KHATIJABAI ABDULLA SOOMAR Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS case has been stated under S. 64(1) of the ED Act, 1953, and two questions have been referred to this Court by the Tribunal at the instance of the accountable person, namely, the applicant. These two questions are:

(2.) SO far as question No. 1 is concerned, when this reference reached hearing before us, Mr. Munim, learned advocate for the applicant, stated that the applicant did not desire this Court to give any answer to this question. Accordingly, we refrain from expressing any opinion with respect to question No. 1. For an understanding of how question No. 2 came to be referred to us, it is necessary to set out the material facts. The deceased, Abdulla Soomar Shivji, gave a gift of two sums of Rs. 75,000 each to his grandson, Hassan Jafferali Shivji, and grand daughter, Aminabai Jafferali Shivji, both minors, on 11th May, 1955, and 23rd July, 1956, respectively. These gifts were accepted on behalf of the minors by their father. The deceased was a partner in the firm of M/s Soomar Shivji and Company. The first sum of Rs. 75,000, gifted as aforesaid, was deposited by the guardian of the minors in the said firm on 10th July, 1955. The second sum of Rs. 75,000 was similarly deposited in the said firm on 12th Aug., 1955. The deceased retired from the said firm on 12th Nov., 1958. He died on 25th March, 1960. Until his death the said two sums remained deposited with the said firm. As he had died within two years of his retirement from the said firm, the Asstt. CED included these two sums in the estate of the deceased as property which was deemed to pass on the death of the deceased under S. 10 of the ED Act. This view was upheld by the Appellate CED as also by the Tribunal. It is against this finding that the second question is directed. At the hearing of this reference several decisions were relied upon by both the learned counsel. Before we turn to consider these authorities it will be convenient to set out at this stage the material provisions of S. 10 of the said Act, which are as follows :

(3.) THE second part of the section has two limbs : the deceased must be entirely excluded, (i) from the property, and (ii) from any benefit by contract or otherwise. It was argued for the appellant that the expression 'by contract or otherwise ' should be construed ejusdem generis and reference was made to the decision of Hamilton J. in Attorney General vs. Seccombe (1911) 2 KB 688 ; 1 EDC 589 (KB). On this aspect of the case, we think the argument of the appellant is justified. In the context of the section, the word ' otherwise ' should, in our opinion, be construed ejusdem generis and it must be interpreted to mean some kind of legal obligation or some transaction enforceable at law or in equity which, though not in the form of a contract, may confer a benefit on the donor." There is no dispute in this case that bona fide possession and enjoyment of the amounts gifted were immediately assumed by the donee and that the first condition of S. 10 of the ED Act was satisfied. There is equally no dispute that no benefit was reserved to the donor by contract or otherwise and that the second limb of the second condition was also satisfied. The controversy has ranged round whether the first limb of the second condition has been satisfied, that is, whether the possession and enjoyment of the amounts gifted were after assumption of possession and enjoyment of the donees retained by the donees to the entire exclusion of the donor. The first authority relied upon by Mr. Munim was a decision of the Judicial Committee of the Privy Council in H. R. Munro vs. Commissioner of Stamp Duties (1934) AC 61 ; 2 EDC 462. In that case a father, who was the owner of a large plot of land on which he carried on the business of a grazier, entered into partnership with his six children to carry on the said business. The partnership business was to be managed solely by the father, and each partner was to receive a specified share of the profits. Subsequently, he transferred, by way of gift by separate registered transfer deeds, all his right, title and interest in separate portions of his land to each of his four sons and the trustees of each of his two daughters and their children. This transfer was subject to the partnership agreement and was on the understanding that any of the partners could withdraw and work the portion of the land gifted to him separately. This partnership was an oral one, and about six years after these deeds of gifts were executed, a written partnership agreement was drawn up under which during the lifetime of the father no partner was entitled to withdraw from the partnership. On the death of the father, the land which he had transferred by way of gift to his six children was included in assessing his estate to death duties under the Stamp Duties Act, 1920 31, which contained a provision in pari materia with S. 10 of the ED Act. On appeal, the Judicial Committee held that the property comprised in the transfers was the land shorn of the rights therein belonging to the partnership and was excluded from being dutiable, because the donees had assumed and retained possession thereof, and any benefit remaining in the donor was referable to the partnership agreement entered into earlier than the gifts and not to the gifts. Before we turn to the other authorities relied upon by Mr. Munim, it will be convenient to refer to another decision of the Privy Council upon which considerable reliance was placed by Mr. Joshi, learned counsel for the respondent, namely, Clifford John Chick vs. Commissioner of Stamp Duties (1958) AC 435 ; (1959) 37 ITR (ED) 89 ; 3 EDC 915. The same section, namely, S. 102 of the New South Wales Stamp Duties Act, 1920 56, which fell for consideration in Munro's case (supra), also came up for consideration in this case. In Chick's case a father had transferred, by way of gift, to one of his sons a pastoral property, the gift being made without reservation or qualification or condition. About seventeen months after the date of gift the father, the son to whom the gift was made and another son of the donor entered into an agreement to carry on in partnership the business of graziers and stock dealers.