VEERASWAMI J. - This is a reference under section 64(1) of the Estate Duty Act, 1953, and the question referred to us is :
'Whether, on the facts and in the circumstances of the case, the value of the two house properties at Rutland Gate and Balajinagar, standing in the name of Srimathi Gaja Gowri Ammal, widow of the deceased, was properly included in the principal value of the estate of the deceased ?'
R. Subbaiah Naidu died on January 30, 1957, leaving his second wife and a will by which he had appointed two executors, who are the accountable persons. The estate of the deceased was valued for purpose of estate duty and in the principal value was included, by the Assistant Controller, the value of two houses together with their relative sites. On appeal, this inclusion was confirmed. At the appellate stage, the revenue proceeded on the basis that the two houses, together with the sites, were the subject matter of gifts made by the deceased to his second wife. The question of benami, which was raised before the Assistant Controller, did not, therefore, loon large before the appellate authority, which is the Central Board of Revenue. But the appellate authority was of the view, like the Assistant Controller, that the gift was with reservation, within the meaning of section 10 of the Act. This view the appellate authority expressed on certain factual findings. The site on which the Rutland Gata house was constructed was purchased on September 4, 1939, in the name of the second wife of the deceased, and likewise the other site in Balajinagar on April 15, 1940. The construction of these two houses was completed by 1941. There is no controversy that the entire money for the purchase of the sites as well as for the construction came from the deceased. The two houses were let out and the tenancy agreement in respect of the Rutland Gata house was entered into between the deceaseds second wife and the tenant on September 29, 1950. The municipal records showed that the houses were registered in her name and the tax receipts in respect of the properties were naturally in her name too. In his will dated September 29, 1954, the deceased recited that he had already made a gift of the two houses together with the sites to his wife and they belonged to her absolutely. The further facts found by the revenue are that the monthly rents were received in cheques drawn up in favour of the deceased and the same credited to his current account in the State Bank, that in March, 1956, this current account was converted into a joint account of the deceased and his second wife and that from 1942-43 to 1957-58 the deceased included the rents received from the two houses in his income returned for purposes of income-tax. It appears that when one of these houses was released by the Collector in July, 1949, the deceased was treated as the owner and the Accommodation Controllers order dated November 15, 1950, releasing the other house under the provisions of the Madras Buildings (Lease and Rent Control) Act, also proceeded on the basis that the deceased was the owner. The property tax for the two houses was paid by the deceased out of his current account. The appellate authority recorded also a further finding :
'.....it has been brought on record that the deceased used to deposit the rentals in his own bank account and utilise the funds for his own purpose.'
The Assistant Controller, on this aspect of the matter, gave his finding in this words :
'So the position is that the rents received from these two houses were deposited by the deceased in his own bunk account and later withdrawn as and when required for his household expenses.'
Both the revenue authorities rejected the contention for the accountable persons that the deceased, as a Hindu husband who had married a long wife, about 18 years at the time of marriage in 1957, acted as a trustee or as an agent for his wife in respect of the two houses, which he had gifted to her and that his acts covered by the findings of the revenue authorities should be assessed in that light and that such acts on the part of the deceased could not be taken as inconsistent with his second wife having assumed exclusive possession and enjoyment of the two houses pursuant to the gift.
It may be seen that the two main facts which prevailed with the revenue for applying section 10 are : (1) that the deceased received the rents from the houses, remitted the same into his own current account, which later was converted into a joint account and utilised the same for his own purposes, and (2) that the deceased himself had included the rental income from the two houses in the returns of his income for purposes of income-tax. It is strongly urged before us for the accountable persons that these two facts are in no way inconsistent with the donee having assumed exclusive possession and enjoyment of the properties. It is said that, viewed in the light of the relationship of the deceased and the donee, it would be but natural for the deceased to have dealt with the rental receipts in the way in which he had done, without in any way derogating from the completeness of the gifts of the two houses. Mr. Sivaramakrishnaiah appearing for the accountable persons also urges that section 10 should receive a liberal interpretation, particular communities in this country. He also reiterates the argument stressed before the revenue that, apart from viewing the matter in that way, the deceased should be regarded as a trustee or as an agent for the second wife. As to the application of the rental receipts, he contends that the net monthly rental income being Rs. 385 this would have been barely sufficient for the maintenance expenses of the second wife, and, looked at in this way, the subject-matter of the gift suffered no detriment and correspondingly the deceased derived no benefit, so as to say that the gift was with reservation.
The Act by section 5 charges duty on the principal value of the estate of a person that passes on his death. A number of sections follow, which state what property of such person is deemed to pass. A gift of immovable property under section 10 will be dutiable unless the donee assumes immediately exclusive and bona fide possession and enjoyment of the subject-matter of the gift, and there is no beneficial interest reserved to the donor by contract or otherwise. The section reads :
'Property taken under any gift, whenever made, shall be deemed to pass on the donors 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.'
The proviso to the section is unnecessary in the present context. The crux of the section lies in the two parts : (1) 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, and (2) the donor must have been excluded from any benefit from the subject-matter of the gift, by contract or otherwise. In short, it must be a gift without any reservation, in order that it may not be included in the estate of the deceased for purposes of estate duty. Such an entire exclusion of the donor can only save the gift from its liability to duty. Dymonds Death Duties, fourteenth edition, 1965, analyses the British counterpart of section 10 in the Estate Duty Act, 1953, and, while noticing the conditions for its applicability, says :
'Condition (c) is the crux of the matter. The condition has two limbs : the deceased must be entirely excluded (i) from the property and (ii) from any benefit by contract or otherwise.'
It does not appear that the order of the appellate authority, like the first order, is rested on the second limb. In any case, we are clearly of opinion that it is not applicable to the facts and circumstances of the present case. There is nothing to show that there was any contract under which the deceased had a beneficial interest in the properties gifted by him to his second wife. Mr. Balasubrahmanyan for the revenue contends that reservation of benefit need not necessarily be always under a contract, as evident from the word 'otherwise' used next to the word 'contract'. We cannot accept his construction. 'By contract or otherwise' used in the section should, in our opinion, be read ejusdem generis. If the word 'otherwise' is to be given the wide scope which the revenue contends for, we fail to see why the section could not have stopped short of using these words in the section. An examination of a similar provision in the Australian enactments shows that section 10, by the concluding words, is not meant to be as wide as the Australian legislation on the subject. In the context, 'otherwise' should be understood as implying some obligation either in law or in equity in the nature of a contract or quasi-contract, or in some other form. In other words, reservation of benefit to the donor should be one enforceable by him. On the facts in this case, there was no such benefit derived by the deceased from the subject-matter of the gift.
The question then is, whether the first limb is satisfied, whether the donor had been entirely excluded from possession and enjoyment of the properties. On the construction of this first limb, especially the words, 'possession and enjoyment', we are inclined to accept the contention of Mr. Sivaramakrishnaiah that they must receive a liberal interpretation. They should be understood not in literal sense, but interpreted in its application, keeping in view the relevant facts and circumstances, including the relationship, manners and customs of persons concerned, the habit of living, manner of dealing with his or her property in the context of judging whether, following the gift, the donor had divested himself of all interest and the donee had assumed possession and enjoyment of the property gifted to the exclusion of the donor. For instance, the conception of married life of Hindus carries with it certain incidents which are not the same as the marital relationship in other communities or nationalities. Likewise, even in the matter of dealing with each others property, a Hindu wife is placed in a peculiar situation in respect of her property. It is not unoften that a Hindu husband deals with his wifes property; it may be because the wife is unable to manage her property or because she is purdah or because of other reasons. In such a case, it will be a matter of consideration in each case whether the acts of the husband, in relation to the property gifted to the wife by him, can be construed as being inconsistent with the wife having exclusive possession and enjoyment. There is, therefore, some force in the contention of Mr. Sivaramakrishnaiah that the deceased, when he collected the rents and remitted the same into his current account, acted as a trustee or an agent of this wife. It is quite possible. We are of the view that, from that circumstance alone, it cannot be said that the wife did not have exclusive possession and enjoyment of the property. Equally, in our opinion, the revenue cannot rely on the circumstance that the deceased included the rental income from the properties covered by the gift in the returns of his income for purposes of income-tax. Section 16(3)(a)(iii) of the Income-tax Act, 1922, requires that the income from property within the purview of that provision should be included in the income of the husband. It may be that the form of return prescribed does not provide a column for the assessee to indicate the particulars in relation to such rental income. But that does not seem to affect the applicability of section 16(3)(a)(iii). In any case, even if the deceased had made a mistake about it, it could not be said that by including the rental income in his return for purpose of income-tax, he, for that reason, must be taken to have exercised some control over the possession and enjoyment of the subject-matter of the gift. As a matter of fact, as we already mentioned, the Rutland Gate house was let out by the second wife and the tenant was put in possession by her. Under the tenancy agreement, the tenant was liable to pay rent to her. That could only be on the basis that the donee had assumed possession and enjoyment of the subject-matter of the gift, at least so far as that house was concerned. In respect of the other house, which was also let out, there was no doubt no lease deed. But, in the circumstances, it would not be an unjustifiable inference if we take it that it should have been let out in the same way as the other house.
We are also of the view that, if nothing more happened, then the husband received the rents and put them in his current account, that would not be inconsistent with the donee having taken exclusive possession of the subject-matter of the gift. It is contended for the accountable persons that the rental income so remitted into the deceaseds account may have been expended for the maintenance of the donee. If that was the case, the principal of Oakes v. Commissioner of Stamp Duties of New South Wales might perhaps apply. But no factual investigation would appear to have been made in this case as to whether actually the rental income was applied in that way. In Oakes v. Commissioner of Stamp Duties of New South Wales, there was a finding that part of the income of the minors there was applied for their maintenance. In this case, on the other hand, the appellate authority recorded a finding that the rental income received by the deceased and remitted into his current account was utilised for his own purpose. We do not find any material on which this finding could be based. But, unfortunately, no reference was made on that question. It is, however, argued by Mr. Sivaramakrishnaiah that this finding should be understood in the context of what the Assistant Controller had stated, namely, that the amount so remitted by the deceased was withdrawn, as and when required, for household expenses. On the other hand, Mr. Balasubrahmanyan for the revenue insists, we think, rightly, that our jurisdiction under section 64(1) of the Estate Duty Act is a limited one and is advisory in nature that we can only offer our opinion on the facts and circumstances stated and we cannot exercise our appellate power and find facts for ourselves from the record. Having regard to the nature of our jurisdiction, when the court is asked to offer an opinion, on the facts and in the circumstances of the case, we have got to accept those facts and circumstances stated in the statement of the case and appearing in the order. In fact section 64(1) confines our jurisdiction to questions arising out of the order. We accept the contention for the revenue on this aspect. If the finding of the Appellate authority stands, namely, that the deceased utilised the rental income received by him in respect of the two houses for his own purpose, obviously, it will be inconsistent with his having been entirely excluded from the possession and enjoyment of the houses. Where, neither the donor nor the donee is in possession, how the income derived from the property is applied will decide the question of exclusion. Attorney-General v. Seccombe 589. was a peculiar case and the facts there, so far as this aspect of the matter is concerned, were not similar to what we have here. Though the donor there was in occupation of a part of the property, which was the subject-matter of the gift, it was held that it was not inconsistent with the donee having bona fide assumed possession and enjoyment. This is explained in various ways as that the donor was left in such occupation as a guest or as a licensee or merely as a matter of goodwill on the part of the donee in view of the benefaction he received at the hands of the donor.
We answer the question against the assessee, though we do so with a certain amount of reluctance. The accountable persons fail because unfortunately no question was asked to be referred to us as to whether the finding that the rental income was utilised by the deceased for his own purpose, was supported by material. The revenue is entitled to its costs. Counsels fee Rs. 250.