Controller of Estate Duty vs Estate of Late M.V.K. Papa Rao

Raghuvir, J.—The two references (R.C. No. 155 of 1976 and R.C. No. 64 of 1978) arise under the E.D. Act and pertain to common facts. Questions 1 and 3 of the following are referred pursuant to the order in E.D.C. No. 1 of 1977, of this court made on July 26, 1977. The second question was referred at the instance of the revenue by the Appellate Tribunal at Hyderabad.

The questions are:

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the lands measuring 43 acres, 28 1/2 cents were acquired by the minor son of the deceased and accordingly its value to the extent of deceased''s half share is not includible in the ''estate passing''?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the properties devolved on the deceased through a will were ancestral properties in which the deceased''s minor son acquired an interest and accordingly only 1/8th value of the properties is includible in the ''estate passing'' and not 1/4th share as adopted by the Assistant Controller of Estate Duty ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in deleting the cash gift of Rs. 80,000 made by the deceased to his minor children holding that the provisions of section 10 were not attracted ?"

These questions were answered in favour of the assessee by the Tribunal in their order on January 31, 1974

M. V. K. Papa Rao died on August 14, 1965. He had settled ac. 43-28 1/2 cents under a deed dated June 8, 1957, in favour of Satyanarayana Prasad, his son (minor) by second wife. Whether such a gift is valid under personal law is the subject in the first question. The deceased had made a cash gift of Rs. 80,000 to Satyanarayana Prasad and to another, a minor daughter, on March, 31, 1962. Whether the gifts were valid u/s 10 of the E.D. Act is the subject in the third question.

M. V. K. Papa Rao succeeded to some "lands" forming part of the estate of his late father (Suraiah). The lands came to be owned by Suraiah under a will executed by his brother-in-law, Ganeswararao. The testament was of the date, March 18, 1936. The question is whether the lands, bequeathed in the last testament of Ganeswararao in the hands of M. V. K. Papa Rao was coparcenary and ancestral property or self-acquired property ?

The Appellate Tribunal at Hyderabad under their order of January 31, 1974, having considered the decision of the Asst. Controller of November 28, 1969, and the order of the Appellate Controller of September 27, 1971, held that the settlement transaction of ac. 43-28 1/2 cents in favour of a coparcener (son) was voidable. The original settlement covered the land in ac. 26-88 cents and out of the income and accretions from out of the same, land in ac. 16-40 cents were purchased. In Hindu law, the consent of coparceners is a sine qua non for a valid gift as otherwise the settlement is voidable. The transaction per se is not void. The document of gift or settlement dated June 8, 1957, therefore, was not void. The beneficiary under the deed was none other than a coparcener, the minor son of the donor. Therefore, following the dicta laid down in the case of Rathamma v. Venkata Subbamma [1977] 1 APLJ 139, the Appellate Tribunal was justified in holding that the lands in ac. 43-28 1/2 cents vested in the (minor) son, Satyanarayana Prasad, and the land was correctly held as not part of the estate of the deceased. The question, therefore, is answered in favour of the assessee.

The cash gift of Rs. 80,000 was made to the two donees--the minor children of Papa Rao--as of fact is not disputed and was not doubted. The third question in these proceedings turns on the scope of Section 10 of the E.D. Act. The first part of the section (the omitted parts are not relevant) reads as under:

"Property taken under any gift, whenever made, shall be deemed to pass on the donor''s death to the extent that bona fide possession and enjoyment of it was not 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....."

(The other two sub-paras are not necessary to be extracted).

The two essential ingredients of the above provision are: (1) the donee should enjoy and should have possession of the subject-matter of the gift immediately after the gift came to be made, and (2) the other ingredient from the standpoint of time, depends on the answer to the question, whether the donor had retained control of what was gifted. The obverse of the ingredients is in simple words ; whether the donees had the benefit of the gift made to them.

The account books of the deceased disclosed the gift. There does not appear as of fact that the money gifted was lent for interest. The factum of gift is shown in the accounts of the deceased, and it is represented, under the provisions of the G.T. Act "the gift" suffered the tax. Whether the fact of not lending the money for interest by the guardian-donor nullifies the gift u/s 10 of the Act is in question.

That the father of the donee minors was the guardian is not disputed. The father of the minors thus had the control over the monies. It is significant to note that the control is not that of a coparcener in legal parlance . but that of a guardian. In such circumstances the two aspects of Section 10 resolve in favour of the assessee on the facts of the case. We agree with the view taken by the Appellate Tribunal in the circumstances. The third question is, therefore, answered in favour of the assessee.

The answer to the second question turns on the interpretation of the will dated March 18, 1936. The English translation of the will--the relevant recital--speaks in the following words :

"The other half shall be enjoyed by my wife, Seshamma, for her lifetime and after her lifetime, the share that fell to her, in the upstair house, pati peradu, my adopted son, Suryarao''s family shall have the rent of the immovable properties that fell to my wife''s share to my father-in-law, Manyam Surayya, or in his place his sons or grandsons with full rights of sale, gift, etc."

When succession opened or when the will became operative on the death of the testator, Ganeswara Rao, his widow, Seshamma, was alive, and on her death Manyam Surayya, the father of the deceased, received the land as legatee. On the death of Surayya, the land was succeeded to by Papa Rao. On these statement of facts, the question again resolves itself on facts, for, Surayya succeeded to the property and enjoyed the corpus: on Surayya''s death, his son, Papa Rao, succeeded to the property. The character of the property in the hands of Papa Rao can be none other than ancestral. Therefore, we agree with the reasoning of the Appellate Tribunal in answering the question in favour of the assessee.

The questions Nos. 1, 2 and 3 in the two references are answered in favour of the assessee and against the revenue. The revenue to pay costs of the assessee. Advocate''s fee Rs. 250.