Controller of Estate Duty vs V.G. Badamia

T.D. Sugla J.

The Tribunal has referred only one question of law to this court for opinion u/s 64(1) of the Estate Duty Act, 1953. The question reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal, on the ratio of the decisions of the Supreme Court in Controller of Estate Duty, Madras Vs. C.R. Ramachandra Gounder, and Commissioner of Income Tax and Controller of Estate Duty, Madras Vs. N.R. Ramarathnam and Others, , was correct in holding :

(a) that there was a mistake apparent on the face of the record in so far as its order dated December 20, 1970 in Estate Duty Application No. 100 of 1966-67 is concerned, and

(b) that the finding of the Tribunal upholding the inclusion of the aforesaid sum of Rs. 3,36,000 in the estate of the deceased passing on his death u/s 10 of the Act merited deletion ?"

The deceased had, during his lifetime, given a sum of Rs. 3,36,000 by way of gift to his wife and sons including minor sons, the amounts were gifted in cash after he had withdrawn the money from this bank account. Subsequently, the amounts were deposited by the donees with M/s. G. T. Badamia and Sons, then a proprietary concern into of the deceased. The business was converted into a partnership consisting of the deceased having 9 annas share and his son, Valimohomed, having 7 annas share in the profits and losses with effect from January 1, 1948.

The departmental authorities as well as the Tribunal held that the provisions of section 10 of the Estate Duty Act, 1953, were attracted inasmuch as the amounts given by way of gifts by the deceased continued to remain in the business of which the deceased was a proprietor for some time and had become and continued as partner thereafter, it appears that, at the instance of the accountable person, reference was made by the Tribunal to the court u/s 64(1) of the Estate Duty Act.

Subsequent thereto, the Supreme Court, in the cases of Controller of Estate Duty, Madras Vs. C.R. Ramachandra Gounder, and Commissioner of Income Tax and Controller of Estate Duty, Madras Vs. N.R. Ramarathnam and Others, , held that section 10 of the Estate Duty Act was not applicable to cases of gifts by the decease merely because, after the amounts were received by the donees the donees had chosen to deposit the money with a concern in which the deceased had proprietary or partnership interest. On the basis of the abovesaid two decisions of the Supreme Court, the accountable person filed a miscellaneous application before the Tribunal on March 4, 1974, it was claimed that the order passed by the Tribunal originally suffered from a mistake apparent on the face of the record in view of the aforesaid two Supreme Court decisions and, therefore, the order required to be rectified in The light of the Supreme Court judgments.

Upon hearing the parties, the Tribunal passed the impugned order holding that its appellate order suffered from a mistake apparent on the face of the record in view of the two Supreme Court decisions (supra). The Tribunal further held that the amount of Rs. 3,36,000 gifted by the deceased to his wife and sons including minor sons was not includible in the principal value of the estate of the deceased.

On these facts, we have to answer the question. The first part of the question is whether the order of the Tribunal originally passed suffered from a mistake apparent on the face of the record. The admitted position being that, in view of the two Supreme Court decisions referred to above, the amounts gifted by the deceased and subsequently deposited with G. T. Badamia and Sons could not be said to be hit by the provisions of section 10 of the Estate Duty act by reason of the mere fact that, after the gifts were received, the amounts gifted were deposited by the donees in a concern of which the deceased was a proprietor or a partner up to his death. It had to be held that the appellate order passed by the Tribunal originally taking a contrary view suffered from a mistake apparent on the face of the record, this being so, we have to further hold that the Tribunal was justified in rectifying the order so as to being it in conformity with the Supreme Court decisions.

The second part of the question is only consequential. The question of law is answered in the affirmative and against the Revenue.

No order as to costs.