Case: George Da Costa Vs. Controller Of Estate Duty In Mysore,Bangalore

2. The property in question is house No. 34 Mahatma Gandhi Road, Bangalore. It had been purchased by the appellants father Dr. C. F. Da Costa (hereinafter called the deceased) in the joint names of himself and his wife on February 14, 1940. They made a gift of the house to their two sons on October 29, 1954. The document recites that the donees had accepted the gift and they had been put in possession. But the parents continued to be in possession of the house though the municipal tax was paid thereafter in the names of the sons. The deceased died on September 30, 1959 more than 4 years after the gift. The appellant, the accountable person, then filed a return showing the value of the estate left by his father at Rs. 93,750 excluding the value of the house No. 34, Mahatma Gandhi Road, Bangalore. The Assistant Controller of Estate Duty, however, included the sum of Rs. 1,50,000 as the value thereof and determined the aggregate value of the estate at Rs. 2,57,249 and assessed the estate duty payable at Rs. 15,751.54 P. by his order, dated November 30, 1959. The appellant thereupon preferred an appeal to the Central Board of Revenue (hereinafter referred to as the Board) which dismissed the appeal and affirmed the view taken by the Assistant Controller of Estate Duty. At the instance of the appellant the Board referred the following question of law for the determination of the High Courton the facts and in the circumstances of the case, the property at No. .34, Mahatma Gandhi Road, Bangalore was correctly included in the estate of the deceased as property passing or deemed to pass on his death under S. 10 of the Act ?" The High Court answered the question in the affirmative, holding that the appellant was liable to pay estate duty with regard to the

Reasoning: A gift of immovable property under S. 10 will, however, be dutiable unless the donee assumes immediately exclusive and bona fide possession and enjoyment of the subject-matter of the gift, and there is no beneficial interest reserved to the donor by contract orcrux of the section lies in two parts: (1) 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 S. 10 of the Act. This view is borne out by the decision of the Court of Appeal in Attorney-Generalv. Earl Grey, 1898-2 QB 534,541, with regard to an analogous provision under S. 38 (2) of the Customs and Inland Revenue Act, 1881, as amended by S. 11 of the Customs and Inland Revenue Act,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 theour opinion, the contention of the respondent must be accepted as correct. As a matter of construction we hold that the words "by contract or otherwise" in the second limb of the section will not control the words "to the entire exclusion of the donor" in the first limb. In other words, in order to attract the section it is not necessary that the possession of the donor of the gift must referable to some contractual or other arrangement enforceable in law or in equity. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was "entirely excluded from possession and enjoyment" within the meaning of the first limb of the section and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estateamendment brought about by the Finance Act, 1965 was effective only from April 1, 1965 and was not retrospective. We think that the insertion of the second proviso to the section must be taken to have been made deliberately by Parliament to be effective from the date of the amendment. We, therefore, see no reason for holding that the earlier provision in S. 10 should be interpreted with reference to the language of the amendment brought about by the Finance Act ofaccordingly reject the argument of Mr. Srinivasan on thisquestion was examined by the Board which found that the property was purchased entirely out of the funds of the deceased, that for the purpose of income-tax the deceased had declared the entire property as his own, and that the income therefrom was exclusively assessed in his hands. On these facts the Board held that though the property stood in the joint names of the deceased and his wife, she was merely a name-lender and the entire property belonged to the deceased and was rightly included in his estate for the purpose of estate duty. In view of this finding of fact it is not possible to accept the argument of the appellant that only half the share of the property should be taken for the purpose of estate duty assessment.