CONTROLLER OF ESTATE-DUTY Vs. N BALAJI

JUDGEMENT

(1.) THIS is a reference at the instance of the CED, Madras, in relation to the estate duty payable on the death of one Narayana Chettiar, who died on April 6, 1963. Between the years 1957 and 1960, commencing from May 26, 1957, the deceased had gifted properties worth Rs. 70, 000 on May 26, 1957, and April 12, 1960, to Balaji, another sum of Rs. 70, 000 on May 26, 1957, and April 12, 1960, to Govinda, a sum of Rs. 25, 000 to Anusuya on April 6, 1958, and on the same day another sum of Rs. 25, 000 to Saroja. Balaji, Govinda, Anusuya and Saroja are the children of the deceased.

(2.) THE deceased then borrowed from Balaji on March 3, 1960, Rs. 65, 000, from Govinda another sum of Rs. 65, 000 on the same day and from Anusuya and Saroja Rs. 25, 000 each on the same date. So at the time of his death there were liabilities to the extent of Rs. 1, 80, 000. THE creditors to whom the deceased owed these monies transferred their right to collect them to a firm called Balaji No. 2 on February 10, 1962. So at the time of the death, the liability of the deceased was towards the firm. No suggestion was made at any time that the transfer by the original creditors to the firm was sham or did not in fact take place. THEre is also no case and there is no material to show that Govinda and Balaji, who were the partners of the firm, Balaji No. 2, brought the properties, which they got by gift from the deceased, to the firm and thus made them the properties of the firm. On these facts, the question is whether the accountable persons are entitled to claim the sum of Rs. 1, 80, 000 which was said to be due from the deceased at the time of his death on April 6, 1963, as a deduction to be made from the value of the estate of the deceased by applying s. 44 of the E.D. Act. In dealing with s. 44 the provisions of s. 46 of the Act will have to be borne in mind, for, the deductions permissible under the earlier section will get abated if the conditions of s. 46 are satisfied THE Tribunal held that the accountable persons are entitled to have the entire amount of the debts claimed as deductions under s. 44 of the Act.

(3.) THERE is no case that the properties which the partners derived as their own was ever brought into the stock of the firm or became the properties of the firm under s. 14 of the Partnership Act, 1932. It is useful to read s. 14 of the Partnership Act at this stage ".14. Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the businessUnless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm." *In view of the fact that there is no relationship between the creditors, who are the partners of the firm, and the properties of the firm, s. 46 has no application. The wording of s. 46(2) makes it clear that only in such cases s. 46 could be applicableIn the light of the above, we have to answer the two questions by giving a combined answer by saying that no abatement whatever can be made by applying s. 46 to the total amount of the debts of the deceased amounting to Rs. 1, 80, 000. The accountable persons are entitled to have this amount of Rs. 1, 80, 000 deducted from the total value of the estate of the deceased at the time of his death on April 6, 1963. We answer the two questions in the above terms. We make no order as to costs in this case.