Controller of Estate Duty vs Smt. G. Dhanamani

N.V. Balasubramanian, J.—At the instance of the CED, Madras, the Tribunal has forwarded the statement of the case and referred the

following question of law under s. 64(1) of the ST Act, 1953 :

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the two gifts of Rs. 5,000 each made by the

deceased to his grand children by making books entries in the books maintained for his personal business, would not at all constitute a valid gift

and hence neither the inclusion of the gifts under s. 9 of the ED Act nor the abatement of the debts under s. 46(1) is sustainable ?

One Govindaraja Mudaliar, who died on 4th January, 1976 made two gifts of Rs. 5,000 to his grandchildren, i.e., Rs. 5,000 to P. Gajalakshmi

and Rs. 5,000 to S. Dhanraj by making book entries in the books maintained for his personal business. The Addl. CED held that the gifts have

been made within two years prior to his death and hence, under s. 9 of the ED Act, the amounts received were includible in the ED of the

Deceased. He also invoked the provisions of s. 46 of the ED Act and made further addition of Rs. 10,000 to the value of the said amount that

passed on the death of Govindaraja Mudaliar. The ACED on appeal, deleted the additional amount on the ground that there could not be two

additions, one under s. 9 and another under s. 46 of the Act, and, therefore, held that only one addition was possible. The Department filed an

appeal before the Tribunal on the ground that both the additions under s. 9 as well as s. 46 are possible, if the statutory conditions for invoking the

provisions of s. 9 as well as s. 46 are satisfied. The Tribunal, however, found that the deceased made the gift by making entries in his own personal

books and there was no gift in the eye of law. According to the Tribunal, when there was a gift by mere book entries, the gift was not effective or

valid in law. The Tribunal, therefore, held that the amounts are includible in the value of the estate that passed on the death of the deceased under s.

5 of the ED Act. It further held that since s. 9 was held to be not applicable, s. 46 of the ED Act also will not apply.

It is this order that is the subject-matter of the present case. Mr. C. V. Rajan, learned standing counsel appearing for the Revenue, brought to

the notice of this Court the finding of the Tribunal. The gifts were made by making entries in the assessee''s personal books of account and the

amounts gifted were retained by the deceased in his individual moneylending business. This Court in the case of E. M. Vs. MUTHAPPA

CHETTIAR v. COMMISSIONER OF Income Tax, MADRAS., has held that mere book entries would not be sufficient to constitute a valid gift,

particularly when the gifts or funds we found to be used in the donor''s business. The finding of the Tribunal is that only by book entries, the alleged

gifts were made and it is also clear from the finding that the funds continued to be used by the deceased in his business. If that is so, on the basis of

the decision of this Court as in Muthappa Chettiar''s case cited supra, the gifts made by the deceased were not valid in law and the logical

consequence is that the money continued to be the property of the deceased which passed on his death. Hence, there is no question of either

applicability of s. 9 or s. 46 of the ED Act to the facts of the case.

Apparently, the Tribunal was right in its conclusion that there was no valid gift in the eye of law. Therefore, we answer the question of law

referred to us in the affirmative and against the Revenue. No costs.