CONTROLLER OF ESTATE DUTY, MADRAS versus C. R. RAMACHANDRA GOUNDER

Citation: [1973] 3 S.C.R. 554 · Decided: 27-02-1973 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

554 
CONTROLLER OF ESTATE DUTY, MADRAS 
v. 
C. R. RAMACHANDRA GOUNDER 
February 27, 1973 
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.] 
Estate Dut,v Act (34 of 1953), s. IQ-Scope of. 
The father· of the r.espondept was a partner in a firm. 
He owned 
property which the firm was occupying as a tenant at will. 
Jn 1953 
he executed a deed. of settlement under which he 
transferred 
that 
prop.erty to two of his sons absolutely and 
irrevocably. 
After 
the 
transfer the firm continued as tenant paying rent to tihe two donees by 
credittng each of t~ir accounts in the account books of the 
firm 
in 
rqu~tl shares. The father also wrote to the firm to transfier from his 
account five sums of Rs. 20,000 each with effect from April, 1953, to 
the credit of his five sons in the firm's books. 
The sons did llOt with-
dra\v any amount from their accounts in the firm and 
the 
amounts 
continued to be invested in the firm for which interest at 
7 l % 
per 
annum \\'as paid to them. The father continued to be a partner of 
the firm even after the transf~r rill 1957, when the firm was dissolved. 
On his death thereafter the property leased out to the firm .which was 
transferred to two of his sons as well as Rupees o~ lakh gifted to the 
five sons, were sought to be included in the estate of the deceased on 
the ground that the donees had not been in possessiOJl and enjoyment 
of the subject matter of the gifts to the entire exclusion of the donor 
within the meaning of s. 10 of the Estate Duty Act, 
1953. 
The High 
Court. on reference, held against the Revenue. 
Dismissing the a.ppeal to this Coud. 
HELD : Neither the property gifted to the dQJ1Ces nor the amount 
of Rs. 1 lakh, gifted to ·the five sons could be included in the estate 
of the deceased. f81A-B] 
Section 10 cons·ists of two conditions, namely, (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 1lhe donor 
immediately upa,l the gift and (2) the donee must have retained such 
possession and enjoyment of the property to the entire exclusion of 
lhe donor or of any _benefit to him by contract or 
oth,erw'ise; 
and 
unless both are satisfied the property would be liable to Estate duty. 
1-;,e second part of the section has two limbs, namely, the 
decea~d 
must be entirely excluded, (a) from the propefty, and (b) ffom any 
benefit by contra.ct or otherwise. The word 
"otherwise" 
must 
be 
cvnstrued ejusdem generis and it must be interpreted to 
mean · sOme 
kind of 1egal obligation or some transaction enforceaWie at law Or in 
equity, which, . though iiot in the form of a contract, may confer a benefit 
on the donor. [557F-H; 558A-Cl 
In the present case, the first two conditions are satisfied because of 
the unequivocal transfer of the properties and the last limb 
of 
the 
condition relating to any benefit to the do:nor by contract or otherwise 
is .inapplicable. The donor. on the date when he gifted the property 
~h1ch was leased out. to the firm~ had two rights. namely, o.wnership 
in t~e property and nght to terminate the tenancy aJld obtain posses-
' 
B 
c 
D 
F 
H 
A 
B 
c 
D 
E 
F 
G 
CONTROLLER ESTATE DUTY v. RAMACHANDRA 
555 
(Jaganmohan Reddy, J.) 
sion thereof. 
He has transferred the ownership and has given such 
POSBession as the circumstances and the nature of the· propefty admit. 
It could not be said that since the d<n>r was a partner in the :firm 
which had taken the property on lease, he derived benefit therefrom and 
was therefore not entirely excluded from the possession and enjoyment 
thereof. 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. [558C·AJ 
George Da <;osta v. Controller of Estate Duty, Mysore, 63 I. T. R. 
497, followed. 
Munro &nd Others v. CommisJioner of Stamp Duties, [1934] A.C. 
61, Clifford John Chick and Another v. Comfnissioneir of Stamp Duties, 
37 I.T.R. (E.D.) 89 and Commissioner of Stamp 
Duties of New 
South Wales v. Perpetual Trustee Company Limited, [1943] A.C. 425, 
referred to. 
Controller of Estate Durv, Mysore 
v. 
S. 
Aswath.anurayana 
Setty 
and Another, 72 I.T.R. 29, approved. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1391 of 
1970. 
Appeal by certificate from the judgment and order dated 
November 25, 1968 of the Madras High Court in Tax Case No. 
103 of 1965. 
B. B. Ahuja, S. P. Nayar and R. N. Sachthey, for 

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