Research › Browse › Judgment

Madras High Court · body

1975 DIGILAW 591 (MAD)

Controller of Estate Duty v. M. C. S. Kannammal

1975-11-26

V.RAMASWAMY, V.SETHURAMAN

body1975
Judgment :- V. RAMASWAMI, J. With reference to the estate of the one Narasimhachari who died on 25th January, 1969, his daughter, as the Accountable person, submitted a "Nill" return. The deceased was a partner of a partnership firm of M.C. Sundararajan and Co. At the time of his death, he had 3/32 share in the partnership. The Asstt. CED, in the view that his share in the goodwill of the firm passed on death, included a sum of Rs. 22, 500 as the value of his share of goodwill that passed on death. The deceased had gifted sum of Rs. 11, 000 to his grand-daughter on 30th September, 1941 and a sum of Rs. 1, 19, 000 to his grandson between September 55 and June 56. The sum of Rs. 11, 000 was invested by the grand daughter in the firm of M.C.S. Rajan and Co. in which also the deceased was a partner at the time of his death. The other sum of Rs. 1, 19, 000 was invested by the grand son with the firm of M.C. Sunderarajan and Co. In the view that the donor/the deceased was not entirely excluded from the enjoyment of the amounts gifted by him till his death, the Asstt. CED included both these amounts in the principal value of the estate of the deceased under S. 10 of the ED Act. The Appellate CED confirmed this order of the Asstt. CED. On a further appeal the Tribunal considered that in view of cls. 15 and 19 in the partnership deed relating to M.C. Sunderarajan and Co., which provided that the retirement, death or insolvency of any partner shall not dissolve the firm as against the other partners and that the goodwill and trade marks, etc., of the firm, shall belong to the continuing partners, the deceased had no interest in the good will of the firm which could pass on the deceased's death and that therefore the sum of Rs. 22, 500 could not be included in the principal value of the estate. 22, 500 could not be included in the principal value of the estate. So far as the amounts gifted are concerned, the Tribunal was of the view that the deceased did not have possession or enjoyment of the amount gifted by him subsequent to the gift, that the donees were in possession and enjoyment of the same to the entire exclusion of the donor and that therefore those two amounts also could not be included. In that view the Tribunal directed the deletion of these three amounts from the assessment. At the instance of the Revenue the following two questions are referred :(1) "Whether on the facts and in the circumstances of the case, the Tribunal was right in excluding a sum of Rs. 33, 500 being the alleged share of the deceased in the goodwill of the firm, from the principal value of the estate of the deceased ?" (2)" Whether on the facts and in the circumstances of the case, the Tribunal was right, in law in holding that S. 10 of the ED Act could not be applied to the deceased's gifts of Rs. 1, 19, 000 and Rs. 11, 000 to his grandson M. C. S. Raghvan and his grand daughter M. S. K. Pushpavalli respectively so as to include them in the dutiable estate ?" The first question is directly covered by the decisions of this Court reported in CGT vs. N. K. Krishna Chetty 87 ITR(p) 1); CED vs. S. M. M. Subramanyam Shetty 99 ITR(page) 320) and CED vs. Ibrahim Qualam Hussain Currimbhay 100 ITR(page) 320) and nothing has been stated by the learned counsel for the accountable person to take this case out from the said decisions, therefore we have to answer that question in the negative and in favour of the Revenue. 2. So far as the second question is concerned, the facts as found by the Tribunal are these : Bonadie possession and enjoyment of the property taken under the gift was immediately assumed by the donees. The donees treated the amounts standing to their credit in the firms as their own and the gift was not conditioned upon their retention of the sum in the firm. The donees have withdrawn various sums of monies from time to time from the gifted property and the accretions thereto for their own use such as to meet insurance premia. The donees treated the amounts standing to their credit in the firms as their own and the gift was not conditioned upon their retention of the sum in the firm. The donees have withdrawn various sums of monies from time to time from the gifted property and the accretions thereto for their own use such as to meet insurance premia. Income-tax and also by way of transfers to other persons. On these facts, the Tribunal considered that thought the amount was deposited by the donees in the firm in which the donor was a partner, the enjoyment of the money after it was deposited, was by the firm of partnership and not by the donor. As far as the donor was concerned, in view of the Tribunal, the donees did not share any of their rights. The Tribunal also relied on the decision of the Supreme Court in Addanki Narayanappa vs. Bhaskara Krishnappa wherein it was held that a Partner of a firm cannot be said to be a owner of any specified share in the partnership and that therefore the deceased could not be said to have any right or interest in the amount deposited by the donees in the firm. The Tribunal also referred to their earlier decision in some similar matters in support of their view. Learned counsel for the Revenue contended that in view of the decision in Radhabai Ramchand vs. CED 98 ITR(page) 660) and CED vs. S. M. M. Subramanyam Chettiar (supra) the deceased could not be said to have been entirely excluded from the possession and enjoyment of the property donated and that therefore S. 10 is clear attracted. On the other hand, the learned counsel for the accountable person contended that though the ratio of the decisions reported in Radhabai Ramchand vs. Ramchand vs. CED (supra) and CED vs. S. M. M. Subramanyam Chettiar (supra) could not be questioned, the Tribunal did not have the benefit of the decisions in these cases and the facts were not analysed with reference to the legal position as now settled by this Court and that therefore the case will have to be remanded to the Tribunal for a fresh consideration of the facts. Having given our careful consideration, we think that it is not necessary to remand the matter to the Tribunal. Having given our careful consideration, we think that it is not necessary to remand the matter to the Tribunal. On the facts found by the Tribunal, it is clear that there was a gift of a sum of money by the deceased to the grand son and grand daughter respectively and that after the gifts, the donees deposited the money in the Partnership firm in which the deceased was a partner. The amounts sought to be included in the principal value of the estate passing on the death of the deceased was available in the firm of Partnership in which the deceased was a partner at the time of his death. Clearly therefore, the deceased was entitled to the possession and enjoyment of the money as a Partner of the firm. The view of the Tribunal, that it was only the Partnership firm as such that was entitled to the possession and enjoyment of the same and not the individual partner, the deceased, is clearly wrong. The deceased, as a partner, was also entitled to possession and enjoyment of the same. This is not a case where the amount donated belonged to the Partnership firm in which the amount was deposited at the time of the gift in order to raise a doubt as to whether the gift was shorn of the right of the partnership for the possession and enjoyment of the same. As already stated, bonafide possession and enjoyment of the property gifted was immediately assumed by the donees and they are treating the entire money as their own. It is by virtue of their deposit in the firm that the firm came to possess and enjoy the same. Therefore clearly the two decisions of this Court in Radhabai Ramchand vs. CED (supra) and CED vs. S. M. M. Subramanyam Chettiar (supra) conclude the issue against the accountable person. We accordingly answer the second question also in the negative and in favour of the Revenue. In the result, both the questions are answered in the negative and in favour of the Revenue. The Revenue will be entitled to the costs of this reference. Counsel's fees Rs. 250 (Rupees Two hundred and fifty).