MOHAMMAD BHAI Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THE CBDT has referred for our opinion the following three questions, viz.:

(2.) IT appears from the statement of the case that one Fida Ali Mohammed Ali died on the 12th May, 1958. On 1st March, 1952, before the ED Act was passed, he had by and under an unregistered deed gifted to his sons his business in stationery goods which was run as a partnership concern between himself and his son, Fazal Hussain, the latter having a right only to share in the profits and losses and not having any interest in the assets of the firm. He also gifted by a registered deed dt. the 1st March, 1952, certain house properties to his sons. Ever since the above gifts, the donees were making payments to the deceased almost regularly, at the rate of about Rs. 200 per month. They maintained a personal account in the name of the deceased in the books of the firm wherein the payments thus made by them were debited. The donees also gave an amount of Rs. 16,902 to the deceased for the marriage expenses of his daughters. The donees in their letters dt. the 22nd May, 1958, addressed to the Assistant Controller admitted that these payments were made to the deceased as a result of their oral promises to him at the time when he made these gifts. On these facts, the Assistant Controller held that the deceased was deriving benefits from properties gifted by him to his two sons. The accountable person, however, contended that the payments made to the deceased were only out of filial love ; that even if the payments were taken as benefits derived by the deceased, they were not such as were legally enforceable, and therefore, the provisions of S. 10 of the Act could not be invoked. IT is further stated that it was also contended that the gift of the business and the gift of the immovable properties were two separate gifts and, if any infirmity was attached to the gift of business and the provisions of S. 10 of the Act were sought to be applied thereto, the same could not be done as regards the other gift of immovable properties. The Assistant Controller, however, held that the benefits enjoyed by the deceased were referable not only to the gift of the business, but also to the gift of house properties and that the gifts should be included in the estate in terms of S. 10 of the Act. IT was also found that he had gifted to his wife the house in which he was residing and continued to reside therein. The Assistant Controller held that the provisions of S. 10 applied to those properties also, inasmuch as he continued to be in possession. The sons as well as the widow preferred an appeal to the Board under S. 63 of the Act against the orders of the Assistant Controller. The widow also filed a separate appeal. IT was contended before the Board that the Assistant Controller erred in including in the principal value of the estate, the value of the house and household goods gifted by the deceased to his wife ; that he was not also justified in applying the provisions of S. 10 of the Act, with a view to bring under assessment the stationery business and the immovable properties gifted by the deceased to his two sons. The Board held that the donees had promised to their father that they would maintain him and followed it up by making recurring periodical payments commencing from the date of the gift amounting to about Rs. 15,000, and in addition, they gave the deceased a sum of Rs. 16,902. These payments were debited to the business accounts, because no regular accounts were maintained for the income from the property. In this view, the deceased, according to the Board, had in fact divided up all his possessions into two portions, one of which he gave to his sons and the other to his second wife, and, therefore, the deceased as donor was not excluded from all benefits referable to the gifts and that the said benefits were referable to the aggregate of the gifts taken by the donees and not only to one of such gifts. Accordingly, it held that the basiness and the immovable properties gifted to the sons were rightly included in the estate of the deceased under S. 10 of the Act. In so far as the house gifted to his wife, Atikabai, is concerned, it was argued by a reference to Mulla's Mohammedan Law that the gift of a house by a Mohammedan to his wife is not invalid by reason of the fact that he lives in that house, nor would it detract from the factum of possession and enjoyment. IT was further contended that, inasmuch as the words "gift" and "possession" were not defined in the ED Act, they should be interpreted in accordance with the general law. The Board was, however, of the opinion that S. 127A of Mulla's Mohammedan Law only described when a gift of property by a husband to his wife may be said to be complete. IT was not the Department's case that the gift in question was incomplete, but whether the entire exclusion of the donor as required by S. 10 had been achieved and maintained till the donor's death. The Board, however, held that the provisions of S. 10 of the Act applied to this gift also.

(3.) IT is contended by the learned advocate for the assessee that the Board was wrong in holding that merely because the deceased resided in the same house after the gift was made to the wife, the gilt of that house ought not to be excluded from the estate of the deceased. Secondly, he contends that Rs. 200 paid by the sons to the father or Rs. 16,000 and odd paid to him subsequently for their sister's wedding, are not benefits referable to the gift; nor can the oral terms be said to be a contractor any enforceable obligation within the meaning of S. 10, and, consequently, the Board was wrong in including the properties gifted to the sons in their entirety. In the alternative, it is contended that only that extent of the property should be included for which Rs. 200 was being paid, namely, the shop, and not the other properties gifted to the sons.