Judgment

JAGANMOHAN REDDY, J. :- This appeal is by certificate against the judgment of the Tamil Nadu High Court, which has answered the following two questions referred to it, in favour of the assessee and against the Revenue.

(1) Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the house property in Avanashi Road, Coimbatore, is not liable to estate duty as property deemed to pass on the death of the deceased under Section 10 of the Estate Duty Act, 1953 ?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 1 lakh gifted by the deceased to his sons in 1953 is not liable to estate duty as property deemed to pass on the death of the deceased under Section 10 of the Estate Duty Act, 1953 ?

These questions arose on the facts set out in the statement of the case which are: one Ramaiah Gounder was a partner in the firm called M. Desai Gounder & Co., Coimbatore. He owned property which the firm was occupying as tenant-at-will. In August 1953, he executed a deed of settlement under which he transferred the property leased out to the firm to his two sons Lingiah and Krishnan, absolutely and irrevocably. After this transfer, the firm continued to be in occupation of the premises paying rent thereof at Rs. 300/- p.m. to the two donees by crediting each of their accounts in the account books of the firm in equal shares. It may be mentioned that Ramaiah the father continued to be a partner of the firm even after the transfer till April 13, 1957, when the firm was dissolved. He had also an account with the firm Desai Gounder & Co., and on March 30, 1953, he requested the firm by a letter to transfer from his account five sums of Rs. 20,000/- each with effect from April 1, 1953 to the credit of his five sons in the firm s books. He also wrote to the five sons informing them of the transfer. Though the sons did not withdraw any amount from their accounts in the firm, the amounts continued to be invested in the firm for which interest at 7 1/2 % per annum was paid to them.

2. On the death of Ramaiah Gounder on May 5, 1957, the Assistant Controller of Estate Duty, included in the estate of the deceased, the property leased out to the firm which was transferred to his two sons. According to him, possession and enjoyment of the subject-matter of the gift had not been assumed by the donees nor had they retained possession thereof to the entire exclusion of the donor, inasmuch as the partnership in which the donor was a partner with other parties continued to be in possession and enjoyment of the gifted property as tenants at will of the donees with respect to the gift of Rs. 1 lakh to the five sons of the deceased, the Assistant Controller held that the donees had not been in possession and enjoyment of the subject-matter of the gift to the entire exclusion of the donor within the meaning of S. 10 of the Estate Duty Act. He, therefore, included this sum of Rs. 1 lakh in principal value of the estate of the deceased.

3. The accountable persons appealed to the Appellate Controller who confirmed the said inclusion. The Tribunal on a further appeal, however, disagreed with the findings of the Assistant Controller and the Appellate Controller. It held that the firm, of which the deceased was a partner, occupied the property but that such interest was not as owner of the property, and therefore, the gift had been made without the donor retaining any interest, as such it could not be included in the estate of the deceased under S. 10 of the Estate Duty Act. It further held that the sum of Rs. 1 lakh gifted to the sons was given by the sons to the firm which had benefit of the money and that the father could not be said to have enjoyed the benefit of the money as partner of the firm. In this view, the Tribunal excluded the sum of Rupees 1 lakh from the estate of the deceased. The High Court agreed with these findings.

4. It is contende