1. Shri Jaishi Ram died on October 23, 1961, leaving behind his wife, four sons and three daughters. The deceased and his sons constituted a joint Hindu family governed by the Mitakshara School of Hindu law, and the family possessed movable and immovable properties. In April and May, 1958, Shri Jaishi Ram made gifts of Rs. 20,000 each in favour of his son, Jagdish Chand Mehra and his four daughters-in-law. The total amount of these gifts was Rs. 1 lakh. These amounts were thereafter invested by the donees in the firm in which Shri Jaishi Ram was a partner. On these facts, a question has arisen whether the sum of Rs. 1 lakh, which had been gifted by Shri Jaishi Ram in favour of his son, Jagdish Chand Mehra, and his four daughters-in-law, can be deemed to have passed on his death as his estate in terms of Section 10 of the Estate Duty Act, 1953 (hereinafter called 'the Act').
2. On behalf of the Controller of Estate Duty, the petitioner in this case,it has been stated that this question of law is covered by the judgment of mylearned brother, D.K. Mahajan J., and S.S. Sandhawalia J., in Controllerof Estate Duty v. Ronaq Ram Bakshi Ram Gupta, which is correct, but thelearned counsel for the respondent respectfully submits that that case hasnot been correctly decided and that decision requires reconsideration. Thelearned judges followed the decisions of the Gujarat High Court in Smt.Shantaben S. Kapadia v. Controller of Estate Duty and Controller of EstateDuty v. Chandravadan Amratlal Bhatt, which were delivered by the sameBench. In these cases, it was held that as the subject-matter of the giftwas made available to the partnership in which the deceased had aninterest as a partner and placed at its disposal, the deceased was notentirely excluded from the subject-matter of the gifts, and hence the provisions of Section 10 applied to the cases. The learned judges in support oftheir view relied on the decision of the Privy Council in Clifford John Chickv. Commissioner of Stamp Duties, and the judgment of their Lordships ofthe Supreme Court in George Da Costa v. Controller of Estate Duty. Thefacts of the Supreme Court decision referred to may be.briefly stated. Dr.C. F. Da Costa purchased house No. 34, Mahatma Gandhi Road, Bangalore,in the joint names of himself and his wife, on February 14, 1940. Theymade a gift of the house to their two sons on October 29, 1954. The document recited that the donees had accepted the gift and they had been putin possession. But, the parents continued to be in possession of the house,though, the municipal tax was paid thereafter in the names of the sons.Dr. C. F. Da Costa died on September 30, 1959, more than four years afterthe gift. The Assistant Controller of Estate Duty included the sum ofRs. 1,50,000 as the value of the said house in the estate of the deceasedand assessed estate duty on the aggregate value of the estate. Theaccountable persons preferred an appeal to the Board of Revenue whichwas dismissed and the following question of law was referred to the HighCourt for determination :
'Whether, on the facts and in the circumstances of the case, the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on the death under Section 10 of the Act?'
3. The High Court answered the question in the affirmative holding that the accountable persons were liable to pay estate duty with regard to the house. An appeal was then taken to the Supreme Court. While dealing with the contention of the appellants, their Lordships observed:
'But it was contended by Mr. Sen for the respondent that the case of the revenue does not rest upon the second limb of the section but upon the first limb which requires that the donor must have been entirely excluded from possession and enjoyment of the property. It was pointed out that there was no such exclusion in the present case and the finding of the Board is that the deceased continued to stay in the house till his death as the head of the family and was looking after the affairs of the household. It was contended, therefore, that the first limb of the section is not satisfied in this case and the property must' be held to pass on the death of the deceased under that section. In our opinion, the contention of the respondent must be accepted as correct. As a matter of construction, we hold that the words 'by contract or otherwise in the second limb of the section will not control the words' to the entire exclusion of the donor' in the first limb. In other words, in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was 'entirely excluded from possession and enjoyment' within the meaning of the first limb of the section, and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty.'
4. It is submitted by the learned counsel for the respondent that that case related to immovable property of which physical possession was retained by the donee, but in the present case the possession of the gifted money was completely taken by the donees. Before the decision of their Lordships of the Supreme Court, a second proviso had been added to Section 10 of the Estate Duty Act, 1953, reading as under:
'Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor's death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition.'
5. On the basis of this amendment, it was argued before their Lordships that the intention of the legislature was clear and the residence of the deceased parent in the house after the gift would not detract from the completeness of the gift, but their Lordships did not accept this contention on the ground that the proviso newly added was prospective and not retrospective in its operation.
6. As against these judgments relied upon by the learned counsel for the petitioner, the learned counsel for the respondent has brought to our notice the following judgments: Controller of Estate Duty v. Birendra Kumar Sen, a Division Bench judgment of the Assam and Nagaland High Court, Controller of Estate Duty v. Estate of Janab S. Ibrahim Rowther, H.R. Murno v. Commissioner of Stamp Duties and Controller of Estate Duty v. C.R. Rama-chandra Gounder.
7. In these judgments the view taken is that the exclusion of the donor is complete if by the transaction of the gift no right is retained by the donor and the gifted property is completely taken possession of by the donee. In case the donee, subsequent to the gift, becomes a partner with the donor with the gifted property the property does not pass with the death of the donor as a part of his estate and remains the property of the donee. A similar view was taken by the Andhra Pradesh High Court in Mohammed Bhai v. Controller of Estate Duty. The judgment in Mohammed Bhai's case was cited before the Division Bench of this court in Ronag Ram Bakshi Ram Gupta's case, but the learned judges preferred to follow the judgments of the Gujarat High Court 'referred to above, impliedly rejecting the view of the Andhra Pradesh High Court. It has now been vehemently stressed by the learned counsel for the respondent that the view of the Andhra Pradesh High Court has found favour with the Assam and Nagaland High Court and Madras High Court, and, in view of the conflict of judicial decisions, it is a fit case in which the matter should be re-examined by a larger Bench so as to decide whether Ronaq Ram Bakshi Ram Gupta's case was correctly decided. On the language of Section 10 of the Estate Duty Act, it is possible to take the view propounded on behalf of the respondent, particularly in view of the addition of the second proviso to Section 10 in 1965, which makes it clear that if the right of residence is retained by the donor as a part of the transaction of the gift, the property shall be deemed to pass on his death as his property and will not become the property of the donee. But if by the transaction of gift he does not retain the right of residence in the gifted house but continues to reside therein by the goodwill of the donee, the gifted property would remain the property of the donee and would not pass as the property of the donor on his death. We, therefore, agree to the submission of the learned counsel for the respondent that the matter should be decided by a larger Bench and the learned counsel for the petitioner also agrees to this course.
8. The second question that has arisen in the present case concerns the sum of Rs. 20,667, the value of the 1/6th share which Shri Jaishi Ram had relinquished in the joint Hindu family less than two years before his death. It was argued before the Income-tax Appellate Tribunal on behalf of the respondent that the transaction of relinquishment of right did not amount to a disposition or a gift and consequently Section 9 of the Estate Duty Act did not apply. Reliance was placed on a judgment of the Madras High Court in Commissioner of Gift-tax v. N.S. Getti Chettiar. The Tribunal accepted the contention raised on behalf of the respondent. Before us it has been argued by the learned counsel for the petitioner that according to Explanation 2 to Section 2(15) of the Act, the relinquishment of the right to the share in the joint family property amounted to disposition of property and, therefore, according to Section 27 of the Act the relinquishment amounted to gift in favour of the sons and having been made within two years of the death, the amount was includible in the estate of the deceased. Since we are inclined to refer this case to a larger Bench on the first question, it will be proper and fair that this question may also be decided by that Bench. We are accordingly of the opinion that this case should be decided by a Full Bench of at least three judges. The papers may be placed before my Lord the Chief Justice for constituting the larger Bench.