DIVAN,J. - (1.) IN this reference under S. 64(1) of the ED Act, 1953 (hereinafter referred to as the Act), the following question has been referred to us by the CBDT : "Whether, on the facts and in the circumstances of the case, the sum of Rs. 60,000, standing to the credit of the account of the deceased's brother, in the firm of M/s Shantilal C. Kapadia, was correctly included in the principal value of the estate of the deceased."
(2.) THIS reference arises out of the assessment for estate duty of the estate of Shantilal C. Kapadia, who died on 20th Feb., 1957. On the death of the deceased, his widow, who is the applicant in this reference, filed a statement of account in the prescribed form, showing the principal value of the estate passing on the death of the deceased at Rs. 1,39,199. The Assistant Controller determined the principal value of the estate at Rs. 2,14,340 and, in arriving at the principal value, he added, inter alia, a sum of Rs. 60,000, which had not been shown in the statement of account furnished by the applicant (hereinafter referred to as the accountable person), and it is in connection with this amount of Rs. 60,000 that this reference has been made. The deceased and two other persons related to him were partners of the firm of Shantilal C. Kapadia, Cambay. On 18th Oct., 1962, in the books of account of the partnership firm, a sum of Rs. 60,000 was debited to the account of the deceased and credited to the account of Subhashchandra, brother of the deceased. At the time of this transfer no cash was paid to Subhashchandra but from 18th Oct., 1952, till the date of the death of the deceased the amount stood credited in the books of the firm in the account of Subhashchandra. The firm did not allow any interest either on the capital invested by each of the partners of the firm or on this amount of Rs. 60,000 standing to the credit of Subhashchandra. On 29th Aug., 1953, the deceased made a declaration of gift in respect of the amount of Rs. 60,000 on a stamp paper of Rs. 3. Subsequently, i.e., on 20th June, 1955, in a book belonging to Subhashchandra, the deceased acknowledged on behalf of the firm that a sum of Rs. 60,000 was kept by Subhashchandra with the partnership on "Anamat" account and without interest. It was contended before the Assistant Controller that the deceased had gifted the sum of Rs. 60,000 to Subhashchandra more than two years prior to the date of his death and that, therefore, the amount could not be included in the principal value of the estate of the deceased. The Assistant Controller held that the conditions laid down in S. 123 of the Transfer of Property Act for making a gift of movable property were not complied with in this case and that even if there was a valid gift, the amount was includible in the principal value of the estate of the deceased under the provisions of S. 10 of the Act. Thereafter there was an appeal to the Central Board of Revenue and the Board held that the credit balance of the deceased in the account books of the firm was an actionable claim and as there was no execution of an instrument in writing when the transfer of the sum of Rs. 60,000 from the account of the deceased to the account of Subhashchandra was made, the procedure laid down in S. 130 of the Transfer of Property Act had not been complied with and hence the transfer was defective in law. The Central Board also came to the conclusion in the alternative that even if it was to be assumed that there was a valid gift, the amount would have to be considered as property deemed to pass under the provisions of S. 10 of the Act. Thereafter, at the instance of the accountable person, the above question has been referred to this Court. In the view that we are taking regarding the applicability of S. 10 of the Act to the facts of the present case, it is not necessary for us to decide whether in fact there was a valid gift or not. We wish to make it clear at this stage that we are not deciding the question whether the credit balance of the deceased in the books of account of the firm was an actionable claim or whether the gift by way of entries in the books of account amounted to a valid gift in the eye of the law; but we are proceeding on the assumption that there was a valid gift in favour of Subhashchandra, the brother of the deceased.
(3.) UNDER S. 10 of the Act, 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.;