Judgment

KHANNA. J. :- This appeal by the Controller of Estate Duty on certificate is against the judgment of the Madras High Court whereby that court answered the following question referred to it under Section 64 (1) of the Estate Duty Act, 1953 (Act 34 of 1953) (hereinafter referred to as the Act) partly in favour of the assessee and partly in favour of the revenue.

"Whether, on the facts and in the circumstances of the case, the entire value of the property known as "Mayavaram Lodge" or any portion of its value is liable to be included in the principal value of the Estate of the deceased as property deemed to have passed on his death?

2. The matter arises out of the estate duty case of Shri R. Venkateswara Iyer who died on April 6, 1957. The respondent, Smt. Parvathi Ammal who is the widow of the deceased and is an accountable person in the case, filed statement relating to the estate of the deceased before the Assistant Controller of Estate Duty. The Assistant Controller determined the principal value of the estate to be Rs. 2,50,374/-. In computing the principal value the Assistant Controller took into account a sum of Rs. 1,50,000 on account of the value of property Known as "Mayavaram Lodge."

3. The Assistant Controller found that till March 11, 1955 the deceased, who was a self-made man, owned two buildings, including Mayavaram Lodge, besides some agricultural land. The deceased was carrying on the business of boarding and lodging in Mayavaram Lodge. He had also a small chit business. On March 11, 1955 the deceased executed a document described as a partition deed, whereby he gave "Mayavaram Lodge" to his five sons in equal shares and retained for himself the other house and agricultural land. On June 25, 1955 the deceased entered into an agreement with his sons by which they leased to the deceased Mayavaram Lodge wherein as before he continued to carry On his boarding and lodging business. in the profit and loss account a sum of Rs. 15,000 was mentioned for payment of rent of Mayavaram Lodge. Later on the deceased gave the boarding house on sub-lease to a third party.

4. The respondent claimed that Mayavaram Lodge should be excluded from the estate duty assessment of the deceased on the ground that the said property was transferred on March 11, 1955 more than two years before his death. It was urged that the fact that the sons let out the building to the deceased should not be taken to be a special benefit derived by the deceased. The respondent also pointed out that Mayavaram Lodge was taken on lease long after the original transfer and the lease and the transfer could not be treated as associated transactions. Plea was also taken that the document of March 11, 1955 constituted deed of partition of joint family properties,

5. The Assistant Controller rejected these contentions. He found that the property referred to in the deed dated March 11, 1955 was the self-acquired property of the deceased and that there was no evidence to show that the deceased treated it as joint family property. He accordingly held that the deed, though described as a partition deed, should be treated as a settlement. Although the settlement was found to have been made by the deceased more than two years before his death, the fact that the deceased took back the property from his son shortly thereafter to continue his business therein showed, in the opinion of the Assistant Controller, that the deceased got a direct benefit in the property. The Assistant Controller in this context referred to the fact that there was not much interval of time between the settlement and lease and that the payment of rent was not in cash but by book entries. The Assistant Controller accordingly held that Mayavaram Lodge was liable to be taken into account for assessing the estate duty. He accordingly included a sum of Rs. 1,50,000 on that account.

6. The respondent preferred an appeal to the Board of Direct Taxes against the order of the Assistant Controller. The only