- (1.) This is an appeal against the judgment of a Division Bench of the High Court of Rajasthan rendered on a reference made to the Rajasthan High Court under S. 64(l) of Estate Duty Act, 1953. The question referred to the Rajasthan High Court for determination was as follows : Whether on the facts and in the circumstances of the case the provisions of S. 10 of the Estate Duty Act, 1953 were applicable to this case.
(2.) The relevant facts are that one Motilal Sanghi (deceased) made a gift of Rs. 1 lac on September 1, 1955 in favour of his four sons. Each of the sons was given a gift of Rs. 25,000.00. These amounts were invested by the sons in the firm known as Sanghi Brothers which was constituted by the said Motilal soon after the said gifts were made. Motilal Sanghi was a partner in the said firm and had an 8 annas share in the firm; each of his four sons had a share of 2 annas in the profits and losses of the firm. It was stated by learned counsel appearing for the accountable person before the Rajasthan High Court that the firm was managed not by Motilal Sanghi but it was managed by the eldest son, namely, N. K. Sanghi. Motilal Sanghi died on July 21, 1961. A question arose whether the sum of Rs. 1 lac gifted by him as aforesaid was liable to be included in his estate for purposes of computation of estate duty under the provisions of the Estate Duty Act. The Assistant Controller of Estate Duty took the view that the sum was liable to be included in the estate of the said deceased in view of the provisions of S. 10 of the Estate Duty Act as that amount was not retained by the donees to the entire exclusion of the donor. An appeal preferred by the accountable person to the Appellate Controller of the Estate Duty was allowed by him holding that S. 10 was not attracted to the circumstances of the case and an appeal preferred by the revenue to the Appellate Tribunal was dismissed. A reference was, thereafter, made to the High Court at the instance of the revenue. After considering the provisions of S. 10 of the Estate Duty Act, the Division Bench of the High Court which decided the reference came to the conclusion that the provisions of S. 10 were attracted and the amount in question was liable to be included in the estate of the deceased for the purpose of assessment of estate duty. The High Court took the view that the said amount gifted by Motilal Sanghi to his sons was brought back into the partnership business of the donor and the donees and hence it was difficult to say that during the continuance of the partnership the donees enjoyed the amounts gifted to the entire exclusion of the donor. The donor, in one sense or the other, had dominion over that property and that property was utilised both for the benefit of the donor and the donees and hence S. 10 of the Estate Duty Act was attracted.
(3.) Before considering the arguments of the learned counsel, we may note the relevant portion of S. 10 of the Estate Duty Act. The said portion runs as follows : "Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise.";