DEB, J. - (1.) THE following question is involved in this reference under S. 64(1) of the ED Act, 1953 : "Whether, on the facts and in the circumstances of the case, a sum of Rs. 75,000 would be deemed to pass within the meaning of S. 10 of the ED Act, 1953 ?"
(2.) THE facts stated in the statement of the case are as follows : The deceased was a partner of B. A. Brothers, Calcutta. On 7th Nov., 1953, he made a gift of Rs. 1 lakh to his daughter by making entries in the books of the said firm ; the donee received the gifted amount on 7th Nov., 1953, and on the same day became a partner of the said firm by contributing Rs. 75,000 as her capital out of the gifted amount ; the donor had 0-4-0 share and the donee had 0-3-0 share in the said firm with effect from that date ; and the donor died on 18th Oct., 1960, while he was a partner of the said firm. Rs. 75,000 was included in the valuation of the estate of the deceased under S. 10 of the ED Act, 1953, hereinafter referred to as "the Act", by the Asstt. CED whose order was sustained by the Appellate CED by following the decision of the Privy Council in the case of Clifford John Chick vs. Commissioner of Stamp Duties (1959) 37 ITR (ED) 89; 3 EDC 915 (PC). A further appeal was filed by the accountable person before the Tribunal. It was contended before the Tribunal on his behalf that Rs. 75,000 did not pass on the death of the donor under s. 10 of the Act, for according to him, the donor had no right to possess or enjoy this amount and that Chick's, case (supra) had no application to the facts and circumstances of the case. It was also contended on his behalf that the said capital contributed by the donee could not in law be the property of the firm and, therefore, the deceased could neither derive any benefit out of it nor could he exercise any control over it as a partner of the firm. The Tribunal, after discussing the law of partnership, quoting Lindley on Partnership, 11th edition at page 406, citing S. 10 of the Act and distinguishing Chick's case (supra), accepted those contentions and allowed the appeal in the following terms : "It is clear on a plain reading of the section itself that only such portion of a gifted property is deemed to pass on the donor's death on which he had retained possession and benefit to himself even after making the gift. In the instant case, there could be no possession of the donor over the donee's capital even if he was a partner along with the donee in the firm in which the capital was invested by the latter, because capital, as we have stated above, was not at all the property of the partnership. Nor could the donor derive any benefit out of the capital, because whatever interest or benefit accrued upon this capital went wholly and exclusively to the donee. Thus, the donor having neither got possession over the sum of Rs. 75,000 nor having retained for himself any benefit therein, no part of the property, namely, the capital invested in the partnership firm, B. A. Brothers, Calcutta, could be deemed to pass on the death of the donor. The inclusion of the said amount of Rs. 75,000 in the dutiable assets of the deceased is, therefore, erroneous and must be deleted.
(3.) SEC . 10 of the Act readers 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." ;