H.N. Seth, J. - (1.) THIS is a reference under Section 64(1) of the Estate Duty Act at the instance of the accountable person, Sri Abdul Alim. The Central Board of Direct Taxes has referred the following question for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the sum of Rs. 44,000 gifted by the deceased to his minor sons on April 15, 1954, was correctly included in the estate of the deceased as property deemed to pass on his death under Section 10 of the Estate Duty Act, 1953 ?"
(2.) THE estate duty assessment concerned the estate of late Shri Hajee Abdul Haq who died on 15th of October, 1957. THE accountable person filed a statement of account declaring the net principal value of the estate, passing or deemed to pass on the death of the deceased. While determining the total value of the estate left by the deceased, the Assistant Controller, Estate Duty, included a sum of Rs. 44,000 which the deceased had gifted to his minor sons on 15th of April, 1954. He held that the deceased held the money gifted to the minor sons as a trustee with effect from 15th of April, 1954, till the date of his death. Section 22 of the Estate Duty Act, therefore, became applicable and this amount also is deemed to pass on death of the deceased, and is liable to be included in the principal value of the estate left by the deceased. The accountable person then went up in appeal before the Board. The Board did not agree with the conclusion of the Assistant Controller that the present case was covered by the provisions of Section 22 of the Act. It, however, held that the amount is liable to be included in the estate of the deceased as property which is deemed to pass on his death under Section 10 of the Act. According to it, the deceased had not entirely excluded himself from the money gifted. This money went to augment the assets of the firm in which the deceased was a partner. In the result, it upheld the order of the Assistant Controller, Estate Duty, including the amount of Rs. 44,000 in the estate of the deceased. At the instance of the accountable person, the Board has referred the aforementioned question for the opinion of this court.
(3.) A perusal of the appellate order of the Board shows that the case of the accountable person was that the deceased had gifted a sum of Rs. 44,000 to his minor sons in cash. The order further shows that this money was subsequently brought in as capital of the firm in which the deceased was a partner. The two minors were also admitted to the benefits of the firm. According to the statement of the case, the deceased made a gift of Rs. 44,000 to his minor sons on 15th of April, 1954, by debiting his capital account with the firm. This indicates that perhaps the gift was not made in cash. Be that as it may, there is no dispute about the fact that the gift was in fact made and that the amount gifted was reinvested in the firm as its capital. The deceased was a partner in this firm and the two donees were admitted to its benefits. Section 10 of the Estate Duty Act, 1953, provides that property taken under gift, whenever made, shall be deemed to pass on the donor's death to the extent its bona fide possession and enjoyment is not immediately assumed by the donee and thenceforth retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise. The question that arises for consideration, therefore, is whether, in the circumstances of this case, it can be said that the two donees retained the sum of Rs. 44,000 to the entire exclusion of the donor.;