K ISMAIL Vs. CONTROLLER OF ESTATE DUTY MYSORE

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Bangalore Bench, has stated a case and referred the following questions of law under section 64(1) of the Estate Duty Act, 1953, hereinafter called

(2.) The deceased, Suleman Sait, was a partner of a firm by name, 'M/s. Ismail Haji Suleman Sait, Hospet', carrying on business in foodgrains, oil, etc., in Hospet town. He died on first December, 1966. The Assistant Controller of Estate Duty determined the net principal value of the estate at Rs. 2,19,813. Thayt amount included a sum of Rs. 13,860 which, according to the Assistant Controller, represented the deceased's 1/5th share of the goodwill value of the firm. It also included a sum of Rs. 71,900, which was the amount gifted by the deceased to his wife and children with interest thereon, which amounts were kept in the firm and utilised for the purposes of the business. On appeal preferred by the accountable, person, the Appellate controller valued the goodwill at two year's purchase of the average profits. The contention of the accountable person that the aforesaid sum of Rs. 71,900 was not property passing on death under section 10 of the Act was rejected. That decision of the Appellate Controller was affirmed by the Appellate Tribunal. Aggrieved by the decision of the Appellate Tribunal, the accountable person has sought reference to this court on the above questions of law.

(3.) The second question of law is concluded by the decisions of the Supreme court in Controller of Estate duty v. C. R. Ramachandra Gounder and Commissioner of Income-tax and Controller of Estate duty v. N. R. Ramarathnam. In the latter case the facts were these : The deceased his three sons and a daughter were partners in a firm which carried on money lending business. On March 31, 1953, and April 1, 1956, the deceased transferred to his sons and daughter amounts totalling Rs. 1,29,924 by adjustment entries in the books of the firm against the balance to his credit in the firm. The amounts continued to remain with the firm and were utilised in the business and the deceased continued to be a partner of the firm till his death on October 17, 1960. The question was whether the sum of Rs. 1,29,924 could be included in the property passing on his death under section 10 of the Estate Duty Act, 1953. The Appellate Tribunal, applying Munro's case, held that the subject-matter of the gifts did not come within the purview of section 10 and was not subject to estate duty. On a reference, the High Court held that the sum of Rs. 1,29,924 was not liable to estate duty as property deemed to pass on the death of the deceased under section 10. In the said case, the amounts transferred by the deceased to his daughter and sons continued to remain in the partnership business subsequent to the transfers till the death of the deceased and were utilised in the firm's money-lending business. Following the decision in Ramachandra Gounder's case, the Supreme Court held that the amount of Rs. 1,29,924 which was the subject-matter of the gifts did not come within the purview of section 10 and, therefore, not property subject to estate duty. The said decision concludes this matter and accordingly, we answer question No. 2 in the negative and in favour of the accountable person.