- (1.) SHRI Jaishi Ram died on October 23, 1961, leaving behind his wife, four sons and three daughters. The deceased and his sons constituted a joint Hindu family governed by the Mitakshara School of Hindu law, and the family possessed movable and immovable properties. In April and May, 1958, Shri Jaishi Ram made gifts of Rs. 20,000 each in favour of his son, Jagdish Chand Mehra and his four daughters-in-law. The total amount of these gifts was Rs. 1 lakh. These amounts were thereafter invested by the donees in the firm in which Shri Jaishi Ram was a partner. On these facts, a question has arisen whether the sum of Rs. 1 lakh, which had been gifted by Shri Jaishi Ram in favour of his son, Jagdish Chand Mehra, and his four daughters-in-law, can be deemed to have passed on his death as his estate in terms of Section 10 of the Estate Duty Act, 1953 (hereinafter called "the Act" ).
(2.) ON behalf of the Controller of Estate Duty, the petitioner in this case, it has been stated that this question of law is covered by the judgment of my learned brother, D. K. Mahajan J. , and S. S. Sandhawalia J. , in Controller of Estate Duty v. Ronaq Ram Bakshi Ram Gupta, which is correct, but the learned counsel for the respondent respectfully submits that that case has not been correctly decided and that decision requires reconsideration. The learned judges followed the decisions of the Gujarat High Court in Smt. Shantaben S. Kapadia v. Controller of Estate Duty and Controller of Estate Duty v. Chandravadan Amratlal Bhatt, which were delivered by the same Bench. In these cases, it was held that as the subject-matter of the gift was made available to the partnership in which the deceased had an interest as a partner and placed at its disposal, the deceased was not entirely excluded from the subject-matter of the gifts, and hence the pro visions of Section 10 applied to the cases. The learned judges in support of their view relied on the decision of the Privy Council in Clifford John Chick v. Commissioner of Stamp Duties, and the judgment of their Lordships of the Supreme Court in George Da Costa v. Controller of Estate Duty. The facts of the Supreme Court decision referred to may be. briefly stated. Dr. C. F. Da Costa purchased house No. 34, Mahatma Gandhi Road, Bangalore, in the joint names of himself and his wife, on February 14, 1940. They made a gift of the house to their two sons on October 29, 1954. The docu ment recited that the donees had accepted the gift and they had been put in possession. But, the parents continued to be in possession of the house, though, the municipal tax was paid thereafter in the names of the sons. Dr. C. F. Da Costa died on September 30, 1959, more than four years after the gift. The Assistant Controller of Estate Duty included the sum of Rs. 1,50,000 as the value of the said house in the estate of the deceased and assessed estate duty on the aggregate value of the estate. The accountable persons preferred an appeal to the Board of Revenue which was dismissed and the following question of law was referred to the High Court for determination : "whether, on the facts and in the circumstances of the case, the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on the death under Section 10 of the Act?"
(3.) THE High Court answered the question in the affirmative holding that the accountable persons were liable to pay estate duty with regard to the house. An appeal was then taken to the Supreme Court. While dealing with the contention of the appellants, their Lordships observed: "but it was contended by Mr. Sen for the respondent that the case of the revenue does not rest upon the second limb of the section but upon the first limb which requires that the donor must have been entirely excluded from possession and enjoyment of the property. It was pointed out that there was no such exclusion in the present case and the finding of the Board is that the deceased continued to stay in the house till his death as the head of the family and was looking after the affairs of the household. It was contended, therefore, that the first limb of the section is not satisfied in this case and the property must" be held to pass on the death of the deceased under that section. In our opinion, the contention of the respondent must be accepted as correct. As a matter of construction, we hold that the words 'by contract or otherwise in the second limb of the section will not control the words' to the entire exclusion of the donor' in the first limb. In other words, in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was 'entirely excluded from possession and enjoyment' within the meaning of the first limb of the section, and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty. ";