CONTROLLER OF ESTATE DUTY Vs. LEELAVATHI DEVI SMT

JUDGEMENT

(1.) One Shri Govindram Shivaldas was carrying on a proprietary business. On 24th Oct., 1965, he debited his capital account in the business with Rs. 15,000 and opened an account in the name of his son, Kailash, and credited the said amount of Rs. 15,000 to that account. The business was conducted as a proprietary concern till 8th Nov., 1966. An amount of Rs. 1,906 was credited to the account of Kailash as interest. Thus, on 8th Nov., 1966, the amount standing to the credit of Kailash in the books of the proprietary concern of Shri Govindram Shivaldas was Rs. 16,906. The proprietary concern of Shri Govindram Shivaldas was converted into a partnership concern w.e.f. 9th Nov., 1966, by the son, Kailash, becoming a partner along with the father. The credit balance of Rs. 16,906 in the account of Kailash was transferred to the books of the firm and was credited in the name of Kailash as his capital contribution to the business of the firm. The credit balance in the account of Kailash in the firm's books as on 15th Sept., 1969, when Shri Govindram Shivaldas died, was Rs. 37,268. In the assessment to the estate duty, after the death of Shri Govindram Shivaldas, the Asstt. CED held that out of the said sum of Rs. 37,268 the amount of Rs. 15,000 originally gifted by the deceased to Kailash was includible in the principal value of the estate of the deceased. According to the Asstt. CED, the mere passing of entries in his books of account did not have the effect of divesting the deceased of the domain over the amount in question. Against the order of the Asstt. CED, the accountable person preferred an appeal to the Appellate CED, who confirmed the conclusion of the Controller. Against the order of the Appellate CED, the accountable person took the matter on further appeal to the Tribunal and before the Tribunal, on behalf of the accountable person, reliance was placed on the decisions of the Supreme Court in CED vs. C. R. Ramachandra Gounder (1973) 88 ITR 448 (SC) and CIT & CED vs. N. R. Ramarathnam (1973) 91 ITR 1 (SC), and it was contended that S. 10 of the ED Act was inapplicable. This contention of the accountable person was resisted by the Department. However, the Tribunal held that S. 10 did not apply to the amount in question. In para. 6 of its order, the Tribunal pointed out :

(2.) IN view of the statement occurring in the penultimate sentence of the above paragraph, namely, "this of course is on the supposition that there was a valid gift on 24th Oct., 1965", it is necessary to refer to what the Tribunal records in para. 6 of its order. In that paragraph, the Tribunal states :

(3.) THIS reference came before the Hon'ble the Chief Justice and Ramanujam J. The learned judges referred the case to a Full Bench. While doing so, the learned judges observed :