted Section 10. In Controller of Estate Duty v. Estate of Late V. Ramaiah Sreshti : [1976]104ITR195(AP) , it was found that from 1952 to 1960, the income was appropriated by the deceased himself and it was only subsequently on March 27, 1960, a sum of Rs. 2,000 was credited to his wife's account. The amounts credited to the account of the donees were also used by the deceased for his own business. It was, therefore, held in that case that the deceased was not excluded from the property, as the donees did not retain the possession and enjoyment of the property to the entire exclusion of the donor, or of any benefit to him by contract or otherwise, as contemplated by Section 10.

4. The facts in this case are similar to the facts of the case in Controller of Estate Duty v. C. R. Ramachandra Gounder : [1973]88ITR448(SC) . That was also a case where the deceased had executed a deed of settlement under which he transferred the house property let to the firm to his two sons absolutely and irrevocably and, thereafter, the firm paid the rent to the donees by crediting the amount in their accounts in equal shares. The sons did not withdraw any amount from their accounts in the firm and the amounts remained invested with the firm for which interest at 71/2 per cent.was paid to them. The deceased, even after he made the gift in favour of his sons, continued to be a partner of the firm till it was dissolved on 13th April, 1957, and, thereafter, he died on 5th May, 1957. The question raised was whether the value of the house property gifted could be included in the principal value of the estate of the deceased as property deemed to pass under Section 10 of the Act. The Supreme Court, on those facts, held that the possession which the donor could give was the legal possession which the circumstances and the nature of the property would admit and this the donor had given and the benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but was unconnected therewith.

5. It should be borne in mind that, in ordinary Hindu families, the property belonging exclusively to a female member is normally managed by the manager of the family. If the property belongs to the wife and the husband manages the property on her behalf, it would be idle to contend that the management by the husband of the properties is inconsistent with the title of his wife to the said properties. What has been said about the management of the properties would be equally true about the actual possession of the properties (See Kanakarathanammal v. Loganatha Mudaliar, : [1964]6SCR1 ).

6. It is true that, while construing Section 10 of the Act, we have got to strictly go by the language of Section 10. As already noticed, Section 10 contemplates possession and enjoyment of the property gifted by the donor to the exclusion of the donor immediately upon the gift and retention of possession and enjoyment of the property to the entire exclusion of the donor. The lease deed relied upon by the learned counsel for the revenue was executed prior to the date of the gift of the two rice mills. After the gift deed was executed, no amount received as rents under the lease deed was appropriated by the donor. There is also the further fact that the income from the rice mills was shown by the accountable person in the income-tax returns filed by her. It cannot, therefore, be said that, merely by reason of the fact that the deceased was collecting the rents on behalf of his wife, the donee was not in possession and enjoyment of the property to the entire exclusion of the donor. This is only a case where the donor had only managed the property on behalf of his wife and nothing more and that is common in ordinary Hindu families. We can understand the arguments of the learned counsel for the revenue that Section 10 applies to the facts of the present case, if there is anything to suggest that there was appropriation of the income by the donor as in the case of Controller of Estate Duty v. Estate of Late V. Ramaiah Sreshti [1916] 104 ITR 195. We, therefore, hold that the Tribunal was not in error in directing deletion of the amount of Rs. 2,25,000 from the principal value of theestate.

7. The application is, therefore, dismissed. No costs.


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