CONTROLLER OF ESTATE DUTY Vs. ASWATHANARAYANA SETTY S
LAWS(KAR)-1966-9-7
HIGH COURT OF KARNATAKA
Decided on September 29,1966

CONTROLLER OF ESTATE DUTY Appellant
VERSUS
S. ASWATHANARAYANA SETTY Respondents


Cited Judgements :-

MAHABIR PRASAD PODDAR VS. CONTROLLER OF ESTATE DUTY [LAWS(PAT)-1976-3-12] [REFERRED TO]
CONTROLLER OF ESTATE DUTY VS. P. MARIAPPA MUDALIAR [LAWS(MAD)-1979-11-71] [REFERRED TO]


JUDGEMENT

Hegde, J. - (1.)THE deceased, Sri Sivanagere Subbiah, was partner in the firm of Messrs. S. Subbiah and Raja Ramakrishnaiah, Sira, under a partnership agreement dated November 28, 1947. THE deceased had a half share in the said business. THE capital standing to the credit of the deceased in the books of the firm as on June 30, 1954, was Rs. 1,07,148. On June 30, 1954, this amount was divided into three parts of four annas, two annas and two annas, respectively, and the two shares of two annas each in the capital were transferred to the accounts of the two sons of the deceased, viz., S. Aswathanarayana Setty and S. Venkateshiah. THE shares so transferred to the accounts of the sons amounted to Rs. 28,796 each. With sons and Raja Ramakrishnaiah and his son, Raja Sanjiviah, the profit-sharing ratio being four annas for the deceased, two annas each for his two sons, and four annas each for Ramakrishnaiah and his son. A fresh partnership deed was duly drawn on this basis and this re-constituted firm continued to exist till the death of the deceased on November 16, 1957. A copy of the partnership deed dated July 1, 1954. together with a free English translation of the same is appendix "A" and forms part of statement.
(2.)IN the estate duty proceedings that followed upon the death of the deceased, the accountable persons contended that the capital of Rs. 57, 594 transferred by the deceased to the sons on June 30, 1954, was an absolute transfer and the deceased did not get any interest whatever in the capital transferred or in the profits. The Assistant Controller of Estate Duty, however, did not accept this contention and held that the amount transferred by the deceased to his sons came under the purview of gifts and that the gifts so taken by the sons were not retained by them to the entire exclusion of the deceased and that, therefore, this amount must be deemed to be the property that passed on the death of the deceased as per the provisions of section 10 of the Estate Duty Act. The order of the Assistant Controller is a appendix "B" and forms part of the statement.
The accountable persons preferred an appeal before the Appellate Controller of Estate Duty against the said order of the Assistant Controller. It was contended by them that, since the right to the benefit of the partnership could not be referable to the gifts, the gifts were complete and the deceased did not retain any benefit. Reliance was placed upon the decision in Munro's case. The Appellate Controller rejected this contention and, relying upon the decision in Chick's case 2, held that the property gifted by the deceased to his sons was not retained by them to the entire exclusion of the deceased or of any benefit to him. He, therefore, confirmed the addition of the amount of Rs. 57,594 to the value of the estate of the deceased. The order of the Appellate Controller is appendix "C" and forms part of the statement.

Against this order of the Appellate Controller, the accountable persons preferred an appeal before the Tribunal. It was contended on their behalf that the admission of the two sons of the deceased into the partnership which was already in existence merely increased the number of partners in the firm and that all partners in the enlarged firm were governed by the provisions of the Indian Partnership Act regarding their rights and obligations in respect of the firm; that all the partners were independent of one another and every one of the partners was the absolute owner of his share in the business of the partnership and that, therefore, the deceased could not be said not to have been excluded from the property gifted by him to his sons or from any benefit arising therefrom. On the other hand, it was contended by the department that by taking the sons into the partnership with the funds he had given, the deceased had brought back his money and so benefit accrued to the father. The Tribunal held that the transfer of Rs. 28,796 to each of the two sons was not tied with strings and that there were also no strings attached to the entry of the sons into the partnership with the father. The Tribunal further held that the firm and the individuals were different and, to the extent of the benefit derived by the father from the firm, he had his capital in it and only if any benefit was left over, after the sons had their share, could any go to the father. But that could not be so, because the benefit derived was proportionate to the money invested. The Tribunal held that the decision in Munro's case was more opposite of application than that of Clifford John Chick. The Tribunal finally held that there was nothing to show that the gifted property or any part of it came back to the deceased on July 1, 1954, and that, therefore, there was no ground for adding a sum of Rs. 57,594 in the computation of the estate left. The copy of order of the Tribunal is appendix "D" and forms part of the statement.

(3.)THIS order of the Tribunal was subsequently rectified by substituting the figure of Rs. 73,695 for the figure Rs. 57,594. The order of the Tribunal in the Misc. Application in E. D. A. No. 77 of 1962-63 dated November 4, 1964, is appendix "E" and forms part of the statement.
The following question is referred :

"Whether, on the facts and in the circumstances of the case, the sum of Rs. 73,695 is not to be included in the computation of the estate left by the deceased ?"



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