CONTROLLER OF ESTATE DUTY, A.P., HYDERABAD versus SMT. GODAVARI BAI

Citation: [1986] 1 S.C.R. 348 · Decided: 18-02-1986 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Dismissed

Judgment (excerpt)

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aJNTROLIER OF ESTATE DUTY, A.P., HYDERABAD 
v. 
SMT. GODAVARI BAI 
FEBRUARY 18, 1986 
[V,D. TULZAPURKAR, SABYASACHI MUKHARJI & RANGANATH MISRA, JJ.] 
Estate Duty Act 1953, s.10 - Ingredients of -
Property 
taken under any gift -
Whether part of estate of deceased 
donor passing on his death - Dependent upon what was subject 
matter of gift and whether gift of absolute nature or subject 
to certain rights. 
The respondent's husband was a partner in a firm carry-
ing on business as bankers. He issued a cheque for Rs.3,00,000 
in favour of the firm on 4th October, 1952 with 3 view to give 
Rs. 1,00,000 to each of his three minor grand nephews. This 
amount was debited to his account in the firm and credited in 
the accounts of the three minors in equal proportion. He died 
on 21st February 1956. The said sum continued to stand in the 
respective accounts of the three minors in the books of the 
firm till its dissolution on 4th July, 1960 whereafter some 
assets were allotted to each one of them in lieu of the 
amounts standing to their credit. 
The respondent, as the accountable person, filed an 
account declaring the value of the asses see' s estate without 
including the aforesaid sum of Rs. 3,00,000 transferred by the 
deceased to his three grand nephews. The respondent-assessee .i _ 
contended before the Deputy Controller (i) that these trans-
fers were not gifts but amounted to transfer of actionable 
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claims made in conformity with s. 130 of the transfer of 
Property Act by effecting entries in the books of account; and 
(2) that the transfer amounted to a novation which did not 
require an instrument signed by the transferor. The Deputy 
Controller negatived both the contentions and held that the 
sum of Rs. 3 lakhs was includible in the estate of the 
deceased that passed on his death. The Appellate Controller 
confirmed the aforesaid order in appeal. In the further appeal 
preferred by the respondent, the Appellate Tribunal, held (i)~ 
that the plain reading of section 130 showed. that the transfer 
CONTROLLER ESTATE DUTY v. GODAVARI BAI 
349 
of an actionable claim became complete and effective only upon 
ir the execution of an instrument in writing signed by the 
transferor or by his duly authorised agent; (ii) that the 
cheque issued by the deceased in favour of the firm only 
authorised the firm to pay to itself the sum of Rs. 3 lakhs 
from out of the amount lying at the credit of the deceased but 
it did not by itself authorise the firm to transfer this 
amount to anyone else and that such a transfer could be autho-
rised by a separate letter of instructions from the deceased 
but no such. instrument obtained and the oral instructions 
given could not take the place of such an instrument in 
writing and, therefore the transfer of Rs. 3 lakhs done in 
favour of the donees was not in accordance with the require-
ments of section 130; (iii) that the amount of Rs.3 lakhs was 
also includible in the estate of the deceased under section 10 
of the Estate Duty Act even if it were assumed that the 
transfer became complete and effective on the date of the 
transfer inasmuch ~s on the facts, it could not be said that 
the donees retained possession and enjoyment of the gifted 
....., amounts to the entire exclusion of the donor or of any benefit 
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r< to him and that this position continued to exist till the 
death of the decea~ed. 
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The High Court in a reference at the instance of the 
assessee, set asid¢ the order of the Tribunal on the grounds 
(i) that it was a I gratuitous transfer of an actionable claim 
and the inter-position of a cheque 
issued by the deceased in 
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favour of the firm made all the difference inasmuch as the 
transfer of an actionable claim represented by a negotiable 
instrument like a cheque was governed by section 137 in 
preference to section 130 of the Transfer of Property Act and 
) that the cheque together with the oral instructions (which 
~ even the Tribunal presumed were given by the deceased) would 
constitute the firm a trustee or an agent holding the moneys 
for the benefit of the minors and, as such, the transfer to 
minors was valid, complete and effectual; (ii) that the donor 
had been completely excluded from the subject-matter of the 
gift and, as such, section 10 was not applicable. 
Dismissing the appeal, 
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HEU>: 1. The transaction in question clearly fell within 
the ratio of the decision in Munro's case and 

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