N.K. SANGHI, PARTNER OF M/S SANGHI BROTHERS versus CONTROLLER OF ESTATE DUTY, RAJASTHAN

Citation: [1988] SUPP. 1 S.C.R. 210 · Decided: 06-05-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

A 
B 
c 
N.K. SANGHI, PARTNER OF MIS SANGHI BROTHERS 
v. 
CONTROLLER OF ESTATE DUTY, RAJASTHAN 
MAY 6, 1988 
(R.S. PATHAK, CJ AND M.H. KANIA, J.] 
Estate Duty Act, 1953-Sections 10-'--Assessee-Gifted Rs.1 Lack 
to four sons-Amount invested by sons in partnership firm-Assessee 
and sons had shares in. partnership-Amount given as Gift-Whether 
includible in estate of assessee-Liability for estate duty-Whether 
arises. 
One Motilal Sangbi made a gift of ks.25,000 each to bis four sons, 
on September 1, 1955. These amounts were invested by the sons in the 
firm known as Sangbi Brothers which was constituted by the said Moti-
lal soon after the gifts were made. Motilal Sanghi had an 8 annas share 
D 
in the firm; the four sons had a share of 2 annas each. Motilal Sangbi 
died on July 21, 1961. The Assistant Controller of Estate Duty took the 
view that the sum of Rs. I lac was liable to be included in the estate of 
Motilal Sangbi in liew of the provisions of Section 10 of the Estate Duty 
Act as that amount was not retained by the donees to the entire exclu-
sion of the donor. The Appellate Controller, however, held that section 
E 
10 was not attracted to the circumstances of the case. The Division 
Bench of the Rajastban High Court in a reference made to it held that 
section 10 was attracted. It took the view (1) that the said amount was 
brought back into the partnership business of the donor and the donees 
and hence it was difficult to say that during the continuance of the 
partnership the donees enjoyed the amounts gifted to the entire exclu-
F 
sion of the donor and (2) that the donor, in one sense or the other, had 
dominion over that property, and the property was utilised both for the 
benefit of the donor and the donees. 
Before this Court it was contended by the appellant that when the 
amounts were invested by the donees in the said firm, the interest wbicll 
G the deceased got in the amounts invested by the donees, as a p"'1ne~ of 
the firm, was in no way related to the gifts and hence, merely by reason 
of that investment, it could not be said that the dooees bad not retained 
the said amount to the entire exclusion of the donor for the purposeS of 
section 1-0. It was, on the other hand, contended on behalf of the respon-
dent that as the said amounts were immediately thereafter invested in the 
H firm, it could not be said that the amounts were retained by the donees 
210 
.. 
' 
.. 
N.K. SANGH! v. CONTROLLER OF ESTATE DUTY !KANIA, J.J 211 
to the entire exclusion of the donor who bad a certain dominion over A 
that property as a partner, 
Allowing the appeal, this Court, 
HELD: (1) The interest which the deceased father retained or 
obtained in the aggregate sum ofRs.1 lac invested by the said four sons 
B 
in the said firm, was an interest merely as a partner in the said firm and 
was not related to the gifts made by him to his sons. [220D-E] 
(2) It cannot be said that by reason of constitution of the said 
partnership and the investment of the said ainount by the sons in the 
partlllership, the sons had not assumed bona fide possession and the 
enjoyment of the amounts gifted to them or that they had not retained 
C 
the same to the entire exclusion of their father. [220E-F] 
(3) The said amount of Rs.1 lac could not be included in the estate 
of the said deceased under the provisions of section 10 of the Estate 
Duty Act. l220G] 
D 
George Da Costa v. CED, [1967] 63 ITR 4'J7 (SC); H.R. Munro· 
v. Commissioner of Stamp Duties, [1934] AC 6l; 2 Enc 462; Clifford 
John Chick v. Commissioner of Stamp Duties, [1958] AC 435; (1959) 37 
ITR (ED) 89; 3 EDC 915; CED v. C.R. Ramachandra Gounder, [l'J73] 
88 ITR 448 (SC); CED v. N.R. Ramarathnam, [l'J73] 91ITR1 (SC); 
E 
CED v. Kamlavati and CED v. Jai Gopal Mehra, [l'J79] 120 ITR 456 
(SC); CED v. R. V. Viswanathan, [l'J76] 105 ITR 653 and CED v. 
Godavari Bai, [1986] 158 ITR 683 referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 608 
~~~-
F 
From the Judgment and Order dated 8.5.1973 in the High Court 
of Rajasthan in D.B. Civil Estate Duty Reference No. 46 of 1967. 
G.C. Sharma and P.K. Mukharjee for the Appellant. 
G. Ramaswami, Additional Solicitor General, Ms. A. Subhashini 
and K.P. Bhatnagar for the Respondent. 
The Judgment of the Court was delivered by 
G 
KANIA, J. This is an appeal against the judgment of a Division 
H 
212 
SUPREME COURT REPORTS 
[1988] Supp. 1 S.C:R. 
A Bench of the High Court-of Rajasthan rendered on a reference made
Excerpt shown. Read the full judgment & AI analysis in Lexace.