CONTROLLER OF ESTATE DUTY Vs. HAJI SATTAR

JUDGEMENT

(1.) IN this case which has been stated by the Tribunal under S. 64(3) of the ED Act, 1953, the following two questions have been submitted to the Court for its opinion :

(2.) THE facts in so far as they are material for the determination of the above two questions are very few and may be briefly stated. The deceased Haji Latif Gani Kachhi made a gift of Rs. 40,000 to each of his three sons on 19th May, 1955. This amount was handed over to the sons. Three days later, on 22nd May, 1955, his sons entered into a partnership with their father under a deed of partnership dt. 22nd May, 1955, in respect of the business which till then the deceased was carrying on as a sole proprietor. As their capital contribution to the said partnership each of the sons brought in a sum of Rs. 40,000. The shares of the deceased and the three sons in the profits and losses of the said firm were equal, that is, four annas or 25 per cent. each. The deceased died on 15th June, 1957. Out of the three sons the two respondents before us are the accountable persons.

(3.) SO far as the second question is concerned, since the deceased had not retained any possession or control or enjoyment in the said sums which were gifted, the findings of the taxing authorities, that the three fourths share of the sons in the goodwill of the said firm was as a result of the said sum of Rs. 1,20,000 was a gift to which S. 10 of the Act was attracted, cannot be sustained. If, therefore, these amounts, as gifts to the said three sons, belonged and continue to belong absolutely to the sons and identical sums were brought in by them as their contribution to the partnership capital, they had become partners in their own right and their shares in the goodwill of the firm could not be said to be property which passed on the death of the deceased. It may further be pointed out that at the time when the said partnership was formed the deceased was about 82 years old and he would most certainly require the time and energy of younger partners if the business were to be carried on. It was on this ground that this High Court held in CED vs. Kantilal Nemchand 1978 CTR (Bom) 268 : (1978) 115 ITR 89 (Bom), that in such a case there was sufficient consideration for the father taking his son as a partner with a share in the business and even increasing his share later on.