Case Note & Summary
Purnabai, the deceased, held three fixed deposit receipts with the State Bank of Bikaner on April 1, 1953. She intended to gift the amounts to her grandson Suryakant, a minor. The receipts were renewed in the joint names of Purnabai and Suryakant, payable to either or survivor. On August 16, 1953, Purnabai executed a deed of gift in favour of Suryakant, which was accepted by Suryakant's father as natural guardian. Purnabai informed the bank of the gift and stated that the receipts should remain in joint names until Suryakant attained majority. Despite the gift, Purnabai continued to present the receipts for renewal upon maturity and obtained fresh receipts in the joint names. One receipt was encashed on August 25, 1955, and the proceeds were reinvested in Suryakant's name alone; the other two were renewed again in joint names. Purnabai died on February 15, 1956. The Assistant Controller of Estate Duty included the value of the three receipts and interest in her estate under Section 10 of the Estate Duty Act, 1953, on the ground that the donee had not assumed immediate possession and enjoyment to the entire exclusion of the donor. The Central Board of Revenue and the Rajasthan High Court confirmed the inclusion. On appeal, the Supreme Court held that for a gift to be excluded from estate duty under Section 10, the donee must immediately assume bona fide possession and enjoyment and thereafter retain it to the entire exclusion of the donor and of any benefit to the donor. The Court found that by continuing to hold the receipts in joint names with the right to encash them, Purnabai retained important benefits; there was no evidence that she acted merely as guardian or benamidar for the minor. Consequently, the gifted amounts were deemed to pass on her death. The Court also held that the proceeds of the receipt encashed within two years of death and reinvested in the donee's name were similarly includible. The appeal was dismissed and the Revenue’s assessment upheld.
Headnote
A) Estate Duty - Gift - Section 10, Estate Duty Act, 1953 - Condition for Exclusion from Estate - For gifted property to be excluded from estate duty, the donee must immediately assume bona fide possession and enjoyment and thenceforward retain it to the entire exclusion of the donor and of any benefit to the donor; if the donor retains any benefit, the property is deemed to pass on the donor's death (Paras 718 B, 718 F). B) Estate Duty - Gift of Fixed Deposit Receipts - Joint Names with Either or Survivor Clause - Retention of Benefit - Where the donor made a gift of fixed deposit receipts to a minor grandson but thereafter continued to obtain renewal of the receipts in joint names of herself and the donee, payable to either or survivor, and the donor herself presented the receipts for renewal and could have encashed them, she retained important benefits; the donee did not assume exclusive possession and enjoyment; the amounts were correctly included in the estate of the deceased under Section 10 (Paras 718 F, 718 G). C) Estate Duty - Gift - Encashment and Reinvestment Within Two Years of Death - Amounts reinvested in the name of the donee alone after encashing a gifted receipt but within two years of the donor's death were also liable to be included in the estate of the deceased (Para 718 G).
Issue of Consideration
Whether the amount of the fixed deposit receipts gifted by the deceased was correctly included in her estate as property deemed to pass on her death under Section 10 of the Estate Duty Act, 1953?
Final Decision
The appeal was dismissed. The Court held that under Section 10 of the Estate Duty Act, 1953, the amounts of the fixed deposit receipts were correctly included in the estate of the deceased because the donor retained important benefits by continuing to hold the receipts in joint names with the right to encash them. The donee did not assume immediate bona fide possession and enjoyment to the entire exclusion of the donor. The amounts were deemed to pass on the donor's death and were liable to estate duty.
Law Points
- Legal points not extracted
- Gift
- estate duty
- possession and enjoyment
- section 10 Estate Duty Act
- 1953
- exclusion of donor's benefit
- bona fide assumption by donee
- retention of benefit
- joint names
- either or survivor
- deemed to pass on death
