H.N. Seth, J. - (1.) AT the instance of the accounting party, Behari Lal Matanhelia, the Central Board of Direct Taxes has referred the following question for the opinion of this court, under Section 64(1) of the Estate Duty Act: "Whether, on the facts and in the circumstances of the case, the balance of Rs. 48,513 remaining at the date of death of the deceased out of the amount credited to the wife's account by debiting the account of the deceased in the books of Messrs. Sheo Prasad Kanhaiyalall, Bahraich, in which the deceased was a partner, was correctly included in the estate of the deceased as property passing or deemed to pass on his death ?"
(2.) ONE Sri Kanhaiyalall Matanhelia died on 21st July, 1957. Beharilal Matanhelia, as the accountable person, filed a statement before the Assistant Controller, Estate Duty, Varanasi, declaring the total value of the properties passing or deemed to pass on the death of Kanhaiyalall as Rs. 1,72,670. After considering the material produced before him, the Assistant Controller determined the principal value of the estate passing or deemed to pass on the death of Kanhaiyalall as Rs. 3,00,141 and calculated the duty payable thereon. In computing the principal value of the estate passing on the death of Kanhaiyalall, the Assistant Controller included a sum of Rs. 48,513 being the credit balance standing in the account of Smt. Bridhika Devi (wife of the deceased) in the books of the firm, Messrs. Sheo Prasad Kanhaiyalall, Bahraich, in which the deceased was a partner. On behalf of the accountable person it was claimed that this sum of Rs. 48,513 came out of a sum of Rs. 51,000 gifted by the deceased to his wife on 30th December, 1951, more than two years before his death. This gift was effected by adjustment in the books of the firm in which the deceased was a partner by making debit and credit entries in the account of the deceased and his wife. The Assistant Controller found that there was no evidence to show that the alleged gift was accepted by the wife. He held that in the absence of any evidence transfer of the amount by book entries only could not constitute a valid and completed gift and, therefore, the amount standing to the credit of the wife on the death of Kanhaiyalall had to be included in his estate as property passing on his death. The Assistant Controller further found that the amount said to have been gifted remained invested with the firm without payment of any interest. The deceased was a controlling partner in the firm. In the circumstances, it cannot be said that after making the gift the deceased entirely excluded himself from any benefit therefrom. In the result, the Assistant Controller held that, even assuming that there was a gift, the amount of Rs. 48,513 had to be added to, the estate of the deceased passing on his death under Section 10 of the Act. He also found that having regard to the provisions of Section 46(1) of the Act, no deduction could be claimed for the amount as a debt due from the deceased inasmuch as the consideration of the debt consisted of property derived from the deceased himself. In appeal, the Board held that mere transfer entries in the account books of the firm were not sufficient to make a valid gift. It also observed that it was immaterial whether the transaction in question amounted to a valid gift for, even if it were, these sums would be includible in the estate of the deceased in view of Section 10 of the Estate Duty Act. The money remained credited with the firm where the deceased was a partner and no interest was being paid to the donee. In the circumstances, it could not be said that the deceased had entirely excluded himself from the gifted property or that the donee had taken possession of the property to the entire exclusion of the deceased or of any benefit to him. It, accordingly, held that the amount of Rs. 48,513 was correctly added to the total value of the property passing on the death of the deceased.
(3.) AT the instance of the accountable person the Board has now referred the aforementioned question for the opinion of this court. On behalf of the department the validity of the gift was challenged only on the ground that it could not be made by effecting transfer entries in the account books of the firm and that there was no evidence to show that the same had been accepted by the donee. We will proceed to consider the arguments raised in respect of the aforementioned infirmities and take it that no other legal infirmity attaches to the gift.;