T O HYDROSE Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE proprietor of a grocery business by name Kader Ooran had eight children, one of them being a minor. On 31st March, 1960, Kader Ooran gifted Rs. 40,000 worth of stock-in-trade, cash and cheques to his wife and children ; and on 1st April, the next day, he entered into a partnership with them taking them as partners in the business and admitting the minor son to the benefits of the partnership. (The partnership deed, annexure " A", however, states that the gift was on 1st April, 1960, and was by way of settlement). On 14th March, 1961, Kader Ooran died ; and the balance- sheet of the business for the year was prepared as on 31st March, 1961. In the said balance-sheet, a sum of Rs. 31,069 was shown as the profit for the year, i.e., after the date of the gift, that fell to the share of the wife and children. Since Kader Ooran died within two years of the date of the gift, the sum of Rs. 40,000, the value of the stock-in- trade, cash and cheques, was the property of Kadar Ooran, which should be deemed to pass to the donees only on his death. There is no dispute regarding this either. The Asstt. CED included the sum of Rs. 31,069 also in the estate left by Kader Ooran and duty was charged on the aggregate. On appeal, the Appellate CED was of the opinion that this sum would not form part of the estate left by Kader Ooran and, consequently, reduced the value of the estate by this amount. On further appeal, the Tribunal disagreed with the Appellate Controller, reversed the appellate order and restored the order of the Assistant Controller. Then at the instance of the accountable person, the question :

(2.) THE counsel for the accountable person has contended before us that what was gifted to the wife and children was a sum of Rs. 40,000, so that the profit derived from the partnership in which the said sum was invested by the widow and children would not form part of the estate left by Kader Ooran. The counsel has also relied strongly on the English decision of the House of Lords in Sneddon vs. Lord Advocate (1954) A.C. 257 : (1954) 25 ITR (ED) 6 : 3 EDC 491 (HL). The counsel for the Revenue, on the other hand, has contended that what was gifted by Kader Ooran was a share in the business with a proportionate capital of Rs. 40,000.

(3.) IN the next paragraph His Lordship has considered the question whether there was any distinction between a gift to a person for his own benefit and a gift to trustees for the benefit of persons entitled in succession. And the question appears to have been answered in the negative. The discussion in that paragraph also indicates that the proposition laid down above applied not only to cash gifts but to transfers of shares as well. (How far this is correct, in the manner we look at the question, we venture not to express any opinion on, in this case.) In Dymond's Death Duties, 13th edition, pages 232 to 234, the question regarding the subject-matter of gifts is dealt with. The Sneddon case (1954) A.C. 257 : 25 ITR (ED) 6 :3 EDC 491 (HL) is also referred to in the discussion : and it is observed that where an original absolute gift was of cash, the practice has always been to charge duty on that cash alone and to ignore any subsequent dealings with it by the donee. There is also some discussion regarding this principle in its application to a gift of other property and a gift by way of settlement. In Halsbury's Laws of England, 3rd edition, vol. 15, page 18, para 34, appears that the property chargeable is the property originally given whether the gift is made by settlement or not. And in the same volume, at page 72, para 146, appears that every estate includes all income accrued upon the property comprised therein down to and outstanding at the date of the death. In Green's Death Duties, 4th edition, page 416, s. 6(5) of the English Finance Act of 1894, which runs :