H.N. Seth, J. - (1.) THE Income-tax Appellate Tribunal, Delhi Bench, has made this reference under Section 64(1) of the Estate Duty Act at the instance of the Controller of Estate Duty, U.P.
(2.) THE case relates to the estate duty assessment in respect of the property of Sri Gaindamal who died on 14th October, 1964. The deceased was a partner in a firm, Messrs. Gaindamal Sukhbir Singh. From out of his personal funds, deposited in the firm, he made a gift of an amount aggregating Rs. 65,000 to his grandsons on various dates. Out of this amount a sum of Rs. 25,000 was gifted within two years of 14th October, 1964, the date on which Gaindamal died. Whole of Rs. 65,000 was not included in the estate duty return filed by the accountable person. The Assistant Controller of Estate Duty found that subsequent to the gift, the donees deposited the amount gifted to them with the firm, Gaindamal Sukhbir Singh, in which Gaindamal was also partner. The total amount of gift was, therefore, liable to be included in the estate left by the deceased as property deemed to pass on his death under Section 10 of the Estate Duty Act. He further estimated that the firm must have paid a sum of Rs. 12,000 to the donees by way of interest on the amount deposited by them. According to him, this sum was also an amount which should be deemed to pass on Gaindamal's death. In the result he added a sum of Rs. 77,000 in the value of the property deemed to pass on Gaindamal's death.
(3.) IN appeal before the Controller of Estate Duty, the accountable person did not dispute the addition of Rs. 25,000 (the amount gifted by Gaindamal within two years of his death) in the value of the property passing or deemed to pass on the death of Gaindamal. He, however, disputed the addition of Rs. 40,000, balance of the gifted amount, and interest amounting to Rs. 12,000 in the value of the property left by the deceased. The Controller found that from out of the amount of Rs. 40,000 a sum of Rs. 10,000 had been gifted by making book entries which was not valid and upheld its addition. Gift of remaining sum of Rs. 30,000 was made by the deceased by delivering cash to the respective donees. However, the donees deposited this amount with the firm, Gaindamal Sukhbir Singh, but subsequently withdrew a sum of Rs. 5,000 more than two years before Gaindamal's death. Under Section 10 of the Estate Duty Act, only an amount of Rs. 25,000 could be the property deemed to pass on the death of Gaindamal. Consequent to this finding, the Appellate Controller retained the interest which appertained to Rs. 10,000 (the amount in respect of which the gift was held to be invalid) amounting to Rs. 3,000 in the estate of the deceased. IN short the Appellate Controller upheld the inclusion of the gift amounting to Rs. 60,000 (Rs. 25,000 gift made within two years of Gaindamal's death, Rs. 10,000 invalid gift and Rs, 25,000 property deemed to pass on donor's death) and interest amounting to Rs. 3,000 in the estate of the deceased. In second appeal, the accountable person objected to the inclusion of Rs. 25,000, the amount gifted in cash and deposited by the donees with the firm in which the deceased donor was also a partner, Rs. 10,000 the amount said to have been gifted by Gaindamal by making entries in the account books of the firm and the interest on this sum amounting to Rs. 3,000 in the estate of the deceased. It will thus be seen that the propriety of the addition of Rs. 35,000 in the value of properties passing or deemed to pass on the death of Gaindamal, which was questioned before the Appellate Tribunal, was made up of two amounts, viz., a sum of Rs. 25,000 cash said to have been gifted by the deceased to his grandsons who deposited the same with the firm, Gaindamal Sukhbir Singh, and Rs. 10,000 said to have been gifted by Gaindamal by making entries in the books of the firm. Somehow, the Appellate Tribunal has been under an impression that the amount of Rs. 35,000 was made up of Rs. 30,000, the amount said to have been gifted in cash and deposited by the donees with the firm, and Rs. 5,000 gifted by making book entries.;