CONTROLLER OF ESTATE DUTY Vs. RATANLAL BUDHAMAL TAKI

JUDGEMENT

(1.) THIS is a reference on a case stated under S. 64(1) of the E.D. Act, 1953 (referred to hereinafter as "the said Act"). The following two questions have been referred to us for our determination :

(2.) THE facts giving rise to this reference are as follows: The deceased had a proprietary business of the manufacture of bidis. At the end of Samvat year 2011, that is, on Diwali 1957, he transferred an amount of Rs. 1,60,000 each to his son and minor grandson by way of gifts. With effect from the beginning of Samvat year 2012, the said proprietary business of manufacturing bidis was converted into a business run by a partnership consisting of the deceased himself and the two donees.

(3.) THE Asstt. CED valued the goodwill of the business at Rs. 58,000. He held that originally the asset was owned by the deceased in its entirety. On account of the admission of the son and the grand son, the goodwill had come to be shared amongst the three partners. He applied the provisions of S. 10 of the said Act to this asset and included an amount of Rs. 58,000, being the value of the goodwill in the estate of the deceased for the purposes of determining the property of the deceased which passed under S. 5 of the said Act. An appeal preferred by the accountable person to the Appellate CED against the order of the Asstt CED. to the aforesaid extent, was dismissed by the Appellate CED. There were some other additions and adjustments made by the Asstt. CED with which we are not concerned in this reference. On further appeal by the accountable person to the Tribunal, the Tribunal held that merely because a donee of a gifted property invested that property in a firm in which the donor was a partner it could not be said that the donor was interested in that property and consequently it could not be said that the property passed to the donee on the death of the donor, provided the requisite period of two years has passed. On this reasoning, the Tribunal allowed the appeal and held that the amount of Rs. 2,82,000 as well as the sum of Rs. 58,000 were wrongly included in the estate of the deceased. In coming to this conclusion the Tribunal placed strong reliance upon the decision of the Punjab and Haryana High Court in CED vs. Jai Gopal Mehra (1972) 85 ITR 175 (FB).