The donor must be entirely excluded from the property itself and from any benefit by contract or otherwise in order for the property to be deemed to pass on the donor's death under S. 10 of the Estate Duty Act, 1953.

Judgment

RAMASWANI, J. : This appeal is brought, by special leave, from the judgment of the. Mysore High Court s dated November 17, 1964 in Tax Referred Case No. 1 of 1964.

2. The property in question is house No. 34 Mahatma Gandhi Road, Bangalore. It had been purchased by the appellant s father Dr. C. F. Da Costa (hereinafter called the deceased ) 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 document recites 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. The deceased died on September 30, 1959 more than 4 years after the gift. The appellant, the accountable person, then filed a return showing the value of the estate left by his father at Rs. 93,750 excluding the value of the house No. 34, Mahatma Gandhi Road, Bangalore. The Assistant Controller of Estate Duty, however, included the sum of Rs. 1,50,000 as the value thereof and determined the aggregate value of the estate at Rs. 2,57,249 and assessed the estate duty payable at Rs. 15,751.54 P. by his order, dated November 30, 1959. The appellant thereupon preferred an appeal to the Central Board of Revenue (hereinafter referred to as the Board ) which dismissed the appeal and affirmed the view taken by the Assistant Controller of Estate Duty. At the instance of the appellant the Board referred the following question of law for the determination of the High Court :

"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 his death under S. 10 of the Act ?" The High Court answered the question in the affirmative, holding that the appellant was liable to pay estate duty with regard to the house.

3. Under S. 5 of the Estate Duty Act, 1953 (Act No. 34 of 1953) (hereinafter called the Act ), estate duty is payable on the principal value of the estate of every person dying after the commencement of the Act. Section 2 (16) of the Act defines the expression "property passing on death and is to the following effect:

"2. In this Act, unless the context otherwise requires,-

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(16) "property passing on the death" includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and on the death includes at a period ascertainable only by reference to the death ;" Section 10 of the Act included in the expression "passing on death" even gifts made by a deceased in certain circumstances. The section reads as follows :

"Gifts whenever made where donor not entirely excluded. - 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 :

Provided that the property shall not be deemed to pass by reason only that it was, not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death".

4. In the present case, the Board has found that though the deceased had gifted the house in question to his children four years before the date of his death, he still continued to stay in the house till his death as the head of the family and also was looking after the affairs of the house. It was contended on behalf of the appellant that upon these facts the High Court erred in holding that S. 10 of the Act was attracted to the case and there was no exclusion of the