Case: Controller Of Estate Duty, Kerala Vs. M/S. R.V. Vishwanathan &amp; Ors

donor had given. The benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but was unconnected therewith.Coming to the facts of this case, we find that according to the agreed statement of the case, the deceased transferred the sum of Rs. 45, 000 from his persona account to the credit of each of his four sons on September 12, 1955, with a view to covert the business carried on by him into a partnership business with his major sons. clause 4 of the deed of partnership which was executed by the deceased and his four adult sons on September 17, 1955, was as under :"4. The capital of the partnership for the present shall be Rs. 2, 25, 000 contributed equally by the five partners at Rs. 45, 000 each but the partners shall have the option to increase the capital as and when required, each partner contributing the additional capital as and when same proportion as the original contribution and all such contributions including the original investment shall carry no interest for any duration. The present capitals represented by the assets, outstanding, liabilities and goodwill of the business, P. R. N.Ramanatha Iyer & Co., and R. V. Veeramani Iyer, which have been taken over as going concerns and made part and parcel of the partnership business here by constituted. The agreement which was entered into on the following day by the deceased and his four adult sons relating to the admission of the two minor sons of the deceased to the benefits of partnership expressly recited that Rs. 45, 000 had been transferred by the deceased from his personal account to the credit of each of the minor sons. It was also stated that the capital of the partnership would be Rs. 3, 15, 000 made up by contribution of Rs. 45, 000 by the deceased and each of his sons and that the share of the deceased and his six sons in profits would be one-seventh each. The transfer of Rs. 45, 000 by book entries in favour of each of the four adult sons on September 12, 1955, and in favour of each of the minor sons on September 16, 1955, the execution of the partnership deed on September 17, 1955, and of the other agreement on September 18, 1955, in our opinion, were all parts of one integrated transaction, the object of which was to bring about transfer of six-sevenths share of the deceased in his business in favour of his sons so that he and his sons might have each one- sevenths share in business. The Tribunal has expressly recorded a finding that what the deceased gifted to his sons was only a share in the business. The Tribunal also expressed its full agreement with the following observations made by the Assistant Controller :"From the facts of the case it is clear that the gift in favour of the sons represented amounts transferred by book entries to the account of each of the sons who were admitted to the partnership and that it does not actually represent cash sums of Rs. 45, 000 as such. By virtue of these transfer entries the sons of the deceased got a share in the business. Thus, the gift cannot be construed as a gift of cash but it only represented a gift of a share in the business. By virtue of this gift, the sons had necessarily to become partners. The subject-matter of the gift is the investment in the business and such investment was compulsory or, in other words, gift was for the specific purpose of admission into the business as partners and for no other purpose." 13. The above finding of the Tribunal has been arrived at upon the material facts and relevant circumstances of the case and in answering the question referred to by the Tribunal, we must proceed upon the basis of the correctness of the above findings. although Mr. Mehta has tried to assail that finding, nothing cogent has been brought to our notice as might indicate any infirmity in that finding. The circumstances of the case indeed point to the conclusion that the said finding is well-founded. 14. In the right of the finding that the deceased transferred six-sevenths share in the business in favour of the sons and retained only one- seventh share, no question can possibly arise for the inclusion of the said six-sevenths share or of the amount of Rs. 2, 70, 000 in the estate of the deceased. The transfer of Rs. 2, 70, 000 by the deceased in the favour of his sons was not in cash but was by means of book entries. The transfer of that amount was a part of the scheme as stated above, to transfer six-sevenths share in the business in favour of the sons. There was no absolute transfer of Rs. 2, 70, 000 in favour of the sons but the transfer was made subject to the condition that the sons would use it as capital, not for any benefit of the deceased donor but for each of them becoming entitled to one-seventh share in the business. No benefit of any kinds was enjoyed by way of possession or otherwise by the deceased under the gift of the subject-matter of the gift. Whatever benefit was enjoyed by the deceased subsequent to the date of the gift was on account of the fact that he held one-seventh share in the business, which share heartened throughout and never parted with. No extra benefit was also conferred under the deed of partnership upon the deceased although some extra benefit was conferred upon two of the major sons in the form of remuneration because of their active and full participation in the business. Keeping in view the position of law discussed earlier, it is plain that the facts of the case would not fall within the ambit of section 10 of the Act.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]In the right of the finding that the deceased transferred six-sevenths share in the business in favour of the sons and retained only one- seventh share, no question can possibly arise for the inclusion of the said six-sevenths share or of the amount of Rs. 2, 70, 000 in the estate of the deceased. The transfer of Rs. 2, 70, 000 by the deceased in the favour of his sons was not in cash but was by means of book entries. The transfer of that amount was a part of the scheme as stated above, to transfer six-sevenths share in the business in favour of the sons. There was no absolute transfer of Rs. 2, 70, 000 in favour of the sons but the transfer was made subject to the condition that the sons would use it as capital, not for any benefit of the deceased donor but for each of them becoming entitled to one-seventh share in the business. No benefit of any kinds was enjoyed by way of possession or otherwise by the deceased under the gift of the subject-matter of the gift. Whatever benefit was enjoyed by the deceased subsequent to the date of the gift was on account of the fact that he held one-seventh share in the business, which share heartened throughout and never parted with. No extra benefit was also conferred under the deed of partnership upon the deceased although some extra benefit was conferred upon two of the major sons in the form of remuneration because of their active and full participation in the business. Keeping in view the position of law discussed earlier, it is plain that the facts of the case would not fall within the ambit of section 10 of the ActThe Tribunal has expressly recorded a finding that what the deceased gifted to his sons was only a share in the business. The Tribunal also expressed its full agreement with the following observations made by the Assistant Controller :"From the facts of the case it is clear that the gift in favour of the sons represented amounts transferred by book entries to the account of each of the sons who were admitted to the partnership and that it does not actually represent cash sums of Rs. 45, 000 as such. By virtue of these transfer entries the sons of the deceased got a share in the business. Thus, the gift cannot be construed as a gift of cash but it only represented a gift of a share in the business. By virtue of this gift, the sons had necessarily to become partners. Ther of the gift is the investment in the business and such investment was compulsory or, in other words, gift was for the specific purpose of admission into the business as partners and for no other purpose."The above finding of the Tribunal has been arrived at upon the material facts and relevant circumstances of the case and in answering the question referred to by the Tribunal, we must proceed upon the basis of the correctness of the above findings. although Mr. Mehta has tried to assail that finding, nothing cogent has been brought to our notice as might indicate any infirmity in that finding. The circumstances of the case indeed point to the conclusion that the said finding is