JUDGMENT <NAME>, <NAME>

1. These two references raise an interesting but rather difficult question of law relating to the construction and application of section 10 of the Estate Duty Act, 1953. It is necessary to state the facts of the two references in some detail in order to appreciate how the question arises. The facts are not the same in the two reference and, therefore, we shall first state the facts of Reference No. 2 of 1970 and then set out the facts of Reference No. 4 of 1970.

2. Ref. No. 2 of 1970. - This reference arises out of assessment to estate duty made on the principal value of the estate of one <NAME> who died on 9th October, 1961. <NAME> was a partner in a firm called Messrs. <NAME> in which he had 1/7th share. During his life <NAME> made the following gifts in favour of his sons, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, his grandsons, <NAME> and <NAME>, and his daughter, <NAME>, on the dates shown against their respective names :

Name of donee Date of gift Amounted gifted Rs. Chhotalal 28-9-56 35,000 <NAME> 27-9-56 35,000 <NAME> 19-9-56 5,000 <NAME> ,, 10,000 <NAME> ,, 10,000 <NAME> ,, 10,000 <NAME> ,, 10,000 Bai Mani ,, 5,000 ----------- 1,20,000 ---------- -----------------------------------------------------------

3. The gifts were made by means of cheques handed over to the donees. The donees encased the cheques and deposited the amounts in the firm of Messrs. <NAME>. The amounts so deposited were credited in the individual accounts of the respective donees opened in the books of account of the firm of Messrs. <NAME>. Each of them was a partner in his capacity as manager and karta of his Hindu undivided family. There was a partner partition in the case of each Hindu undivided family and the amount coming to the share of each of these donees on such partial partition was, in two of the cases, credited in a separate account of such donees and then amalgamated it the other account in which the amounts deposited were credited and in the other cases, credited in the existing account of such donee. The amount of profits coming to the shares of each donees as also the amount of interest were credited and the withdrawals made by each donee were denied in the respective accounts of each donee. On theses facts the Assistant Controller of Estate Duty took the view that section 10 was attracted and by reason of that section the aggregate amount of gifts totaling to Rs. 1,20,000 was includible in the principal value of the state of <NAME>. This view as affirmed by the Appellate Controller in appeal and the accountable person thereon preferred further appeal to the <ORG>. The <ORG> also took the same view as the taxing authorities and held that section 10 was clearly applicable on the facts of the case. An additional contention was, however, raised before the <ORG> on behalf of the accountable person in order to get out of the regiour of section 10 . That contention was that the donees must be deemed to have withdrawn the amounts deposited by them with the firm of Messrs. <NAME> more then two years prior to the death of <NAME> and the case, therefore, fell within the first proviso to section 10 . This contention was also rejected by the <ORG> except in regard to a small amount of Rs. 1,032. The <ORG> examined the individual accounts of the donees and applying the principle that "where a partner has credits in his individual accounts and where the credits by any of income of the year and other receipts far exceed the capital embarked upon by the partner in the firm, the resumption would be that the withdrawals are out of the income and receipts and should not be deemed to have come to of the original capital", held that there was nothing to show that the amounts deposited by the donees were withdrawn by them prior to 9th October, 1959, except for a small sum of Rs. 1,032, which must be deemed to have been withdrawn by <NAME> before 23rd October, 1957. The <ORG> accordingly gave relief to the accountable person to the extent of Rs. 1,032 and sustained the addition of the balance of Rs. 1,18,968 in the principal value of the estate of <NAME> under section 10 . This decision of the <ORG> is challenged in Reference No. 2 of 1970, at the instance of the accountable person.

4. Reference No. 4 of 1970. - This reference arises out of assessment to estate duty made on the accountable person in respect of the estate of one <NAME> who died on 26th July, 1962. During his lifetime <NAME> was a partner in a firm called Messrs. <NAME> which carried on business at Rajkot. <NAME> made gifts of Rs. 2,00,000, each in favour of his two minor sons, <NAME> and <NAME>, on 21st March, 1953. These gifts were made by debiting the aggregate sum of Rs. 4,00,000 in the account of <NAME> and credited a sum of Rs. 2,00,000, each in the respective accounts of <NAME> and <NAME> in the books of account of the firm of Messrs. <NAME>. Subsequently on 22nd December, 1956, <NAME> made another gift of a sum of Rs. 2,00,000 in favour of his minor grandson, <NAME>, and this gifts was made by <NAME> by withdrawing a sum of Rs. 2,00,000 from the firm of Messrs. <NAME> and handing it over to <NAME>. Out of the sum of Rs. 2,00,000 received by him by way of gifts, <NAME> deposited a sum of Rs. 50,000 with the firm of Messrs. <NAME> on 2nd January, 1957, and a further sum of Rs. 1,49,500 was deposited by him on 3rd January, 1957. <NAME> thus deposited an aggregate sum of Rs. 1,99,500 with the firm of Messrs. <NAME> out of the sum of Rs. 2,00,000 gifted to him <NAME>. It may be pointed out, though it is not material to the question arising for decision in the resent reference, that <NAME> and <NAME> were admitted to the benefits of the partnership in the firm of Messrs. <NAME> on 1st April, 1954. The firm of Messrs. <NAME> was, however, dissolved with effect from 7th March, 1962, and the terms and condition on which the dissolution was effected were recorded in a deed of dissolution dated 12th March, 1962. On the death of <NAME> on 26th July, 1962, a question arose as to whether the amounts of Rs. 2,00,000, each gifted to <NAME>, <NAME> and <NAME> were liable to be included in computing the principal value of the estate of <NAME>. The Assistant Controller held that the amount of Rs. 2,00,000, each gifted to <NAME> and <NAME>, were liable to estate duty by reason of section 10 because they had been deposited by the donees with the firm of Messrs. <NAME> in which <NAME> was a partner and it could not, therefore, be said that possession and enjoyment of theses amounts was retained by the donees to the entire exclusion of <NAME>. So also, for the same reason, the amount of Rs. 1,99,500, deposited by <NAME> with the firm of Messrs. <NAME> out of the sum of Rs. 2,00,000 gifted to him by <NAME> was held by the Assistant Controller to be includible in the principal value of the estate of <NAME> under section 10 . The accountable person being aggrieved by the decision of the Assistant Controller preferred an appeal to the Appellate Controller but the Appellate Controller relying on section 10 held the inclusion of the amount of Rs. 5,99,500. This led to the filing of a further appeal to the <ORG>. By the time this appeal came us for hearing before the <ORG>, two decision had been given by this court, one in <CITATION> and the other in <CITATION> , which appeared to short the view taken by the taxing authorities. The <ORG> was bound by the ratio of these two decisions and the <ORG> accordingly held that the amount of Rs. 5,99,500 was chargeable to estate duty under section 10 . The accountable person raised an alternative contention before the <ORG>, namely, that even if section 10 was applicable on the facts of the case, the entire amount of Rs. 5,99,500 was not liable to be included in the principal value of the estate but the charge of estate duty should be confined only to the extent of the interest of <NAME> had possession and enjoyment of the entire amount of Rs. 5,99,500, as a partner in the firm of Messrs. <NAME>, it could not be said that assertion and enjoyment of any part of the amount of Rs. 5,99,500 was retained by the donees to the entire exclusion of <NAME> and the whole of the amount of Rs. 5,99,500 was, therefore, liable to the charge of estate duty under section 10 . The accountable person has brought Reference No. 4 of 1970 challenging the validity of this decision taken by the <ORG>.

5. The determination of the question arising in theses reference turns on the true interpretation of section 10 , because it is on the application of that section that it is claimed by the revenue that the amounts gifted by the deceased in each case are includible in the principal value of the estate of the deceased. If the applicability of section 10 can be excluded by the accountable person the amounts having admittedly been gifted by the deceased more than two prior to his death in each case would be outside the pale of estate duty and the revenue would not be entitled to include them in the principal value of the estate of the purpose of levy of estate duty. It, therefore, because necessary to consider what is the scope and meaning of section 10 and whether the amounts gifted by the deceased in either case fall within the mischief of that section. Now, section 10 has come up for consideration before <ORG> on a number of occasion and it has been judicial interpreted in no less then three decisions. Before we refer to these decisions, it would be convenient to set our section 10 as it was in force at the material time :

"10. Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that none fide possession and enjoyment of it was no immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise :

Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at lest one year before the death :

Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor's death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition."

6. <ORG> pointed out in <CITATION> and that was reiterated by <ORG> in <CITATION> , that the crux of section 10 lies in two parts : (i) 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 (ii) the donee must have retained sub-possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him, by contract or otherwise. Both theses conditions are cumulative. If either of these conditions is not fulfilled, the property, would be liable to estate duty. The first part of the section does not present any difficulty of construction. It is the second part which requires consideration. It is two limbs : the deceased must be entirely excluded, (i) from possession or enjoyment of the property; and (ii) from any benefit, by contract or otherwise. We are not concerned here with the second limb because the revenue took its stand only on the non-fulfillment of the condition in the first limb and did not seek to rely on the second limb for bringing the case within section 10 . It is, therefore, not necessary for us to consider the second limb which, as pointed out by Viscount <NAME> in <NAME> v. Commissioner of Stamp Duties, while dealing within a almost identical provisions in section 102(2) (d) of the New South Wales Stamp Duties Act, 1920-56, constitution a very difficult part of the second. It would be sufficient to state that according to the view taken by <ORG> in <CITATION> and <CITATION> , the word "otherwise" in the second limb should be construed ejusdem gainers 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 the donor. It must also be pointed out that, according to the decision of <ORG> in <CITATION> , the benefit "by contract or otherwise" contemplated in section 10 must be referable to the property gifted. We need not, however, dwell any longer on the second limb, but one thing is clear that the words "by contract or otherwise" in the second limb do not control the words "to be entire exclusion of the donor" in the first limb. What the first limb requires is that as a fact the donor must be excluded from the possession and enjoyment of the property. The first limb may be infinged "if the donor occupies or enjoys the property or its income 'in fact' even though he had no light to do so which he could legally enforce against the donee". In other words, "in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity". The sole question is one of fact : has the donor been entirely excluded from the subject-matter of the gift ? That is the single fact to be determined. If he has not been so excluded, it is not relevant to ask why he was not excluded nor is it material to consider whether his non-exclusion has been advantages or otherwise to the donee : Vide <NAME>'s case.

7. It could be seen from his analysis of the section that the basic question that has to be asked in determining the applicability of the section is as to what is the subject-matter of the gift, for, the exclusion of the donor required by the section is from the subject-matter of the gift. It is true, as pointed out by Viscount <NAME> in <NAME> case, that it is often "a matter of fine distinction what is the subject-matter of a gift" and this question may give rise to a difference of opinion amongst judges, but the inquiry has to be made, because it is only if the donor is not, as a fact, excluded from possession and enjoyment of the property of gifted, that the section would be attracted. It must, therefore, follow logically and inevitably that if the gift is of a property shorn of certain of the rights which appertain to complete ownership, the donor cannot, merely because he remains in possession and enjoyment of those rights, be said within the meaning of the section not to be excluded from possession and enjoyment of that which he has given. Or, to put is differently, it is not enough for the revenue to say that the donor is in possession and enjoyment of certain rights in the property. If those rights are no included in the gift but the property is gifted subject to those rights, the possession and enjoyment of those rights by the donor does not militate against the entire exclusion of the donor from possession and enjoyment of that which is gifted. What is required to be seen in such a case is, whether the donor is excluded from possession and enjoyment of the property minus those rights, or subject to those rights, because that constitutes the subject-matter of the gifts. This proposition emerges clearly from three decisions of <ORG> to which we shall immediately proceed to refer.

8. The first is the decision of <ORG> in <NAME> v. Commissioner of Stamp Duties. That was a decision given in an appeal from the judgment of <ORG> of New South Wales. This decision is of great assistance to us and we will, therefore, start the facts in some detail. <NAME> who was the owner of a large area of land in New South Wales on which he carried on the business of a grazier, orally agreed with his six children in 1909 that thereafter the business should be carried on by him and them as partners under a partnership at will, the business to be managed slowly by him and each partner to receive a specified share of the profits. In 1913, <NAME> transferred by way of gift to his children or trustee for them his right, title and interest in portions of the land. The evidence showed that the transfers were taken subject to the partnership agreement, and on the understanding that any partner could withdraw and work his land separately. Thereafter, in 1919, <NAME> and his children entered into a formal partnership. <NAME> remind a partner in the business until his death in 1929 and on his death, duty was claimed in respect of the land transferred in 1913 on the ground that the land had not been retained by the donees to the entire exclusion of him, or of any benefit of whatsoever kind or in any way whatsoever, whether enforceable at law or in equity or not, and was, therefore, chargeable to duty under section 102(2) (b) of the Stamp Duties Act, 1920-1931. It may be pointed out here that section 102(2) (d) of the Stamp Duties Act, 1920-1931, was in identical terms as section 10 of our Estate Duty Act barring only a small difference in that instead of the words "by contract or otherwise", the <ORG> South Wales statute contained the words "of whatsoever kind or in any way whatsoever whether enforceable at law or in unity or not and whenever the deceased died". The claim of the revenue based on section 102(2) (d) was rejected by <ORG> and Lord <NAME>, delivering the judgment of <ORG>, stated the ground of rejection in the following words :

"It is unnecessary to determine the precise nature of the right of the partnership at the time of the transfers. It was either a tenancy during the terms of the partnership or a licence coupled with an interest. In either view what was comprised in the gift was, in the case of each of the gifts to the children and the trustees, the property shorn of the right which belonged to the partnership, and upon this footing it is in their Lordships' opinion plain that the donee in each case assumed bona fide possession and enjoyment of the gift immediately upon the gift and thenceforward retained it to the exclusion of the donor. Further, the benefit which the donor had as a member of the partnership in the right to which the gift was subject was not in their Lordships' opinion a benefit referable in any way to the gifts. It was referable to the agreement of 1909 and nothing else, and was not, therefore, such a benefit as is contemplated by section 102 , sub- section 2(d) ."

9. It may be pointed out that this decision was referred to with approval by <ORG> in <CITATION> .

10. The second decision to which we must refer is the decision in <ORG>, New South Wales v. <ORG> The fact of this case were that a settler vested certain shares in trustees of whom he himself was one, upon trust for the benefit of an infant son but with a resulting trust for himself, if the son did not attain the age of twenty-one. It was contend on behalf of the revenue that as the settler was a trustee and has an equitable interest in the reversion, there was not an entire exclusion of him and of any benefit to him of whatsoever kind or in any way whatsoever, and the charge of duty was, therefore, attracted under section 102(2) (d) of the New south Wales Stamp Duties Act, 1920. <ORG> while dealing with this contention took the opportunity of reviewing the earlier cases and in particular Attorney-General v. <NAME>, <NAME> v. Attorney-General and In re <NAME>. It is not necessary to refer to the first two cases but the last case may be considered, for the judgment of <ORG> was expressly approved by Lord <NAME> of Killowen delivering the opinion of the <ORG> in <ORG> case. The facts of In re <NAME> may be reproduced substantially as stated by Lord <NAME> of Killowen. Sir <NAME> <NAME> was a mortgagee of estates in Mayo in a sum of Pound 15,000 with interest at 4 1/2 per cent. The mortgage debt and securities having been vested in trustees, Sir <NAME> by an indenture made in 1902 declared that they were to stand possessed thereof in trust out of the income to pay in each year to his daughter, Mrs. <NAME>, the sum of Pourd 575 for her life, and after here death on trust as to the principal sum for her children as mentioned, with power to Mrs. <NAME> to appoint, and annual sum to the surviving husband during his life. If no child of Mrs. <NAME> attained a vested interest in the trust funds, they were to be held in trust for Sir <NAME> absolutely and there was also a trust of the balance, if any, of the yearly income for sir <NAME> absolutely. The trustees received the interest of the mortgage which amounted to Pound 675 per annum and paid Pound 575 to Mrs. <NAME> and the balance to Sir <NAME>. On the death of Sir <NAME>, the <ORG> made a claim to duty in respect of the entire sum of Pound 15,000 as property passing on his death under section 11(1) of the Customs and REvenue Act , 1889. It was held by <NAME>, and his decision was affirmed by <ORG> that duty was not payable in respect of Pound 15,000 but only in respect of the value of Sir <NAME>'s interest in the balance of income and his continent interest in the principal sum. It is important to see how Lord <NAME> of Killowen summarized the judgment of the Chief Baron :

"'Gift' he said, "in the context meant beneficial gift. A person who declares trusts of property only gives the benefits interests covered by the trusts. Everything else he retains and does not give; and there is an entire exclusion of the donor from the property taken under the disposition of the gift. Sir <NAME> obtained no benefit either by way of reservation court of the gift, or collateral in reference to the gift."

11. Then, after closed analysing the decision in <NAME> v. Attorney-General, Lord <NAME> of Killowen proceeded to show that it was not inconsistent with In re <NAME> and said of it :

"There is nothing laid down as law in that case which conflicts with the view that the entire exclusion of the donor from possession and enjoyment which is contemplated by section 11(1) of the Act of 1889 is entire exclusion from possession and enjoyment of the beneficial interest in property which has been given by the gift, and that possession and enjoyment by the donor of some beneficial interest therein which he has not included in the gifts is not inconsistent with the entire exclusion from possession and enjoyment which the sub-section requires."

12. Lord Russell of Killowen observed that if In re <NAME> was rightly decided as it must be held to be so, it covered the case before the Board and the claim of the revenue must fail because the settler in his capacity as donor "was entirely excluded from possession any enjoyment of what he had given to his son... In the interval between the gift and his death, the settler received no benefit of any kind or in any way from the shares, nor did he receive any benefit whatsoever which was in any way attributable to the gift."

13. Theses three decisions, namely, <NAME> v. Commissioner of Stamp Duties, In re <NAME> and Commissioner for Stamp Duties of New South Wales v. <ORG> proceeded upon a common principle, namely, that it is the possession and enjoyment of the actual property given that has to be taken into account and if that property is, as it may be, a limited equitable interest or an equitable interest distinct from another such interest which is not given, or an interest in property subject to an interest or right that is retained, it is of no consequence for his purposes that retained interest or right remains in the beneficial possession and enjoyment of the person who provides the gift; that it is not inconsistent with the entire exclusion of the donor from possession and enjoyment of the property that is given.

14. Now, as against these three decisions in <NAME> v. Commissioner of Stamp Duties, In re <NAME> and Commissioner of Stamp Duties v. <ORG>, we must refer to the decision in <NAME> case, which applied the same principle but reached a contrary conclusion because of its distinctive facts. That was also a decision given in an appeal from a judgment of <ORG> and the provisions which came up for consideration before <ORG> was the same section 102(2) (d) of the new South Wales Stamp Duties Act, 1920-56. The facts of that case are a little material and may be briefly stated as follows. In 1934, a father transferred by way of gift to one of his sons a pastoral property, the gift being made without reservation or qualification or condition. Some seventeen months after the gift, in 1935, the father, the donee-son and another son entered into an agreement to carry on in partnership the business of graziers and stock dealers. The agreement provided, inter alia, that the father should be the manager of the business and that his decision should be final and conclusive in connection with all matter relating to its conduct; that the capital of the business should consist of the livestock and plant then owned by the respective partners; that the business should be conducted on the respective holdings of the partners and such hidings should be used for the purposes of the partnership only; that all lands held by any of the partners at the date of the agreement should remain the sole property of such partner and should not on any consideration be taken into account as or deemed to be an assets of the partnership, and any such partner should have the sole and free right to deal with it as he might think fit. Each of the three partners owned a property, that of the donee-son being that which had been given to him by his father in 1934, and each partners brought into the partnership, livestock and plant, and their three properties were thenceforth used for the depasturing of the partnership stock. That continued up to the death of the father in 1952. On the death of the father a question arose whether the value of the property given to the son in 1934 was liable to be included in computing the value of the father's estate for the purposes of death duties. The revenue claimed that it was includible as property passing on the death of the father under section 102(2) (d) of the New South Wales Stamp Duties Act, 1920-56. This claim of the revenue was upheld by <ORG> of <ORG>. Viscount <NAME>, speaking on behalf of <ORG>, pointed out that while it was not disputed that the son had assumed bona fide possession and enjoyment of the property immediately upon the gift to the entire exclusion of the father, he had not, on the facts, there forth retained it to the father's entire exclusion, for, under the partnership agreement, and whatever force and effect might be given to that part of it which gave a partners the sole and free right to deal with his won property, "the partners and each of them were in possession and enjoyment of the property so long as the partnership subsisted". The learned Discount stated that where the question is whether the donor has been entirely excluded firm the subject-matter of the gift, that is the single fact to be determined, and, if he has not been so excluded, the eye need look no further to see whether his non-exclusion has been advantageous or otherwise to the donee. It is also not relevant to ask why he was not excluded. The sole question is one of fact, namely, whether there is exclusion of the donor from possession and enjoyment of the subject-matter of the gift. The learned Viscount held that since the property which was the subject-matter of the gift in favour of the son was in possession and enjoyment of the partners and each of them, so long as the partnership subsisted, the father who was one of the partners was not entirely excluded from possession and enjoyment of the property and the property was liable to the charge of estate duty under section 102(2) (d) of the New South Wales stature. The decision in <NAME> v. Commissioner of Stamp Duties was relied upon on behalf of the appellant to repel the claim of the revenue but the learned Viscount distinguished that by saying :

"..... it is not disputed that the property was given outright by the deceased to his son. As was said by <NAME> in Commissioner of Stamp During v. <NAME>, 'If ever there was a gift of an estate in fee simple, carrying the fullest right known to the law of exclusive possession and enjoyment, surely this was such a gift.' It follows that the decision of this board in <NAME> v. Commissioner of Stamp Duties, on which the appellants relied, has no application to the present case. It must often be a matter of fine distraction what is the subject-matter of a gift. If, as in <NAME>'s case, the gift is of a property shorn of certain of the rights which appertain to complete ownership, the donor cannot, merely because he remains in possession and enjoyment of those rights, be said within the meaning of the section not to be excluded from possession and enjoyment of that which he has given. This view of the section, which was reaffirmed in <CITATION> , upon a consideration of a similar section in a British statute, need not be further elaborated. But the question may arises and, having arisen, may lead to a difference of opinion as to what is the subject-matter of the gift.... In the present case there is no room for any such difference."

15. It would thus be seen that while the subject-matter of the gift in <NAME>'s case was the property shorn of certain rights which belonged to the partnership in which the donor was a partner and which were not included in the gift, in <NAME> case, what was gifted was the property without any reservation or qualification, or, in other words, to use the words of <NAME> In Commissioner of Stamp Duties v. <NAME>, "an estate in fee simple, carrying the fullest right known to the law of exclusive possession and enjoyment." It was because of this difference that though the same principle was applied by <ORG> in both cases, the conclusion reached in one cases was entirely opposite to the conclusion reached in the other.

16. We must, therefore, proceed to consider what is the subject-matter of the gift in the case before us and then ask the question : has the donor been entirely excluded from possession and enjoyment of the property that is gifted. But before we proceed to do so, we refer to the decision of <ORG> in <NAME> case, on which the strongest reliance was placed on behalf of the accountable person. The facts of this case are a little material in order to appreciate the true ratio of this decision. The deceased who was a partner in a firm owned a house property let to the firm as tenant-at-will. In August, 1953, the deceased executed a deed of settlement under which he transferred the property let to the firm to his two sons absolutely and irrevocably and, thereafter, the firm paid the rent to the donees by crediting the amount in their accounts in equal shares. The deceased further directed the firm to transfer from his account a sum of Rs. 20,000 to the credit of each of his five sons in the books of account of the firm with effect from 1st April, 1953, and he also informed them of this transfer. The firm accordingly transferred a sum of Rs. 20,000 to each of the five sons by debiting a sum of Rs. 1,00,000 to the account of the father and crediting a sum of Rs. 20,000 in the account of each of the five sons in the books of account of the firm. The sons did not withdraw any amount from their accounts in the firm and the amounts remained invested with the firm for such interest at 7 1/2 per cent. per annum was paid to them by the firm. The deceased continued to be a partners in the firm up to 13th April, 1957, when the firm was dissolved and thereafter he died on 5th May, 1957. The question arose in the course of assessment to estate duty whether the value of the house property and the sum of Rs. 1,00,000 gifted by the deceased were includible in the principal value of the estate. The revenue claimed that since the deceased as a partner in the firm was in possession and enjoyment of these two properties, the possession and enjoyment of theses two properties could not be said to have been assumed and retained by the donees to the entire exclusion of the deceased and, therefore, they fell within the mischief of section 10 and were liable to be charged to estate duty under that section. <ORG>, however, rejected this claim of the revenue on the ground that, in respect of each of the two properties, the deceased has given such possession as the circumstances and the nature of the property admitted and the benefit which the donor had from the two properties as a members of the partnership was not a benefit referable in any way to the gift but was unconnected with the gift and, therefore, it was not possible to say that the deceased was not entirely excluded from possession and enjoyment of the two properties gifted by him. Now, if we examine the decisions of <ORG> closely, it would be apparent that <ORG> came to this conclusion, because in both cases there was no outright gift of the property to the donees without any reservation or qualification. So far as the house property was concerned, it was let out to the firm and what the deceased had was merely the reversion and, therefore, when the deceased gifted the house property, the subject-matter of the gift was the reversion in the house property, that is, the house property subject to the leasehold interest of the firm. Now, obviously, if this was the subject-matter of the gift, its possession could be given by the deceased to the donees only by instructing the firm to attorn tenancy to the donees and thenceforth to pay the rent to the donees. That was done by the deceased and the donees were thus put in possession and enjoyment of the property gifted, and this possession and enjoyment of the property gifted remained with the donees right up to the death of the deceased. The donor was, therefore, entirely excluded from possession and enjoyment of the property that was gifted by him. This was the line of reasoning adopted by <ORG> and that becomes evidence from the following passage from the judgment of <NAME> in that case :

"The donor on the date when he gifted the property to his sons which was leased out to the firm, had two rights, namely, of ownership in the property and the right to terminate the tenancy and obtain possession thereof. There is no dispute that the ownership has been transferred subject to the tenancy at will granted to the firm, to the donor's two sons because the firm from thenceforward had attorney to the donees as their tenant by crediting the rent of Rs. 300 to the respective accounts in equal moiety. The donor could, therefore, only transfer possession of the property which the nature of that property was capable of which in this case is subject to the tendency. He could do nothing else to transfer the possession in any other manner unless he was required to effectuate the gift for the purpose of section 10 of the Act by getting the firm to vacate the premises and handing over possession of the same to the donees leaving the donees thereafter to lease it out to the firm. Even then the objection of the learned advocate that since the donor was a partners 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, will nevertheless remain unsatisfied. To get over such an objection, the donees will have to lease out the property after getting possession from the firm to some other person totally unconnected with the donor. Such an unreasonable requirement the law does not postulate. The possession which the donor can given is the legal possession which the circumstances and the nature of the property would admit. This he has given."

17. It is no doubt true that as a partner in the firm the deceased was in possession and enjoyment of the house property by virtue of the tenancy of the firm which was not comprised in the gift. What was gifted was the house property subject to the tenancy of the firm and, therefore, the possession and enjoyment of the house property by the deceased in virtue of the tenancy of the firm did not detract from the entire exclusion of the deceased from that which was gifted, namely, the house property subject to the tenancy in favour of the firm. That is why <NAME> observed :

"The benefit the donor had as a member of the partnership was not a benefit referable in any way to the gift but was connected therewith."

18. The same line of reasoning prevailed with <ORG> also in regard to the amount of Rs. 1,00,000 though we do not find any separate discussion of this question in the judgment of <NAME> The amount of Rs. 1,00,000 was lying with the firm to the credit of the account of the deceased and the firm was entitled to make use of it for the purpose of the partnership business. Since the deceased was a partner, he was not entitled to withdraw the amount of Rs. 1,00,000 standing to his credit without the consent of the other partners. The amount of Rs. 1,00,000, therefore, belonged to the deceased subject to the right of the firm to use it for any of the purposes of the partnership. This right to use the amount of Rs. 1,00,000 for the purposes of the partnership belonged to the partners and each of them including the deceased by virtue of the partnership. Now the gift of the amount of Rs. 1,00,000 by the deceased in favour of his five sons was effectuated by means of have entries. The deceased did not - and perhaps could not - withdraw the amount Rs. 1,00,000 from the firm and hand over Rs. 20,000 to each of his five sons. There was no outright gift of a sum of Rs. 20,000 to each of the five sons and each of the five sons could not do as he wished with the sum of Rs. 20,000 received by him way of gift. If that had been done the subject-matter of the gift to each of the five sons would have been Rs. 20,000 but what the deceased did was to ask the firm to debit Rs. 1,00,000 in his account and credit Rs. 20,000 in the account of each of his five sons with the firm. The result was that each of the five sons received the sum of Rs. 20,000 subject to the right of the firm to use it for the purpose of the partnership. The gift by the deceased in favour of each of his five sons was thus not a gift of Rs. 20,000 but a gift of Rs. 20,000 subject to the right of the firm to make use of it for the purposes of the partnership. This right to use the sum of Rs. 20,000 for the purposes of the partnership was in possession and enjoyment of the partners and each of them including the deceased and did not form the subject-matter of the gift. If, therefore, the deceased contained in possession and enjoyment of this right as a partners in the firm, it could not be said that he was not entirely excluded from possession and enjoyment of the subject-matter of the gift, which was in the case of each of the five sons Rs. 20,000 subject to such right. This was the reason why <ORG> held that the revenue had failed to establish that the five sons had not retained possession and enjoyment of the amount gifted to them to the entire exclusion of the deceased. This is clearly born out by the last two paragraphs of the judgment where the decisions of <ORG> in <CITATION> has been approved by <ORG>. The fact of the case before <ORG> were similar to the facts in the case before <ORG> and on those facts <ORG> held that it could not be said that "after the gifts, the donees did not retain the property gifted to the entire exclusion of the donor". <ORG> quoted with approval the following observation from the judgment of <ORG> :

"That in order that the property could deem to pass and estate duty could be livable in such cases, the benefit of the donor must be a benefit referable to the gift and not a benefit referable to his own property. The view that, if it is once found that the deceased had some benefit in the property, that in itself was sufficient to bring the case within the ambit of section 10 irrespective of the question whether that benefit was referable or not referable to the gifts, in our opinion, is erroneous."

19. These observation clearly show that, accordingly to the view taken by <ORG> which view was affirmed by <ORG>, the right to use the amount transferred to the sons for the purposes of the partnership was a right which was in possession and enjoyment of the deceased as a partners in the firm and it was, therefore, not a right referable to the gift. The amount gifted was subject to this right and, therefore, merely because the deceased enjoyed this right, it could not be said that the deceased was not excluded from possession and enjoyment of that which was gifted by him. This is the true ratio of the decision of <ORG>. <ORG> equated the case with the decision in <NAME> v. Commissioner of Stamp Duties. We must confess that, in view of this decision of <ORG>, the decision given by this court in <CITATION> can not longer be regard as good law. So also the decision of this court in <CITATION> must be held to be overruled in so far as it relates to the gifts by the deceased of Rs. 10,000 each in favour of his three minor sons.

20. We must hold, having regard to this decision of <ORG>, that the amounts of Rs. 2,00,000 each gifted by <NAME> in favour of <NAME> and <NAME> by debiting the aggregate sum of Rs. 4,00,000 in the account of <NAME> and crediting a sum of Rs. 2,00,000 each in the accounts of <NAME> and <NAME> in the books of account of the firm of the Messrs. <NAME> are not eligible to estate duty, since it cannot be said that bona fide possession and enjoyment of the properties respectively gifted to them was not assumed and retained by them to the properties respectively gifted to them was not assumed and retained by them to the entire exclusive of the donor. The amounts of Rs. 2,00,000 each gifted by the deceased to <NAME> and <NAME> must, therefore, be excluded in commuting the principal value of the estate of <NAME>. But, so far as the other amounts gifted by <NAME> and <NAME> are concerned, the position is wholly different. There the revenue is on firm ground. It is obvious that in these cases the amounts were gifted outright by the deceased in favour of the donees and the donees actually received the amounts filed from the deceased and thereafter deposited the amounts with the firm in which the deceased was a partner. The subject-matter of the gift in each was a sum of money which was given without reservation or qualification. The deceased in his capacity as a partner in the firm was not in possession or enjoyment of any part of the amounts gifted to the donees. The gifts of the amounts to the donees were not subject to any interest or right which belonged to the firm. It is, therefore, obvious that when the donees deposited the amounts gifted to them with the firm in which the deceased was a partner, the partners and each of them including the deceased obtained possession and enjoyment of those amounts. It is difficult to see how it can be said on these facts that the deceased was not (sic) excluded from possession and enjoyment of the property gifted. The "objective and outward facts", to use the expression of <NAME> in Commissioner for Stamp Duties (N. S. W.) v. <NAME> are wholly inconsistent with such exclusion. It would, therefore, seem that the amounts of the gifts must come which the mischief of section 10 . The learned Advocate-General appearing on behalf of the accountable person in Reference No. 4 of 1970, however, contend that section 10 did not envisage property like money which is capable of losing its identity by merger with the other money of the donee, for in such a case it would be extremely difficult, if not impossible, to find out whether the donor has or has not been excluded from possession and enjoyment of that which is given. We do not think this contention is well founded. The word "property" used in section 10 is a word of wide import. It is not hedged in by any restrictions or qualifications. It must mean every kind of property and money in this economic would certainly be within the section. The burden of establishing that the donor has not been excluded from possession and enjoyment of the property gifted is on the revenue and if money gifted by the deceased is merged with the other money of the donee and it is, therefore, not possible for the revenue to satisfy that it is money gifted which is in possession and enjoyment of the deceased, the revenue may fail. But that can be no ground for excluding from the scope and ambit of section 10 money which is certainly a kind of property. The learned Advocate-General then contended that where the amount gifted is deposited by the donee with the firm in which the deceased is a partner, it cannot be said that the deceased is not excluded from possession and enjoyment of it. But this contention is also without force. When any property is in possession and enjoyment of a firm, it is in possession and enjoyment of the partners and each of them and where the deceased is a partner in the firm, he would be equally in possession and enjoyment of the property. That is clear from the law of partnership and is amply supported by the decision of <ORG> in <NAME> case. If the contention of the learned Advocate-General were right the decisions in <NAME> case would have to be regarded as incorrect but that decision has been approved by <ORG> in <NAME> case as well as <NAME> case. We must, therefore, hold that so far as the aggregate amount of Rs. 1,20,000 gifted by <NAME> in favour of his sons, grandsons and daughter and the amount of Rs. 1,99,500 gifted by <NAME> in favour of his grandson are concerned, bona fide possession and enjoyment of these amounts was not retained by the donees to the entire exclusion of the donor and they were accordingly includible in the principal value of the estate of the deceased in each case under section 10 .

21. That take us to the next contention urged on behalf of the accountable person in both the references. That contention was that, even if section 10 was held to be applicable, on a proper interpretation of the language of section 10 , property gifted by the deceased shall be deemed to pass only to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and these forward retained to the entire exclusion of the donor and, therefore, passing was limited only to the extent of non-exclusion of the donor from possession and enjoyment of the property and, consequently, what was the interest of the donor represented by his participation in possession and enjoyment of the property and not the property which was in possession or enjoyment of the donor. Here, in both cases, said the accountable person, the donor was in possession and enjoyment of the amounts gifted in his capacity as a partner in the firm and, therefore, the amounts gifted passed only to the extent to which the deceased was not exclude from possession and enjoyment, that is, to the extent to which the deceased participated in possession and enjoyment of those amounts in his capacity as partner in the firm. Therefore, contended the accountable person what should be included in the principal value of the estate of the deceased, is not the aggregate of the amounts gifted but the value of the interest of the deceased representing his participation in possession and enjoyment of those amounts in his capacity as a partners in the firm. The contention was sought to be supported by the decision of <ORG> in <CITATION> . Now, it is true that this decision of <ORG> supports the contention urged on behalf of the accountable person but with the greatest respect to the learned judges who decide this case, we find ourselves unable to accept the view taken by them. Section 10 is clear in its terms. It defines the extent of the property gifted which shall be deemed to pass on the donor's death. What shall be the extent is to be gathered from the words which follow. To find out the extent, we have to ask the question : what is the part of the property of which bona fide possession and enjoyment was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor ? That part of the property which answers this description would be deemed to pass on the donor's death and that which does not, would be outside the pale of the section. Take, for example, a case where a house is gifted by the deceased but the deceased continues in possession and enjoyment of a part of the house or a part of the house is subsequently given to the deceased for his residence. In such a case, it would be possible to say of that part of the house which is in possession and enjoyment of the deceased that bona fide possession and enjoyed of the house to the extent of that part was not immediately assumed by the donee or, though assumed, not subsequently retained, to the entire exclusion of the donor. But in regard to the rest of the house, this description would not apply and it would not be deemed to pass on the donor's death. It is not permissible under the section to split up the property into different intangible interest and say that bona fide possession and enjoyment of a particular interest was not immediately assumed by the donee and thenceforward rained to the entire exclusion of the donor and, therefore, that interest also is deemed to pass on the donor's death. That is precisely what <ORG> did in <CITATION> . There the deceased gifted a property in which he was carrying on boarding and lodging business to his sons absolutely but, subsequently, he took the property on lease by paying rent to his sons and carried on the same business. The question arose on his death as to whether the entire property was liable to be included in the principal value of his state on the ground that possession and enjoyment of the property was not retained by the donees to the entire exclusion of the donor. The contention of the revenue was that the entire premises being in possession and enjoyment of the deceased until his death, the whole of it would pass. This contention was, however, rejected by <ORG> which held that it is only the value of the right would pass on his death an attract duty and the value of the other rights which the donees retained to the entire exclusion of the deceased would not pass. This decision, with great respect, ignores the plain words of the section. What the section on a plain grammatical construction of its language requires and enjoyment of the property gifted is not assumed and thenceforward retained by the donee to the entire exclusion of the donor. The possession and enjoyment required by the section to be assumed and retained by the donee to the entire exclusion of the donor is of the property gifted. The section does not contemplate exclusion or otherwise of the donor from possession and enjoyment of any interest in the property. That is clearly not the intention of the legislature as evidence by the words used in the section. If such has been the intention, the legislature could have used appropriate words such as "to the extent of any interest in the property of which bona fide possession and enjoyment was not..." The fallacy underlying the construction contends for on behalf of the accountable person can be easily demonstrated by a simple illustration. Take for example a case where the donee after receiving a gift of a house, lets it out to the donor. The possession and enjoyment of the whole of the house would in such a case be with the donor and there would be no part of the house of which it can be said that possession and enjoyment was retained by the donee to the entire exclusion of the donor. The whole of the house would, in the circumstances, pass on the death of the donor. It cannot be said in such a case that as the donor was in possession and enjoyment of only leasehold interest in the house concerned, possession and enjoyment of it was retained by the donee to the entire exclusion of the donor. That approach would be wholly inconsistent with the plain natural construction of the section. The proper reading of the section, in our view, is that the words "to the extent" include the part of the property gifted of which bona fide possession and enjoyment was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor. It is that part of the property gifted which passes and not the remaining part which does not answer the description given in the section. This view which we are taking is clearly support by the decision of the Calcutta <ORG> in <CITATION> . There <ORG> pointed out that the expression "to the extent" introduced in our statute is a departure from the corresponding provisions in the British and Australian Acts and its proper meaning is that it seeks to bring within the charge of estate duty only that art of the property gifted in respect of which there is non-exclusion of the donor from possession or enjoyment. <ORG> observed that this interpretation of the words "to the extent" was clearly supported by the Statement of Objects and Reasons for the introduction of section 10 , namely :

"This clause brings under charge property given in gift, but in which the donor retains some interest by contract of otherwise. Where the donor retains such interests in a part of the property only, estate duty is payable on that part only...."

22. The decision of <ORG> of this court in <CITATION> also supports the view we are taking. The question which arose for consideration in that case was whether a provision in each of five gift deeds executed by the settlor provision maintenance to the wife and unmarried daughter of the settlor out of the income of the properties gifted under the settlement was includible in the principal value of the estate of the settlor on his death. The accountable person contented that the settled properties passed on the death of the settlor only to the extent of the benefit conferred by the provisions for maintenance and the entire value of the settled properties was not liable to the charge of estate duty. The <ORG> bench rejected this contention and pointed out that what the court was required to consider was :

".... whether any of the properties included in the relevant gift deeds has been indicated with precision or specification for providing maintenance for the wife or the unmarried daughters. It is only if there is any such specification or setting apart of any of the properties in respect of which the donor has not been excluded that one can apply the words 'to the extent' in the concept of non-exclusion of the donor from any benefit, under the second limb of the second part of the section 10 . The gift deed make it clear that all the properties covered by the relevant gift deeds are subject to this obligation to provide maintenance for the beneficiary concerned, viz., the wife or the unmarried daughter for whom the provisions is made in the relevant gift deed and it cannot be predicated in the case of any of the five gift deeds that any particulars or portion of the property is subject to this obligation for maintenance, the rest of the properties being free from such obligation. Since it cannot be so dedicated, it is clear that all their properties covered by each gifts deed are subject to the condition for providing maintenance to the person concerned and, therefore, it is clear that in the case of each of the five trust deeds, the donee has not retained possession and enjoyment of the property to the entire exclusion of any benefit to the donor."

23. We must, therefore, reject the contention urged on behalf of the accountable person based on the words "to the extent" in section 10 . It is clear on the admitted facts before us in both cases that the whole amount of Rs. 1,20,000 gifted by <NAME> and the whole of the amount of Rs. 1,99,500 gifted by <NAME> were in possession and enjoyment of the respective donors and it was not possible to say of any part of those amounts that possession and enjoyment of it was retained by the respective donees to the entire exclusion of the donors. Section 10 was, therefore, clearly applicable to both theses amounts and they must be deemed to pass on the death of the respective donors in both cases.

24. The accountable person in Reference No. 2 of 1970 lastly contended that the amounts gifted by <NAME> in favour of two of his sons were withdrawn by them from their respective accounts with the firm of Messrs. <NAME> more than two year prior to the death of <NAME> and, therefore, these amounts were enjoyed by them to the entire exclusion of <NAME> and, therefore, these amounts fell within the first proviso to section 10 and could not accordingly be deemed to pass on the death of <NAME> under section 10 . This contention is, in our opinion, without force. The <ORG> has taken the view that the amounts withdrawn by the donees must first be attributable to income and it is only after income is exhausted that they would be referable to the capital and, on this view, held that save in the case of <NAME> to the extent of Rs. 1,032, no part of the amounts gifted was withdrawn of any of the more than two year prior to the death of <NAME>. This view taken by the <ORG> is so patently right that we do not think it necessary to say anything more about it. We, accordingly, reject this contention also of the accountable person.

25. We must, therefore, answer the question referred to us in Estate Duty Reference No. 2 of 1970 in the affirmative. So far as Estate Duty Reference No. 4 of 1970 is concerned, there are two question referred to us for our opinion. We answer the first question by saying that only a sum of Rs. 1,99,500 out of the amount of Rs. 2,00,000 gifted by the deceased in favour of his grandson, <NAME>, was liable to be included in the principal value of the estate of the deceased under section 10 and the balance of Rs. 4,00,000 gifted by the deceased in favour of his sons, <NAME> and <NAME>, was not liable to be so included and the addition of Rs. 5,99,500 made by the revenue in the principal value of the estate of the deceased was, therefore, justified in so far as it included the balance of Rs. 4,00,000. The second question would be answered in the affirmative.

26. The accountable person will pay the costs of Estate Duty Reference No. 2 of 1970 to the Controller of Estate Duty and, so far as Estate Duty Reference No. 4 of 1970 is concerned, there will be no order as to costs.