D. FALSHAW C.J. - This is a reference made to this court by the Central Board of Direct Taxes, New Delhi, under section 64(1) of the Estate Duty Act of 1953. The question referred reads :
'Whether on the facts and in the circumstances of the case, the agricultural lands alleged to have been gifted by the deceased were correctly included in the estate of the deceased as property passing on her death ?'
The question has arisen in connection with the estate of Shrimati Dhan Devi who died on 26th of September, 1957. Her son, Dilbahadur Singh, submitted a statement of account regarding her estate in the prescribed form in which he declared that the principal value of the estate passing on death was Rs. 1,02,942.00. However, the Assistant Controller of Estate Duty, Patiala by his order, annexure 'B' (in which the date of the order is not printed) has assessed the value of the estate at Rs. 7,30,726.00. The referenced only concerns one item in the assessment, the value of 1,797 bighas of lands which had been fixed at Rs. 1,03,000.00. More than two years before her death on the 11th of February, 1955, the deceased executed sons, Tejbahadur Singh and Vijaybahadur Singh, sons of Dilbahadur Singh. Both were minors at the time of the gift which was accepted in their names by their mother, Shrimati Rajinder Kumari. It was mentioned in the gift deed that the land was under a long lease for 10 years with certain tenants. It is not clear from any of the documents printed in the reference whether the mutation was effected in the names of both the done immediately, though it is stated by the learned counsel for Dilbahadur Singh that this was done, but it is clear that one of the donees, Tejbahadur Singh, died within a few months of the gift and a mutation was certainly effected in favour of the surviving brother, Vijabahadur Singh, in July, 1955.
The Assistant Controller of Estate Duty refused to recognise the gift as valid on the ground that it was not complete, since there could be no valid acceptance on behalf of the minors by the mother in the presence of the father, and that the gift was a sham and benami transaction (both words are used), intended to defeat the provisions of the Pepsu Tenancy & Agricultural Lands Act, 1955. His reasons for reaching the latter conclusion were the so-called unexplained mutation of the whole of gifted lands in the name of Vijaybahadur Singh after the death of his brother, although he was not a heir of his brother, and the fact that in 1956-57 parts of the lands a major had appeared and made a statement in which he admitted that he knew nothing about these sales and had not received any of the sale proceeds.
The appeal filed by Dilbahadur Singh was dismissed by a members of the Central Board of Revenue on the 29th of July, 1961. Part of his order concerns other items included in the estate, and regarding the gifted land he mentioned the conclusion of the Assistant Controller that the gift was made with the intention of evading the legislation regarding ceiling on lands holding, but he only independently discussed the question whether there was any proper acceptance of the gift by the mother of the minor donees, on which point he agreed with the Assistant Controller. However, he also appears to have accepted his finding on the first point, since he overruled the objection on the ground that the gift was neither bona fide nor complete. The point of law which the member of the Central Board of Direct Taxes, to whom the application for a reference was made, considered to arise in the case was as formulated above.
In my opinion, the validity of the gift was wrongly rejected. As regards its completeness, no authority has been cited to show that a gift made by a grandmother to grandchildren cannot be validly accepted by the mother of the minors simply because of the presence of the father, and I cannot see now this renders the acceptance invalid. There appears to me to be no reason for regarding the transactions as benami in the since that the tenants did not attorn to the donees and that rent continued to be realised from the tenants by the donor.
The conclusion that the gift was a sham transaction entered into with the object of evading the provisions of the Pepsu Tenancy & Agricultural Lands Act does not appear to be justified. The Act itself only came into force on the 30th of October, 1956, and the gift would only have been hit by its provisions if it had taken place after the 21st of August, 1956. In my opinion, the sales of portions of land on dates between the 24th of September, 1956, and the 19th of August, 1957, which have been listed in the order of the Assistant Controller, are completely irrelevant in deciding the question of the validity of the gift. If those transactions are hit by the provisions of the Act that is a matter to be a dealt with by the ceiling of the holding of the surviving donee. As I have said, this aspect of the case was no dealt with by the learned members of the Central Board of Revenue who dealt with Dilbahadur Singhs appeal, and the only reasoning on the point is contained in the order of the Assistant Controller who has made much of the fact that in a will executed by the deceased on the 11th of September, 1957, about a fortnight before her death, she left the land to Vijaybahadur Singh. Actually, it is clear from the terms of the will that she did nothing of the kind, and she merely stated that when the whole of the land came to Vijaybahadur Singh after the death of Tejbahadur Singh her intentions had been carried out, and that had taken place in July, 1955.
It was argued on behalf of the department that the finding that the transaction was neither complete nor bona fide was a finding of fact with which we ought not to interfere. The question whether the gift was completed by the acceptance by the mother of the minors on their behalf is a question of law pure and simple, and in my opinion the question of the bona fide nature of the gift is a matter on which we can interfere if we find that the decisions has been based on irrelevant consideration, which in my opinion, is so in the present case. The result is that I would answer the question referred to us in the negative and allow Dilbahadur Singh his costs.
Counsels fee Rs. 200.00.
D. K. MAHAJAN J. - I agree.