MAINABAI GOUR Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS is a reference under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as " the Act"), referring for our answer the following questions of law :

(2.) THE reference arises in respect of the estate of one Badri Prasad Gour who died on 7th November, 1964. THE deceased was carrying on the business of manufacture and sale of limestone under the name and style of M/s. Ramchandra Badri Prasad. THE deceased had taken a quarry lease for a period of five years from 9th November, 1959. THE business was carried on as a proprietary concern till 17th November, 1963, On 15th November, 1963, the deceased transferred sums of Rs. 10,000 each to his two daughters, namely, Smt. Shantibai and Smt. Durgabai, by transfer entries and crediting their personal accounts. A partnership deed was executed on 17th November, 1963, purporting to convert the proprietary business into a partnership concern. Under Clause 2 of the partnership deed, Badri Prasad was allotted a share of 50% in profits and losses. Smt. Shanti-bai and Smt. Durgabai were each allotted a share of 25% in profits and losses. Clause 3 of the deed provided that the daughters will contribute to the capital as per their volition and that the capital of Badri Prasad shall be the one existing in the books of account on the date of execution of the deed. Clause 4 of the deed provided that all the assets and liabilities of the business of M/s. Ramchandra Badri Prasad Gour as on 15th November, 1963, shall become the assets and liabilities of the partnership. Clause 5 of the deed provided that in terms of Section 14 of the Indian Partnership Act, the property of the firm including all property and rights and interest in property originally brought into the stock of the firm under the instrument of partnership or acquired by purchase or otherwise by or for the firm or for the purpose and in the course of the business of the firm including goodwill thereof, shall vest in Badri Prasad. Clause 6 of the deed provided that the daughters shall be entitled to withdraw from the firm only to the extent of the amounts standing to their credit. Clause 10 provided that the borrowing powers for carrying on the business shall vest only in Badri Prasad. Clause 11 provided that Badri Prasad alone will be competent to withdraw monies from banks under his signature. Clause 16 provided that in case of dissolution of the firm the assets and liabilities of the firm shall vest in Badri Prasad and the daughters will be entitled to claim only amounts standing to their credit in the books of the firm ; and in case any amounts are due from them, they shall have to pay the same to the firm. On the date of death of Badri Prasad, the account of the firm showed a credit balance of Rs. 50,408 in favour of Shantibai and Rs. 51,308 in favour of Durgabai. THEse amounts were worked out after crediting Rs. 37,334 to each of them as share of profits due to them.

(3.) THE second Explanation provides that: