Civil Appeal No 608 NT of 1975
From the Judgment and Order dated 851973 in the High Court of Rajasthan in DB Civil Estate Duty Reference No 46 of 1967
GC Sharma and PK Mukharjee for the Appellant
G Ramaswami Additional Solicitor General Ms A Subhashini and KP Bhatnagar for the Respondent
The Judgment of the Court was delivered by KANIA J
This is an appeal against the judgment of a Division 212 Bench of the High Court of Rajasthan rendered on a reference made to the Rajasthan High Court under section 641 of 
The question referred to the Rajasthan High Court for determination was as follows Whether on the facts and in the circumstances of the case the provisions of section 10 of the were applicable to this case
The relevant facts are that one Motilal Sanghi deceased made a gift of Rs1 lac on September 1 1955 in favour of his four sons
Each of the sons was given a gift of Rs25000
These amounts were invested by the sons in the firm known as Sanghi Brothers which was constituted by the said Motilal soon after the said gifts were made
Motilal Sanghi was a partner in the said firm and had an 8 annas share in the firm each of his four sons had a share of 2 annas in the profits and losses of the firm
It was stated by learned counsel appearing for the accountable person before the Rajasthan High Court that the firm was managed not by Motilal Sanghi but it was managed by the eldest son namely NK Sanghi
Motilal Sanghi died on July 21 1961
A question arose whether the sum of Rs1 lac gifted by him as aforesaid was liable to be included in his estate for purposes of computation of estate duty under the provisions of the 
The Assistant Controller of Estate Duty took the view that the sum was liable to be included in the estate of the said deceased in view of the provisions of Section 10 of the as that amount was not retained by the donees to the entire exclusion of the donor
An appeal preferred by the accountable person to the Appellant Controller of the Estate Duty was allowed by him holding that Section 10 was not attracted to the circumstances of the case and an appeal preferred by the revenue to the Appellant Tribunal was dismissed
A reference was thereafter made to the High Court at the instance of the revenue
After considering the provisions of Section 10 of the  the Division Bench of the High court which decided the reference came to the conclusion that the provisions of Section 10 were attracted and the amount in question was liable to be included in the estate of the deceased for the purpose of assessment of estate duty
The High Court took the view that the said amount gifted by Motilal Sanghi to his sons was brought back into the partnership business of the donor and the donees and hence it was difficult to say that during the continuance of the partnership the donees enjoyed the amounts gifted to the entire exclusion of the donor
The donor in one sense or the other had dominion over that property and that property was utilised both for 213 the benefit of the donor and the donees and hence Section 10 of the was attracted
Before considering the arguments of the learned counsel we may note the relevant portion of Section 10 of the 
The said portion runs as follows 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 contract or otherwise
 In the present case there is no dispute that when the amount of Rs 1 lac was gifted by way of gifts of Rs25000 to each of the four sons of the deceased they immediately assumed bona fide possession and enjoyment thereof but it is contended by Mr Ramaswamy learned Addl
Solicitor General that as the said amounts of Rs25000 were immediately thereafter invested in a firm of which the donees and the donors were partners it could not be said that those amounts aggregating to Rs1 lac were retained by the donees to the entire exclusion of the donor
When the amounts were invested in the partnership in which the donor namely the deceased was a partner he got a certain interest and benefit in that amount which was liable to be used for purposes of partnership
The deceased had a certain dominion over that property as a partner in the said firm and hence it could not be said that the amount gifted was retained by the donees to the entire exclusion of the donor and in these circumstances the provisions of Section 10 of the were attracted
It was on the other hand contended by Mr Sharma learned counsel for the accountable person who is the appellant before us that when the amounts were invested by the donees in the said firm the interest which the deceased got in the amounts invested by the donees as a partner of the firm in which the amounts were invested was in no way related to the gift and hence merely by reason of that investment it could not be said that the donees had not retained the said amount to the entire exclusion of the donor for the purposes of Section 10 of the 
It is the correctness of these submissions which has to be examined in the light of the provisions of Section 10 and the decided cases
In George Da Costa vs CED analysing the Section 10 of the said Act this court observed as follows 214 The crux of the section lies in two parts1 The donee must bona fide have assumed possession and enjoyment of the property which is the subject matter of the gift to the exclusion of the donor immediately upon the gift and 2 the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract or otherwise
As a matter of construction we are of opinion that both these conditions are cumulative
Unless each of these conditions is satisfied the property would be liable to estate duty under Section 10 of the Act 
The second part of the section has two limbs the deceased must be entirely excluded i from the property and ii from any benefit by contract or otherwise
It was argued for the appellant that the expression by contract or otherwise  should be construed ejusdem generis and reference was made to the decision of Hamilton J in Attorney General vs Seccombe  1 EDC 589 KB
On this aspect of the case we think the argument of the appellant is justified
In the context of the section the word otherwise  should in our opinion be construed ejusdem generis and it must be interpreted to mean some kind of legal obligation or some transaction enforceable at law or in equity which though not in the form of a contract may confer a benefit on the donor
 We may also at this stage very briefly refer to two leading cases decided by the Privy Council on a provision analogous to Section 10 of the 
In one of these cases namely HR Munro vs Commissioner of Stamp Duties   2 EDC 462 the Judicial Committee held that the property comprised in the transfers was the land shorn of the rights therein belonging to the partnership and was excluded from being dutiable because the donees had assumed and retained possession thereof and any benefit remaining in the donor was referable to the partnership agreement entered into earlier than the gifts and not to the gifts
In that case a father who was the owner of a large plot of land on which he carried on the business of a grazier entered into a partnership with his six children to carry on the said business
The partnership business was to be managed solely by the father and each partner was to receive a specified share of the profits
Subsequently the father transferred by way of gift all his right title and interest in separate portions of his land to each of his four sons and 215 the trustees of each of his two daughters and their children
This transfer was subject to the partnership agreement and was on the understanding that any of the partners could withdraw and work the portion of the land gifted to him separately
The partnership was an oral one and about six years after these deeds of gifts were executed a written partnership agreement was drawn up during the lifetime of the father under which no partner was entitled to withdraw from the partnership
On the death of the father the land which he had transferred by way of gift to his six children was included in his estate in the assessment of death duties under the Stamp Duties Act NSW 1920 which contained a provision in pari materia with section 10 of the 
On appeal the Judicial Committee of the Privy Council held that such inclusion was not justified and laid down the principle which we have set out earlier
The other leading case in this connection decided by the Privy Council is the case of Clifford John Chick vs Commissioner of Stamp Duties  1959 37 ITR ED 89 The same provision namely Section 102 of the New South Wales Stamp Duties Act 1920 56 came up for consideration in that case
The facts were that a father transferred by way of gift to one of his sons a pastoral property the gift being made without any reservation or qualification or condition
Some months later the son to whom the gift was made and another son of the donor entered into an agreement to carry on in partnership the business of graziers and stock dealers
The agreement inter alia provided that the father should be the Manager of the business and that his decision would be final and conclusive in matters connected with the conduct of the business
The agreement further provided that the capital of the business would consist of the livestock and plant owned by the respective partners and that the business would be conducted on the respective holdings of the partners and such holdings should be used for the purposes of the partnership only and that all lands held by any of the partners at the date of the agreement should remain the sole property of such partner and should not be deemed to be an asset of the partnership and such partner should have the sole and free right to deal with it
Each partner brought into partnership inter alia his livestock and plant and their combined properties were thenceforth used for the depasturing of the partnership stock
On the death of the father the question arose as to whether the land gifted was liable to be added to his estate for the purpose of assessment of death duty
The Judicial Committee took the view that the land gifted to the son was liable to so included in computation of father s estate because although the son has assumed bona fide pos 216 session and enjoyment of the property immediately upon the gift to the entire exclusion of the father he had not thenceforth retained the property to the father s entire exclusion as under the partnership agreement the partners and each of them were in possession and enjoyment of the property as long as the partnership subsisted whatever force and effect might be given to that part of the partnership agreement which gave a partner the sole and free right to deal with his own property
For some years the principles laid down in Munro s case and in the case of Clifford John Chick vs Commissioner of Stamp Duties referred to above were followed by the courts of this country in construing Section 10 of the 
However the decision in Chick s case came up for consideration before this court in CED vs CR Ramachandra Gounder Two different types of property were gifted in Gounder s case
The first type of property gifted was a house which the deceased owned and which was let to the firm in which the deceased was a partner as a tenant
He gifted this house to his two sons absolutely
After the deed of gift the firm paid the rent not to the deceased but to the donees by crediting the amount in the donees  accounts in equal shares
The second type of property gifted consisted of money
This gift was effected by the deceased by directing the firm in which he was a partner to transfer from his account a sum of Rs20000 to the credit of each of his five sons in the firm s books of account with effect from a particular date
He gave intimation of this transfer to his sons
Pursuant to the directions given by the deceased a sum of Rs20000 was credited in each of the sons  account with the said firm
The amounts remained invested with the firm for which the firm paid them interest
The deceased continued as a partner of the firm till dissolution
Within one month of its dissolution the deceased died
The question arose as to whether value of the house property and the sum of Rs 1 lac should be included in the property deemed to pass on the death of the deceased under Section 10 of the 
The Court held that neither the house property nor the sum of Rs1 lac could be deemed to pass under Section 10
Jaganmohan Reddy J who spoke for the court said page 452 of the report There is no doubt on the facts of this case the first two conditions are satisfied because there is an unequivocal transfer of the property and also of the money in the one case by a settlement deed and in the other by crediting the amount of Rs20000 in each of the sons  account with the 217 firm which thenceforward became liable to the sons for the payment of the said amount and the interest at 7 12  per annum thereon
 As far as the house property was concerned it was observed that the donor on the day when he gifted the property to his sons which property was leased out to the firm had two rights namely of ownership in the property and the right to terminate the tenancy and obtain the possession thereof
There is no dispute that the ownership had been transferred subject to the tenancy at will granted to the firm to the donor s two sons because the firm from thenceforward had attorned to the donees as their tenant by crediting rent of Rs300 to the respective accounts in equal moiety
The donor could therefore only transfer possession of the property which the nature of that property was capable of which in that case was subject to tenancy
What is pertinent to note in the case is that this Court took the view that the benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but is unconnected therewith
This decision shows that the principle laid down in Chick s case was departed from by the Court in cases in which the property gifted was brought into a partnership in which the donor had an interest merely as a partner
The decision in Gounder s case was followed by this court in CED vs NR Ramarathnam and several other decisions
An analysis the decision of Supreme Court in Gounder s case in our opinion shows that the Supreme Court in that decision referred to Munro s case and also referred to Chick s case
It however made a certain departure from the principle laid down in Chick s case
This would appear clear from the decision of this Court in CED vs Kamlavati 11979 and CED vs Jai Gopal Mehra s cases
Both these decisions involved the question of applicability of Section 10 of the 
In Kamlavati s appeal the facts were that Maharaj Mal the deceased was a partner in a firm which carried on business under the firm name and style of Ms Maharaj Mal Mana Raj
Maharaj Mal had one half share in the partnership and the other two partners had one fourth share each
Maharaj Mal made a gift of Rs1 lac to his son Lalit Kumar and of Rs50000 to his wife Kamlavati
In the books of account of the firm the sums of Rs 1 lac and Rs50000 were debited to the account of Maharaj Mal and credited to the accounts of the son and wife respectively
Almost simultaneously the son was taken as a partner in the said firm by giving him one fourth share out of the 218 one half share of Maharaj Mal
On the death of different partners the firm was reconstituted and some other partners admitted
On the death of Maharaj Mal the question arose regarding the applicability of Section 10 of the said Act
In the other appeal namely Jai Gopal Mehra s appeal the deceased donor made gifts of Rs20000 each in favour of his son and four daughters in law
Thereafter the donees invested the sums gifted to them in the partnership firm in which the deceased was a partner
The donees were not partners in the firm nor were they taken as partners after the gifts were made in their favour
When the case came up in a reference before a Full Bench of the Punjab and Haryana High Court  it answered the reference in favour of the accountable person namely Jai Gopal Mehra
The decision in Kamlavati s case merely followed the Full Bench decision in Jai Gopal Mehra s case
In its judgment the Supreme Court first dealt with the appeal in Kamlavati s case and after referring with approval to the analysis of Section 10 of the in George Da Costa vs CED it referred to the decision in Chick s and Munro s cases
It then turned to the earlier decision of the Supreme Court in Gounder s case
After setting out the later part of the passage in its judgment in that case which we have quoted earlier the Supreme Court observed that It should be noticed that though not explicity but implicitly some departure was made from the ratio of the Privy Council in Chick s case 1959 37 ITR ED 89  when the principle of Munro s case   2 EDC 462 PV was applied it was on the basis that what was gifted by the donor was the whole of the property minus the rights of the partnership which were shared and enjoyed by the donor also the donor enjoying the same bundle of rights in the partnership which he was enjoying before the gift did not bring the case within the ambit of Section 10
But the implicit departure from Chick s case was when it was said that the benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but is unconnected therewith
The departure can be attributed to the very subtle distinction in the facts of the two cases and it is necessary to highlight them
In Chick s case the donor as a partner came to share the possession and enjoyment of the property by the partnership firm long after the gift while in Gounder s case the benefit which the donor was enjoying as a partner in the property gifted was existing at the time of the gift itself and continued to exist even thereafter   219 It is important to note that the principle in Munro s case was applied in the case of Jai Gopal Mehra although the donees invested the amounts gifted in the firm in which the donor was a partner after the gifts were made
The same Bench which decided Gounder s case followed it in the case of CED vs NR Ramarathnam
In this case the facts in relation to the gifts of money by the donor in favour of his three sons and the daughter were materially similar to those of Gounder s case except that the three sons and daughter were also partners in the firm
Yet applying the ratio in Gounder s case it was held that the amounts gifted were not chargeable to Estate Duty under section 10
In Kamlavati s case this Court referred the decision of this Court in CED vs RV Viswanathan and observed as follows In other words the mere fact that the partnership may make use of the sums of money gifted in which the donor also was a partner did not mean that he was allowed to enjoy or derive any benefit in the money gifted which could be referable to the gift itself The Court clarified the position as follows P463 When a property is gifted by a donor the possession and enjoyment of which is allowed to a partnership firm in which the donor is a partner then the mere fact of the donor sharing the enjoyment or the benefit in the property is not sufficient for the application of Section 10 of the Act until and unless such enjoyment or benefit is clearly referable to the gift ie to the parting with such enjoyment or benefit by the donee or permitting the donor to share them out of the bundle of rights gifted in the property
If the possession enjoyment or benefit of the donor in the property is consistent with the other facts and circumstances of the case other than those of the factum of gift then it cannot be said that the donee had not retained the possession and enjoyment of the property to the entire exclusion of the donor in any benefit to him by contract or otherwise
 The court pointed out that distinction between the capital of the 220 partnership and the property of the partnership and that whether an amount forms the part of the capital of the partnership or part of its property it does not belong to co partner in the sense of his being a co owner
Page 464 of 120 ITR 1979
Even in the recent decision of this Court in CED vs Godavari Bai 1986 158 ITR p 683 where the decision in the Chick s case has been cited and discussed at some length the decisions in Kamlavati s and Jai Gopal Mehra s cases have been referred to without any indication that the ratio of the same was not accepted as good law
In fact that decision has been referred to as one in which the principle in Chick s case was applied
In the case before us the deceased gifted Rs25000 to each of his four sons and almost immediately thereafter the firm of Sanghi Brothers was constituted as aforesaid in which the said four sons invested Rs25000 each received from the father
As already pointed out the father as well as the sons had shares in the said partnership
Applying the decision in the case of Kamlavati and Jai Gopal Mehra discussed at some length by us earlier it must be held that the interest which the deceased father retained or obtained in the aggregate sum of Rs 1 lac invested by the said four sons in the said firm was an interest merely as a partner in the said firm and was not related to the gifts made by him to his said sons
In these circumstances it cannot be said that by reason of constitution of said partnership and the investment of the said amounts by the sons in the partnership the donees sons had not assumed bona fide possession and the enjoyment of the amounts gifted to them or that they had not retained the same to the entire exclusion of their father
In our opinion the said amount of Rs1 lac could not be included in the estate of the said deceased under the provisions of Section 10 of the 
In our view the Division Bench of the High Court was in error in applying the ratio of decision in Chick s case to the present case and holding that the said amount of Rs1 lac was liable to be included in the estate of the said deceased for the purposes of computation of estate duty in view of the provisions of Section 10 of the said Act
The learned judges of the High Court have with respect failed to appreciate the true effect of the decision of this Court in Kamlavati s case and failed to appreciate that the interest which the donor retained in the amount gifted and invested by the donees in the partnership in which the donor was a partner is not an interest which can be said to be related to the gift
221 In the result the appeal is allowed
In our opinion the question which was referred to the High Court for determination which we have set out earlier must be answered in the negative and in favour of the accountable person appellant
The respondent must pay the costs throughout
RSS Appeal allowed


Summary:
The suit premises consisted of four rooms in the ground floor where the appellant tenant was running his office
One room in the first floor was in the possession of the landlord respondent
The roof of one room in the rear side of the leased portion had fallen down and it has been replaced by the appellant after obtaining orders of the Rent Controller under Section 12 of the East Punjab Urban Rent Restriction Act 1949
The landlord filed a petition for eviction on the ground of bona fide requirement of the premises for his own use and occupation and change of user of the premises by the tenant
As he failed before the Rent Controller he preferred an appeal and during the pendency of the appeal he obtained the court s order and amended the petition and raised an additional ground under Section 133aiii of the Act seeking eviction of the tenant on the ground that the leased premises had become unsafe and unfit for human habitation
The Appellate Authority called for a findings on this additional ground from the Rent Controller and the finding went against the landlord
The Appellate Authority concurred with the Rent Controller on the said finding and dismissed the appeal
The respondent preferred a Civil Revision Petition before the High Court which sustained the case and ordered the eviction of the appellant under Section 133aiii of the Act
The High Court came to the finding that the falling down of the roof of one of the rooms afforded by itself a cause of action to the landlord to seek eviction of the tenant under the said section and the said cause of action would subsist even if the tenant had repaired the roof under orders of the Rent Controller under Section 12 of the Act
203 In the appeal to this Court by the tenant it was contended that the Rent Controller and the Appellate Authority had concurrently found that the building was neither unsafe nor unfit for human habitation and as such the High Court was not justified in interferring with those findings especially when they were findings of fact
On behalf of the respondent the appeal was contested on the ground that the falling down of the roof in a room was indicative of the damage condition of the building and therefore the High Court was fully justified in ordering eviction and that the replacement of the roof by the appellant would not extinguish the right which had accrued to the respondent under Section 133aiii to seek recovery of the possession of the leased premises
Allowing the appeal  HELD 1
The High Court was not justified in allowing the revision and directing eviction of the appellant under Section 133aiii
206H 2
The High Court proceeded on the erroneous assumption that the falling down of the roof in one room was itself sufficient to warrant a finding that the entire building had become unfit and unsafe for human habitation and called for a declaration to that effect
207F In the instant case the admitted position was except for the roof in one of the rooms falling down no other damage to the building was noticed and in such circumstances there is no scope for holding that a substantial or major part of the building had become unfit and unsafe for human habitation and hence an order of eviction was called for
208G H 3
The High Court had wrongly assumed that besides the falling down of the roof one of the walls has also crumbled
This assumption was a mistaken one because the expert witnesses examined during the trial by the parties have spoken about the good condition of three walls alone of the room and not the fourth because they are the outer walls of the room while the fourth wall was a common wall for the room in question and the adjoining room and hence there was no need to certify its good condition
205E F 4
The High Court had also failed to notice two factors of relevance viz 1 that the respondent had given his consent to the Rent Controller granting permission under Section 12 of the Act to the appel 204 lant to replace the roof and 2 that in spite of the alleged cause of action having arisen due to the falling down of the roof the respondent did not seek amendment of the petition so as to seek eviction of the appellant on the additional ground under Section 133aiii but instead he chose to prosecute his petition only on the original ground for eviction set forth therein and only after falling before the Rent Controller and preferring an appeal to the Appellate Authority he deemed it necessary to amend the petition and ask for eviction of the appellant on the additional ground
207C E 5
The aforesaid conduct of the respondent clearly reveals that he himself has not attached any significance to the falling down of the roof in one of the rooms and has not seriously considered the sustainable cause of action that had arisen to him under Section 133aiii for seeking eviction of the appellant
207E F Balbir Singh vs Hari Ram AIR 1983 Punjab and Haryana 132 Chander Mohini vs Jiva Singh and Sardarni Sampurna Kaur vs Sant Singh  Anr  distinguished