SAROJINIAMMAL Vs. CONTROLLER OF ESTATE DUTY MADRAS

JUDGEMENT

(1.) In this appeal by a certificate granted by the High Court of Madras under S. 65 of the Estate Duty Act, 1953 (hereinafter referred to as "the Act", the vexed question of applicability or otherwise of S. 10 of the Act arises for decision of this Court.

(2.) One Murugesa Mudaliar, the deceased, passed away on 15-10-1964. He was carrying on a business under the name and style of Newton and Company a proprietary concern. On 20-7-1962, the deceased made two cash gifts of Rs. 40,000/- each to his two daughters, namely, Smt. Rajeswari and Gnanambigai by debiting his capital account and crediting their accounts in his personal business book. On 20-7-1962, both the donees wrote letters to the deceased accepting the gifts and thanking their father. Again on 27-7-1962 each donee by separate letters thanking once again for the gifts requested the deceased to retain the same in the business and admit them as partners. Accordingly, a partnership was formed with effect from 1-8-1962 in which the donees and also the donor were the partners. As noticed, the deceased passed away on 15-10-1964. A question arose, inter alia, whether on the facts and in the circumstances of the case, the gifts of Rs. 80,000/- in all made by the deceased to his two daughters by debiting his capital account and crediting the accounts of the donees in his personal business book could not be included in the principal value of the estate of the deceased under S. 10 of the Estate Duty Act.

(3.) The Assistant Controller of Estate Duty overruling the objection of the accountable persons concluded that since the gifted amounts were not taken possession of and enjoyed by the donees to the entire exclusion of the donor, the gifted amounts were liable to be included in the principal value of the estate of the deceased under S. 10 of the Act. On appeal, the Appellate Controller confirmed the assessment. The accountable persons appealed to the Income-tax Appellate Tribunal (Tribunal for short) and the Tribunal found that the gifts in question did not fall within the ambit of S. 10 of the Act and consequently they were not liable to estate duty. The Tribunal found as follows :