Case: Controller of Estate Duty, Gujarat Vs. H. H. Iqbal Mohomed Khan, Nawab of Palanpur

The late Nawab of Palanpur, H. H. Taley Mohomed Khan (hereinafter referred to as the " deceased "), the father of the respondent died on May 17, 1957. The deceased was the owner of a palace known as " Jorawar Palace ". In the year 1954, the deceased sold the palace to the Government of Bombay for a sum of Rs. 15, 00, 000. In January, 1955 the possession of this palace was handed over to the Government of Bombay. A sum of Rs. 5, 00, 000 was paid by the Government of Bombay to the deceased immediately on taking over possession and the balance of Rs. 10, 00, 000 was to be paid to the deceased by the Government of Bombay in three equal annual instalments. The respondent, who is the son of the deceased and the accountable person of the estate, contended before the Deputy Controller of Estate Duty that, out of the aforesaid sum of Rs. 10, 00, 000 due from the Government of Bombay, a sum of Rs. 9, 00, 000 was gifted to him by the deceased on May 3, 1955, and, therefore, the amount should not be included in the estate of the deceased. In support of this claim, the respondent produced before the Deputy Controller a photostat copy of a letter dated May 3, 1955, addressed by the deceased to the respondent. The Deputy Controller rejected the contention of the respondent, holding that the letter dated May 3, 1955, did not amount to a transfer of an actionable claim but that the gift was legally completed only on September 19, 1955, when the deceased intimated to the Government of Bombay his intention to make the gift to the respondent. The Deputy Controller accordingly held that the amount of Rs. 9, 00, 000 must be deemed to have passed to the respondent on the death of the deceased under section 9 of the Estate Duty Act, 1953, and as the gift was made within two years of the death of the deceased, it was chargeable to estate duty. The respondent took the matter in appeal to the Central Board of Revenue and it was contended on his behalf that the gift was governed by the Mohammadan law and section 120 of the Transfer of Property Act was not applicable and as the gift was made two years or more before the death of the deceased, it was not chargeable to estate duty. Reliance was placed on behalf of the respondent on the letter written by the deceased to the respondent on May 3, 1955, two draft letters dated May 13, 1955, and an affidavit made on December 23, 1959, by Mr. Thacker, a partner of Messrs. Mulla & Mulla, who, in May, 1955, were acting as solicitors for the deceased. The draft letter, under which instructions were given to the Government of Bombay to pay the sum of Rs. 9, 00, 000 out of the unpaid balance of Rs. 10, 00, 000 directly to the respondent, was not signed on May 13, 1955, but was signed by the deceased on September 19, 1955, and sent to the Chief Minister thereafter. In view of the instructions contained in that letter, the amount of Rs. 9, 00, 000 was, in fact, paid to the respondent directly by the Government of Bombay. By its order dated January 27, 1960, the Central Board of Revenue held that the provisions of section 130 of the Transfer of Property Act applied to the case, that the letter dated May 3, 1955, did not complete the gift but there was a complete gift only on September 19, 1955, when the deceased signed the letter addressed to the Government of Bombay informing the Government of the gift to the respondent. The Central Board of Revenue accordingly held that there was no valid transfer of the sum of Rs. 9, 00, 000 prior to September 19, 1955, and confirmed the inclusion of that amount in the estate of the deceased. Under section 64(1) of the Estate Duty Act, 1953 (34 of 1953), the Central Board of Revenue stated a case for the opinion of the High Court on the following question of law" Whether, on the facts and in the circumstances of the case, the gift of Rs. 9, 00, 000 should be regarded as having been made within two years of the death of the deceased and liable to estate duty ?"2. At the hearing of the reference it was conceded on behalf of the respondent that section 130 of the Transfer of Property Act was applicable to the case but it was argued that the provisions of that section had been complied with, that the letter of the deceased dated May 3, 1955, itself effected the gift and the amount of Rs. 9, 00, 000 was not liable to be included in the estate of the deceased for the purpose of estate duty. The High Court held that the provisions of section 130 of the Transfer of Property Act applied to the case and the letter dated May 3, 1955, manifested clearly the intention of the deceased to make the gift of Rs. 9, 00, 000 to the respondent and that intention was sought to be carried out and effected by that letter. The High Court accordingly answered the question in favour of the respondent.

Court's reasoning:
4. It is manifest that this section contains a special scheme which has some of the features both of the English common law and of the principles of equity and it is analogous to the provisions which are contained in section 25(b) of the Judicature Act of 1873, which are now enacted in section 126 of the Law of Property Act of 1925. In other words, the section has some of the features of the statutory and some of the equitable modes of assignment. It resembles an equitable assignment in that it applies to assignments by way of charge as well as to absolute assignments and takes effect as between the assignor and the assignee from the date of the assignment. On the other hand it resembles a statutory assignment in that it must be in writing and that it enables the assignee to sue in his own name and to give a valid discharge7. It isd that an instrument in writing under section 130 of the Transfer of Property Act is not required to be in any particular form. It is not necessary that any particular words should be used to effect the transfer of a debt or any beneficial interest in movable property if the intention to transfer in praesenti is clear from the language usedIt is apparent that the first part of the letter refers to a promise previously made by the deceased to the respondent that he would pay the whole of the unpaid balance, i. e., Rs. 10, 00, 000 in such a way that the income thereof would serve as allowance which was being paid to the respondent by the deceasedIn the present appeal, therefore, the question at issue depends upon the proper interpretation of the letter of the deceased dated May 3, 1955.It is apparent that the first part of the letter refers to a promise previously made by the deceased to the respondent that he would pay the whole of the unpaid balance, i. e., Rs. 10, 00, 000 in such a way that the income thereof would serve as allowance which was being paid to the respondent by the deceasedHaving analysed the language of the letter dated May 3, 1955, in its entirety and in its context we are of the opinion that there was merely a proposal or expression of the intention of the deceased to make the gift of the sum of Rs. 9, 00, 000 to the respondent and there was no transfer in praesenti of that amount to the respondent carried out and effected by means of that letter within the meaning of section 130 of the Transfer of Property Act. It follows, therefore, that the transfer of the actionable claim was not completed on May 3, 1955, but the transfer became effective on September 19, 1955, when the deceased signed the draft letter to the Bombay Government requesting it to arrange for the payment of the said sum of Rs. 9, 00, 000 directly to the respondentIt was then contended by Mr. Bhaba that, if the language of the letter dated May 3, 1955, is ambiguous, evidence is admissible of surrounding circumstances in order to enquire what is the meaning of the language used by the deceased in the doucment. We do not, however, agree that there is any ambiguity in the letter dated May 3,1955.The questionof construing the letter is somewhat difficult, but the problem in this case does not go beyond the sphere of difficult construction into the sphere of ambiguity. The difficulty is purely one of construction and which can and should be overcome. We are, therefore, of the opinion that the subsequent declaration alleged to have been made by the deceased to Mr. Thacker as mentioned in the draft letters and the affidavit is not admissible in the matter of interpretation of the letter dated May 3,1955.We accordingly reject the argum ent of the respondent on this aspect of the caseAs regards the question whether a part of an actionable claim can be ther of a gift or not, the view taken by the Central Board of Revenue is that the debt was capable of partition and there was no valid transfer of the sum of Rs. 9, 00, 000 prior to September 19, 1955, when the debt wa s actually partitionedIt is not, however, necessary for us, in the present appeal, to express any opinion on this aspect of the case or to examine whether the view taken by the High Court on this point is correct