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PETITIONER: CONTROLLER OF ESTATE DUTY

       Vs.

RESPONDENT: KAMLAVATI AND SHRI JAI GOPAL MEHRA

DATE OF JUDGMENT05/09/1979

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. PATHAK, R.S. VENKATARAMIAH, E.S. (J)

CITATION:  1980 AIR  142            1980 SCR  (1) 527  1979 SCC  (4) 262  CITATOR INFO :  F          1986 SC 631  (5,14)  D          1987 SC 785  (22)  APR        1988 SC1426  (16)

ACT:      Estate Duty  Act, s.  10-Scope of-Deceased gifted money to son-Son  became  partner  of  the  firm  in  which  donor continued to  be partner-Gift-Whether  dutiable on the death of father.

HEADNOTE:      The deceased was a partner in a partnership firm with a half share  in it.  On March  27, 1957 he made a gift of Rs. 1,00,000/- to  his son  and Rs.  50,000/-to  his  wife,  the respondent. Almost  simultaneously his  son was  taken as  a partner by  giving him  half share  of the deceased, so that from that  time onwards there were four partners of whom the deceased and his son had 1/4 share each. On the death of the deceased in 1962 his 4/1 share was taken by his wife and son equally.      The  Revenue   Authorities  included  the  sum  of  Rs. 1,50,000/ in  the estate of the deceased for the purposes of estate duty.  On appeal the Tribunal was of the view that s. 10 of  the Estate  Duty Act  was not attracted to the gifts. The High  Court answered  the reference  in  favour  of  the assessee.      Dismissing the Revenue’s appeal ^      HELD: The  Tribunal as well as the High Court was right in holding that no estate duty was payable in respect of the two sums. [537B]      1. When  property is  gifted by a donor, possession and enjoyment of which is allowed in a partnership firm in which the donor  was a  partner, the  mere fact that the donor was sharing the  enjoyment or  benefit in  the property  is  not sufficient for  the application  of s.  10 of the Act unless such enjoyment  or benefit is clearly referable to the gift. If possession,  enjoyment or  benefit of  the donor  in  the property is  consistent with  the facts and circumstances of the case,  other than  those of  the factum of gift, then it cannot be  said that  the donee  had not retained possession

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and enjoyment of the property to the entire exclusion of the donor, or,  to the  entire exclusion  of the  donor  in  any benefit to  him  by  contract  or  otherwise.  It  makes  no difference whether  the donee  is a partner in the firm from before or  is taken  as such  at the  time of the gift or he becomes a  creditor of  the partnership firm by allowing the firm to  make use of the gifted property for the purposes of the partnership. [535G-H]      (a) Although  in a  given case  the donee  assumes bona fide possession  and enjoyment  of the  property immediately upon the  gift to  the entire exclusion of the donor, if the donee thenceforth does not retain it to the entire exclusion of the  donor the gift is dutiable. In Chick’s case the gift was without  reservation  and  qualification  and  the  sons assumed and  enjoyed the  property to  the exclusion  of the father. Yet  a few years later when the donor-father and the donees entered  into partnership,  each partner’s  property, including the one gifted by 528 the father,  was  made  available  as  the  capital  of  the business and  property  of  the  partnership.  Each  of  the partners was in possession and enjoyment of the property and allowed the  others to  derive benefit  out of  the property gifted, so  long as the partnership subsisted. The gift was, therefore, dutiable.  In Munro’s  case on the other hand the gift was  of a property shorn of certain of the rights which appertain to complete ownership and after the gift the donor had remained  in possession  and enjoyment  of those  rights which were not the subject matter of the gift. The gift was, therefore, not dutiable.                                                    [531 E-H]      (b)Interpreting s.  10 of  the Estate  Duty Act (before the second  proviso was added) this Court held in Da Costa’s case that  the donor-father  who stayed with his sons in the house till his death after the house was gifted to them, the donor had  not been  entirely excluded  from possession  and enjoyment of  the gifted  property and, therefore, s. 10 was attracted. It  was further  held  that  the  expression  "by contract or otherwise" in second limb of the section did not control the  words "to the entire exclusion of the donor" in the first limb.                                                     [533A-B]      (c) In  Gounder’s case the donor who was a partner of a firm gifted  to his  two sons house property which was under the occupation  of the firm as a tenant at will and the firm thereafter paid  rent to  the donees.  In addition, a sum of Rs. 1  lakh transferred  by the donor in the firm’s books of account and  credited to  the accounts  of the  donor’s five sons, remained invested with the firm on which the firm paid interest to  the sons.  This  Court  applying  the  rule  in Munro’s case  held that what was gifted by the donor was the whole of  the property  minus the  rights of the partnership which were  shared and  enjoyed by  the donor  as well.  The donor was  enjoying that bundle of rights in the partnership which he was enjoying before the gift and this did not bring the case within the ambit of s. 10. In the case of the house property the  possession which  the donor could give was the legal possession.  The benefit  which the  donor  had  as  a member of  the partnership  was not the benefit referable in any way to the gift but is unconnected therewith.                                                       [534E- F]      (d) But  in Gounder’s  case the implicit departure from Chick’s case was when it was said that the benefit the donor had received  as a  member of  the  partnership  was  not  a

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benefit referable  in any way to the gift but is unconnected therewith. This  departure can  be attributable  to the very subtle distinction  in the  facts of the two cases : whereas in Chick’s  case the  donor  as  a  partner  came  to  share possession and  enjoyment of the property by the partnership firm long  after the  gift, in  Gounder’s case  the  benefit which the  donor was  enjoying as  a partner in the property gifted was  existing at  the time  of the  gift  itself  and continued to  exist even  thereafter. It  was not exactly on the basis of Munro’s case that it was said so. [534G]      (e) Where  the gift  of money was in a partnership firm in which  the donor  was a partner and the donees were taken as partners  it was  held that  the benefit  in the property viz. the  money gifted  which the  donees were  enjoying and continued to  enjoy as  partners was not sufficient to bring the case  within the  ambit of  s. 10  irrespective  of  the question whether  that benefit  was referable to the gift or not. In other words if the benefit was referable to the gift then the property would be covered by s. 10, otherwise not. [535A-B] 529      (f) In Controller of Estate Duty v. R. V. Viswanathan & Ors. the  transfer   of the  gifted sums was made subject to the condition  that the  sons would use them as capital, not for any  benefit of the deceased donor, but for each of them becoming entitled  to 1/7th  share in the business. The fact that the  partnership may  make use  of the  sums  of  money gifted in  which the  donor also  was a partner did not mean that he  was allowed  to enjoy  or derive any benefit in the money gifted  which could  be referable  to the gift itself. [535D-E]      2. (a) Where the sums gifted by the donor were invested in the  firm in  which the  donor was  a partner, the donees remained creditors  of the  firm. The  rule  in  Munro’s  is applicable. [537G]      (b) If  a firm  borrows money so as to be itself liable for it  to the  lender the  capital of  the firm  is no more increased than  is the  capital of an ordinary individual is increased by  his  getting  into  debt.  The  capital  of  a partnership is not, therefore, the same as its property even treating it  as the  partnership property.  The  partnership property does not belong to a co-partner in the sense of his being a co-owner. The partnership firm is not a legal entity in the  sense of  having a  legal personality  of  its  own, different from  that of  the partners.  But no  partner  can claim a  share in  the partnership property according to his share in  the partnership.  A creditor of the partnership is entitled  to   get  back   the  whole  of  his  property  on dissolution of  the firm  or otherwise,  while a  partner is entitled to  get a  share in  the net assets of the property realised on the winding up of the partnership. [536C-E]      Clifford John  Chick and  Another  v.  Commissioner  of Stamp Duty 37 I.T.R. 89 (ED), Munro v. Commissioner of Stamp Duties [1934] Appeal Cases 61, George Da Costa v. Controller of Estate  Duty, Mysore  63 I.T.R  497=[1967] 1 S.C.R. 1004, Controller of  Estate Duty,  Madras  v.  C.  R.  Ramachandra Gounder 88  I.T.R. 448=[1975]  3 S.C.R. 554, Commissioner of Income Tax  and Controller  of Estate  Duty, Madras v. N. R. Ramarathnam and  Others; 91  I.T.R. 1=[1974]  1 S.C.R.  372, Controller of  Estate Duty,  Kerala v. R. V. Viswanathan and Others, 105 I.T.R. 653 explained.

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JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeal Nos. 2527 and 2528 of 1972.      From the  Judgment and  Order dated  10-3-1971  of  the Punjab and  Haryana High  Court in  Income Tax Reference No. 12/68 and 5/69.      S. T. Desai, S. P. Nayar and Miss A. Subhashini for the Appellant in both the appeals.      Bhagirath Das, B. P. Maheshwari and Suresh Seth for the Respondent in CA No. 2528/72.      Ex-parte against respondents in C.A. 2527/72.      The Judgment of the Court was delivered by      UNTWALLA J.  These two  appeals by certificate filed by the Controller  of Estate Duty are from the Judgments of the Punjab &  Haryana High  Court. Both  the appeals  have  been heard together as a common 530 question of  law is  involved in  them. It  relates  to  the interpretation and  applicability of Section 10 of the Etate Duty Act, 1953, hereinafter called the Act.      We shall  first proceed  to state the facts and discuss the law  in Civil  Appeal 2527  of  1972.  Even  though  the respondent, Smt.  Kamlavati, was  not  represented  in  this appeal, Mr.  S. T. Desai, learned counsel for the appellant, assisted the  court very  ably  and  fairly.  In  the  other appeal, being  Civil Appeal  2528 of  1972, Shri  Jai  Gopal Mehra, the  respondent, was  represented by  Mr.  Bhagirathi Das. The main judgment of the Full Bench of High Court is in this Civil  Appeal, and  it has  followed the  ratio of this decision in  the other  appeal also.  We, however,  find  it convenient  to  first  discuss  the  question  of  law  with reference to the facts of Civil Appeal 2527 of 1972.      Maharaj Mal,  the deceased,  with whose  estate we  are concerned in  this appeal,  was a  partner in  a partnership firm styled  as M/s  Maharaj Mal  Hans Raj. Mahraj Mal had a half share in the partnership. The other two partners namely Jialal and  Hansraj had each 1/4th share. On the 27th March, 1957 Maharaj  Mal made  a gift  of Rs.  1,00,000 to his son, Lalit Kumar,  and of  Rs. 50,000  to his wife, Kamlavati. In the books  of the  partnership firm the sums of Rs. 1,50,000 were debited  in the  account of Maharaj Mal and credited to the accounts  of Lalit  Kumar and Kamlavati, Rs. 1,00,000 in the name  of Lalit  Kumar and  Rs. 50,000  in  the  name  of Kamlavati.  Almost  simultaneously  with  effect  from  28th March, 1957  as per  the instrument of partnership dated the 2nd April,  1957 Lalit  Kumar was  taken as a partner in the firm of  M/s Maharaj  Mal Hans Raj by giving him 1/4th share out of  the half  share of Maharaj Mal. In other words, with effect from  the said  date there  were four partners in the firm each holding 1/4th share.      On the  17th December,  1957, Hans  Raj died and in his place his  widow Smt. Rup Rani was taken as a partner in the firm getting  1/4th share, the share of her husband. Maharaj Mal died on the 9th January, 1962. On his death the firm was again reconstituted  with Jialal and Rup Rani each retaining 1/4th share,  Lalit Kumar  getting 3/8th  share, i.e., 1/4th his own  share augmented  by half of 1/4th share of deceased Maharaj Mal.  The remaining half of Maharaj Mal’s share i.e, 1/8th was given to Kamlavati.      The Revenue  Authorities relying  upon the  judgment of the Privy  Council in  the case  of Clifford  John Chick and Another  v.  Commissioner  of  Stamp  Duty(1)  as  also  the judgment of the Calcutta High 531 Court in  the case of Rash Mohan Chatterjee v. Controller of

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Estate Duty,  West Bengal(1), held that the said sums of Rs. 1,50,000 were  includible for  the purposes  of  the  estate duty. The  accountable person  took the  matter  in  further appeal before  the Appellate  Tribunal, which  took the view that the  provisions of  Section 10  of  the  Act  were  not attracted to  the two  amounts of gifts made by the deceased to his  wife and son and, therefore, the accountable persons were not liable to pay any estate duty on them. The Tribunal on being  asked by  the revenue made a reference to the High Court under  Section 64(1)  of  the  Act  and  referred  the following question of law for its opinion:-           "Whether on  the facts and in the circumstances of      the case,  the provisions  of section 10 of Estate Duty      Act did  apply to  the gifts of Rs. 1,00,000 and of Rs.      50,000 made  by  the  deceased  to  his  son  and  wife      respectively ?"      On a  consideration of the various authorities the High Court has  affirmed the  view of  the Tribunal and hence the appeal.      Although  Section   10  of   the  Act   came   up   for consideration of  this Court  in many  cases wherein several English decisions were reviewed and the law was laid down as precisely as  was possible  to be  done on the facts of each case, in the application of the principles, Courts are still faced with difficulty resulting in some cleavage of opinion. We, therefore,  think it  necessary to  review some of those cases over again.      In the case of Clifford John Chick (supra) the question for consideration before the Judicial Committee of the Privy Council related  to the  interpretation and applicability of Section 102  of the  New South Wales Stamp Duties Act, which was in  pari materia  with Section  10 of  our Act.  In 1934 father of  Clifford John Chick transferred by way of gift to his son  the property in question. The gift was made without reservation or  qualification or  condition.  In  1935,  the deceased, his  son  Clifford  John  Chick  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 matters  relating to its conduct. Each  partner’s property  including the  one gifted was made  available as  the  capital  of  the  business  and property of  the partnership.  The partnership continued for quite a  good number  of years until the donor died in 1952. In such a situation the Privy Council held that although the first part  of sub-section  2(d) of  Section  102  had  been satisfied in  that the  son had assumed bona fide possession and enjoyment of the 532 property immediately  upon the  gift to the entire exclusion of the  father, he  had not  thenceforth retained  it to the father’s  entire   exclusion,  for   under  the  partnership agreement, the  partners and each of them were in possession and enjoyment  of the  property so  long as  the partnership subsisted. Viscount  Simonds delivering  the opinion  of the Board distinguished an earlier decision of the Privy Council in Munro  v. Commissioner  of Stamp  Duties(1) on the ground that in  Munro’s case  the gift  was of  a property shorn of certain of  the rights which appertain to complete ownership and after  the gift the donor had remained in possession and enjoyment of  those rights  and of  no other right which was the subject  matter of  the gift.  To start with, therefore, the ratio in Chick’s case is that if the donor is allowed to be in  possession and enjoyment of or derive any benefit out

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of the  property gifted then Section 10 of the Act will make such property,  dutiable. If, on the other hand, the donor’s possession, enjoyment  or benefit  is not  relatable to  the property gifted  but to  something outside it then no estate duty is chargeable in respect of such property.      Section 10  came up for consideration before this Court in the case of George Da Costa v. Controller of Estate Duty, Mysore(2). The  said decision  was given  in  respect  of  a period when  the second proviso to Section 10 was not in the Act as  the same  was introduced  by Central  Act 10 of 1965 with effect  from 1-4-1965.  This was a clear case where the donor had  been allowed to stay-in the gifted house till his death even after the house was gifted to his sons. Ramaswami J. delivering  the judgment  on behalf of the Court analysed Section 10  with reference  to some  other provisions of the Act and said at page 501:-           "The crux  of the  section lies  in two parts: (1)      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  (2) the  donee must  have retained      such possession  and enjoyment  of the  property to the      entire exclusion of the donor or of any benefit to him,      by contract  or otherwise.  As a matter of construction      we are  of  opinion  that  both  these  conditions  are      cumulative.  Unless   each  of   these  conditions   is      satisfied, the  property would be liable to estate duty      under section 10 of the Act." The learned  Judge further pointed out that the "second part of the  section has two limbs: the deceased must be entirely excluded, (i) 533 from the  property, and (ii) from any benefit by contract or otherwise, the  word ’otherwise’  to  be  construed  ejusdem generis." But it would be noticed that in the opinion of the Court the  case of the Revenue rightly rested upon the first limb as the deceased had not been entirely excluded from the possession  and   enjoyment  of  the  property  gifted.  The expression "by  contract or  otherwise",  occurring  in  the second limb of the section did not control the words "to the entire exclusion of the donor" in the first limb.      In the  case of Controller of Estate Duty, Madras v. C. R. Ramachandra  Gounder(1) the  donor who was a partner in a firm owned  a property  which  the  firm  was  occupying  as tenant-at-will. He executed a deed of settlement under which he transferred  the property  leased out  to the firm to his two sons.  But the firm continued to be in occupation of the premises paying  rent  to  the  donees  after  the  deed  of settlement. The  deceased had  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  firm’s books with effect from April  1, 1953. In the account of each of the sons, the sum of  Rs. 20,000  gifted to  him was credited. The amounts remained invested  with the  firm on which interest was paid to the  sons. The  deceased continued to be a partner of the firm till  April 13,  1957, when  the firm was dissolved and thereafter he  died on May 5, 1957. The question was whether the value  of the house property and the sum of Rs. 1,00,000 could be  included in  the principal  value of the estate of the deceased  as property deemed to pass under Section 10 of the Act.  This Court  held that no estate duty was liable to be charged  on either  of the properties. The main principle is discussed  with  reference  to  the  house  property  and approving the  decision of the Mysore High Court in the case of Controller of Estate Duty v. Aswathanarayana Setty(2) the

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same principle  was applied with reference to the sum of Rs. 1,00,000 also.  The ratio in Munro’s case as also in another decision of  the Privy  Council  in  Commissioner  of  Stamp Duties of  New South Wales v. Perpectual Trustee Co. Ltd.(3) was applied and it was held:-           "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  tenancy. He  could do  nothing else to transfer      the possession in any other 534      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 partner      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  on 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 give      is the legal possession which the circumstances and the      nature of  the property would admit. This he has given.      The  benefit   the  donor   had  as  a  member  of  the      partnership was  not a  benefit referable in any way to      the gift but is unconnected therewith.      It should  be noticed  that, though  not explicitly but implicitly, some  departure was  made from  the ratio of the Privy Council case in Chick’s. When the principle of Munro’s case was applied it was on the basis that what was gifted by the donor  was the whole of the property minus the rights of the partnership  which were  shared and enjoyed by the donor also; the  donor enjoying  the same  bundle of rights in the partnership which  he was  enjoying before  the gift did not bring the  case within  the ambit  of section  10.  But  the implicit departure  from the  Chick’s case  was when  it was said that  the benefit  the donor had had as a member of the partnership was  not a  benefit referable  in any way to the gift but  is unconnected  therewith. This  departure can  be attributed to  the very  subtle distinction  in the facts of the two  cases and  it is  necessary to  highlight them.  In Chick’s case  the donor  as a  partner  came  to  share  the possession and  enjoyment of the property by the partnership firm long  after the  gift, while  in Gounder’s  the benefit which the  donor was  enjoying as  a partner in the property gifted was  existing at  the time  of the  gift  itself  and continued to  exist even  thereafter. It  was not exactly on the basis  of Munro’s  case that it was said so. Similar was the view  expressed by the Mysore High Court in Setty’s case in relation to the gift of money in a partnership firm where the donor  was a partner and the sons, the donees, were also taken as  partners. Even  then, it  was pointed out that the benefit in  the property  namely the  money gifted which the donor was  enjoying and  continued to enjoy as a partner was not 535 sufficient to  bring the case within the ambit of Section 10 irrespective  of  the  question  whether  that  benefit  was referable or not to the gift. In other words, if the benefit was referable to the gift then the property would be covered

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by Section  10, otherwise  not. The same Bench which decided Gounder’s followed it in the case of Commissioner of Income- tax  and   Controller  of  Estate  Duty,  Madras  v.  N.  R. Ramarathnam and Others(1). In this case the fact in relation to the  gifts of  money by  the donor in favour of his three sons and  the daughter  were almost  identical to  those  of Gounder’s except  that the three sons and daughter were also partners in the firm. Yet applying the ratio in Gounder’s it was held  that the  amounts gifted  were not  chargeable  to estate duty under section 10.      We may  now refer  to the  decision of  a Bench of this Court to  which one  of us  (Untwalia J.) was a party in the case  of   Controller  of  Estate  Duty,  Kerala  v.  R.  V. Viswanathan  and   Others(2).  The  deceased  was  the  sole proprietor of  the business.  He  gifted  the  sums  of  Rs. 2,70,000 to  his four  major and  two minor  sons  each  son getting a sum of Rs. 45,000. The transfers were made by book entries. It  was held that there was no absolute transfer of the sum  of Rs.  2,70,000. It  was a  part of  the scheme to transfer 6/7th shares in the business in favour of the sons. The transfer was made subject to the condition that the sons would use  it as capital not for any benefit of the deceased donor but  for each of them becoming entitled to 1/7th share in the  business. In  other words,  the mere  fact that  the partnership may  make use  of the  sums of  money gifted  in which the  donor also was a partner did not mean that he was allowed to  enjoy or  drive any benefit in the money gifted, which could be referable to the gift itself.      To avoid  the conflict  in the application of the ratio of the  various Supreme  Court cases  as seems  to have been done by  some of  the High  Courts, we would like to clarify and elucidate some of the aspects and facets of the matter a bit further.  When a  property is  gifted  by  a  donor  the possession  and   enjoyment  of   which  is   allowed  to  a partnership firm  in which  the donor is a partner, then the mere fact  of the donor sharing the enjoyment or the benefit in the  property is  not sufficient  for the  application of Section 10  of the  Act until  and unless  such enjoyment or benefit is  clearly referable  to the  gift,  i.e.,  to  the parting with  such enjoyment  or benefit  by  the  donee  or permitting the  donor to  share them  out of  the bundle  of rights gifted  in the property. If the possession, enjoyment or benefit of the donor in the property 536 is consistent  with the other facts and circumstances of the case, other than those of the factum of gift, then it cannot be said  that the  donee had not retained the possession and enjoyment of  the property  to the  entire exclusion  of the donor, or,  to the  entire exclusion  of the  donor  in  any benefit to  him  by  contract  or  otherwise.  It  makes  no difference whether  the donee  is a partner in the firm from before or  is taken  as such  at the  time of the gift or he becomes a creditor of the partnership firm by allowing it to make use  of the  gifted property  for the  purposes of  the partnership. It  should be  remembered  as  pointed  out  by Lindley on  Partnership Twelfth  Edition at  page 178:-"If a firm borrows  money so  as to be itself liable for it to the lender, the capital of the firm is no more increased than is the capital  of an  ordinary  individual  increased  by  his getting into debt." Although as pointed out at page 357 "The capital of  a partnership  is not  therefore the same as its property," even treating it as the partnership property, the partnership property  does not belong to a co-partner in the sense of his being a co-owner. The partnership firm is not a legal entity  in the  sense of having a legal personality of

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its own  different from that of the partners. But no partner can claim  a share  in the partnership property according to his share  in the partnership. A creditor of the partnership is entitled  to get  back  the  whole  of  his  property  on dissolution of  the firm  or otherwise,  while a  partner is entitled to  get a  share in  the net assets of the property realized on the winding up of the partnership.      Mr. Desai  heavily relied  upon  the  decision  of  the Gujarat High  Court in  the case  of Sekarlal  Chunilal  and Others  v.   Controller  of   Estate  Duty,   Gujarat.(1)  A distinction was  drawn after  distinguishing the decision of this Court  in Gounder’s  case  between  the  gifts  of  Rs. 2,00,000 each  in favour  of the two donees and the gifts of the sums  of Rs. 1,20,000 and the sum of Rs. 1,99,500 gifted to the other donees on the ground that the former was not an absolute  gift   but  was   subject  to  the  right  of  the partnership firm  while the  latter assumed the character of first there  being an  absolute gift  and thereafter parting with a  portion of  the enjoyment  and benefit in the gifted property in  favour of  the donor  by investing the money in the partnership.  In the enunciation of the principle of law there  is  no  appreciable,  as  there  could  not  be  any, difference between  what was  said in Gounder’s case by this Court and what has been said by the learned Chief Justice in the Gujarat case. But in the application of the principle to the facts of the two aggregate sums of money it was possible to take  a different  view. In  relation to the gifts of Rs. 1,20,000 it  was possible  to take a view that it was a part and parcel of the same transac- 537 tion namely  the receipt  of the money by the donees by gift and their investing the same in the partnership firm. So was it possible in regard to the sum of Rs. 1,99,500. However, a different view  was taken  by the  High Court.  But  in  the instant case  it is clear that the ratio of the decisions of this Court  referred to above is squarely applicable and the Tribunal as well as the High Court was right in holding that no estate  duty could  be charged in respect of the two sums of money viz. Rs. 1,00,000 and Rs. 50,000.      Similarly  in   the  application   of  the  ratio  some difference of  opinion will appear to have been expressed by the High  Courts in the case of Controller of Estate Duty v. Chaman Lal  Bery(1); Controller  of Estate  Duty  v.  B.  V. Kapadia(2), Controller of Estate Duty, Madras v. S. R. Beevi Rahman(3) and  Controller of  Estate Duty,  Madras v.  V. S. Suryanarayanan(4). It  is not necessary for us to enter into the fine distinction drawn by the High Courts in each of the cases referred  to above.  But we want to emphasise that the principles of  law  laid  down  by  this  Court  in  several decisions which  we have reviewed in this judgment with some further clarification  and elucidation  should be  carefully and broadly  applied to the facts of each case without doing too much  of dichotomy and hair splitting of facts so as not to easily  apply or  not  to  apply  the  provision  of  law contained in Section 10 of the Act.      The facts  of Civil  Appeal 2528  of 1972  are that  in April or  May, 1958,  Jiashi Ram, the deceased made gifts of Rs. 20,000  each in  favour of his son Jagdish Chand and his four daughters-in-law. The donees invested the entire sum of Rs. 1,00,000  gifted to them in the firm in which Jaishi Ram was a  partner. Jaishi  Ram died  on October  23,  1961.  It appears these  donees were not partners in the firm nor were they taken  as such  after the  gifts  were  made  in  their favour. Yet, applying the same principle of law the Tribunal as well  as the  High Court  has held  that the  accountable

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person is  not liable  to pay  estate duty on the sum of Rs. 1,00,000. Here  the donees  remained creditors  and the sums gifted were  already being  utilised by  the firm.  The same remained  being   utilised.  Squarely   Munro’s   ratio   is applicable. In  our opinion,  this case  is  on  a  stronger footing than  that of  Civil Appeal  2527,  as  was  rightly conceded by  Mr. S. T. Desai also. We, therefore, uphold the decision of the High Court in this appeal also. 538      For the  reasons stated  above, both  the  appeals  are dismissed. Civil  Appeal 2528  is dismissed  with costs  but there will  be no  order as to costs in Civil Appeal 2527 of 1972 as the hearing of this appeal proceeded ex-parte. P.B.R.                                    Appeals dismissed. 539