M J RODRIGUES Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) This is a reference made under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as "the Act"), requiring our opinion on the following question :

(2.) The facts leading up to this reference are set out hereinafter : Shri A. A. Rodrigues, in his letter dated December 11, 1957, suggested to his son, James, who was in U.S.A., to form a partnership to manage the coffee estate between themselves and his other son, Michael, to which the latter son had already assented. On April 26, 1958, he gifted one portion of the coffee estate, namely, Eliza Estate, to Michael and another portion of the same estate to James by two deeds which were registered on April 28, 1958. On April 28, 1958, a partnership deed was also executed between the said Rodrigues and his two sons, Michael and James, the share in respect of Rodrigues at 40 per cent., and that of each son Michael and James at 30 per cent. Rodrigues died on March 3, 1969. The estate of the deceased Rodrigues was charged with duty under the Act. However, the Assistant Controller of Estate Duty did not include in the principal value of the estate of the deceased, the shares of the two sons, James and Michael, in the said coffee estate which was an asset of the partnership firm. In the appeal filed by the accountable person before the Appellate Controller, the Assistant Controller sought for enhancement of duty by including the properties gifted by the deceased, Rodrigues, which were includible in the estate as passing on the death of Rodrigues in view of section 10 of the Act. The Appellate Controller held that section 10 was not applicable to the facts of the case in view of the ratio of the decision in the case of Munro (H.R.) v. Commissioner of Stamp Duties [1934] AC 61 (PC); 2 EDC 462 (PC). The Revenue filed a further appeal to the Tribunal. The Tribunal held that the material on record did not support the view of the Appellate Controller that the formation of the partnership preceded the gift executed by the deceased in favour of his two sons and, therefore, remanded the matter to the Appellate Controller directing him to pass a fresh order after considering such evidence as may be led by either party. The Appellate Controller heard the matter afresh and held that the ratio of the case in R. V. Viswanathan v. CED AIR1977 SC 463 , [1976 ]105 ITR653 (SC ), (1977 )1 SCC90 , [1977 ]1 SCR649 , would apply to the facts of the case and, therefore, section 10 would not be applicable to the facts of the case. Again, the Revenue preferred a second appeal to the Tribunal, which ultimately held that if there is an absolute transfer of property by way of gift without any reservation and that property is subsequently put into partnership, of which the donor was a partner, then the principal value of such property is includible under section 10 of the Estate Duty Act as property passing on the donor's death and, therefore, allowed the appeal of the Revenue and directed the Assistant Controller to include the value of the estate gifted by the deceased, Rodrigues, in the principal value of his estate under section 10 of the Estate Duty Act.

(3.) Aggrieved by the said order of the Tribunal, the accountable person sought for reference and at his instance, this reference has been made on the question referred to above.