1. This reference under S. 64(1) of the Estate Duty Act turns on construction of the words "to the extent" in S. 10 of the Act. S. Vaidyanatha Iyer died on 5-9-1958. On 8-6-1956 he addressed the Kumbakonam Bank Ltd, informing it of his intention that the 'two fixed deposits, one for Rs. 15000 and the other for Rs. 10000, should be taken by his second son V. S. Mani and requesting the Bank to pay the principal and interest due on the deposits on maturity to him. On 11-10-1956 V. S. Mani advised the bank that the interest due on the two deposits might be credited to the current account of his father Vaidyanatha Iyer. Both the letters were given effect to by the Bank as intimated by it on 15-10-1956. It appears that the fixed deposits matured for payment on 14th and 15 October 1956.
The Assistant Controller rejected the contention of the accountable person that the gift was made bona fide more than two years before the death of the deceased and did not attract estate duty in view of the provisions of S. 9. This was on the view that the two years should be computed from the date of maturity of the fixed deposits. On appeal the Board of Revenue differed and held that the gift was made two years before the death of the deceased. But the Board concurred with the Assistant Controller and found that the gift was hit by S. 10 and was chargeable to duty. In the circumstances, the question referred to us is:
"Whether on the facts and in the circumstances of the case, the entire amount of the two fixed deposits gifted by the deceased more than two years before his death, has been correctly included in the principal value of the estate of the deceased as property deemed to pass on his death under S. 10 of the Act."
We are of opinion that the view of the Revenue of this question cannot be accepted. For the accountable person it is not disputed that so far as the interest due on the fixed deposits which on the advice of the donee was credited to Vaidyanatha Iyer in his current account it was properly included in the principal value of the estate subject to duty. This submission for the accountable person is based on his construction of the words "to the extent" which occur in S. 10. It is said that the effect of these words is to limit the levy of duty proportionate to the quantum or extent of the property retained by the donee. On the other hand, for the Revenue it is argued that "to the extent" in the section does not refer to extent or quantum of interest not taken possession of and retained by the donee but has the effect of "if" or "where". If that is the effect to be given to the words "to the extent" there is no difficulty in holding that even though the retention with the donor is only of a part of the property which is the subject matter of the gift, the entire property will become chargeable to duty. In our opinion, the correct construction is that which is urged for the accountable person.
(2) The words "to the extent" employed in S. 10 are not to be found either in the English or Australian Acts relating to estate duty. Though the phraseology of S. 10 in the Indian Act would appear to have been substantially borrowed from the English Act, we fail to understand why the Indian Legislature introduced those words in the section unless its intention was to bring to tax only that value of property gifted which is still retained by the donor. The section in case of partial gift, so to state in the context of S. 10, charges only the part covered by the non-exclusion and non-retention clauses in the section. To the extent to which the donor retains as interest in the entirety of the property given away by him as gift, there will be pro tanto liability to estate duty.
(3) It is strenuously urged for the Revenue that if that was the meaning, the words "entire exclusion" will have no sense or content. We are of the view that the word "entirety" in the context refers only to the fractional part, the possession of which has not been taken or assumed by the donee and retained to the exclusion of the donor.
(4) S. 6 also uses the words "to the extent". But in the context of S. 40, those words clearly indicate the extent or quantum of interest. There is no reason to think that those very words in S. 10 have been used in a different sense. The construction we have placed on the words "to the extent" receives support from Rash Mohan Chatterjee v. Controller of Estate Duty, West Bengal, 1964-52 ITR (ED) 1. The question referred to us is answered in favour of the assessee with costs. Counsel's fee Rs. 250.
(5) Reference answered.