JUDGMENT
G.T. Nanavati, J.
1. In this reference under section 256(2) of the Income-tax Act, the Tribunal has referred the following question for the opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the amount of Rs. 60,000 could not be brought to tax under section 10 of the Estate Duty Act, 1953, as the Revenue had failed to discharge the onus of satisfying the second condition of the said section ?”
2. Gokaldas, the father of the accountable person died on November 1, 1972. Between September l9, 1957, and February 28, 1967, he had made eight gifts of a total amount of Rs. 55,000. Those gifts were made in favour of his son, two daughters and three grand-daughters. A further sum of Rs. 5,000 was gifted by him to his fourth grand-daughter. All the seven donees later redeposited equivalent amounts with the donor who paid interest at a fixed rate. The donor had been earning dividend income by investing Rs. 60,000. The Assistant Controller of Estate Duty held that the last gift of Rs. 5,000 attracted the provisions of section 9 of the Estate Duty Act and, therefore, the said amount was deemed to have passed on the death of the deceased. As regards the other gifts, the Assistant Controller held that they were deemed to have passed, on the donor’s death, under section 10 of the Act. The accountable person, therefore, preferred an appeal to the Appellate Controller. Confirming the view taken by the Assistant Controller, the Appellate Controller dismissed the appeal. The accountable person, therefore, preferred a second appeal to the Tribunal. The Tribunal held that there was no material to show that the gift of Rs. 5,000 made to the fourth grand-daughter was made within two years prior to his death and, therefore, section 9 was not attracted. As regards the applicability of section 10 to the other gifts totalling Rs. 55,000, the Tribunal held that the Department had failed to establish that the donees had failed to assume immediate possession and enjoyment of the amounts gifted to them and that the donees had no money of their own when they parted with money in favour of the donor or that they had kept the money in a separate till until they parted with the same in favour of the donor. The Tribunal, therefore, held that section 10 was not attracted in this case. It, therefore, allowed the appeal. The Controller of Estate Duty moved the Tribunal for referring the above-stated question of law to this court. But it appears that the application made by the Commissioner was rejected. Thereupon, the Commissioner approached this court and, pursuant to the order passed by this court on August 21, 1978, this reference has been made.
3. The Supreme Court in George Da Costa v. CED [1967] 63 ITR 497 and CED v. C. R. Ramachandra Gounder [1973] 88 ITR 448, has held that the crux of section 10 lies in two parts : (i) 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 (ii) 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. Both these conditions are cumulative. If either of these conditions is not fulfilled, the property would be liable to estate duty.
4. In CED v. Babubhai Harjivandas [1981] 129 ITR 276, this court has held that beyond the factum of the gifts in cash by the deceased to the different members of his family and the different donees and beyond the factum of those amounts being invested by the respective donees within a few days of the respective gifts with the firm in which the deceased was a partner, nothing else was established which would indicate that in his character as donor the deceased was not excluded from the benefit of the amounts gifted and that would not be sufficient to attract section 10. The reason is obvious. Possession, enjoyment and exclusion contemplated by section 10 must be in respect of gifted property. Therefore, unless the identity of the property gifted and the property reinvested is established, it will not be possible to say that both the conditions required by section 10 are complied with. If we apply the law and test to the facts of this case, it becomes clear that the Revenue has completely failed in establishing that the second condition of section 10 is not fulfilled in this case. The amounts which were gifted by the donor in this case were received by the donees. They were cash gifts. It is no doubt true that equivalent amounts were redeposited by the donees with the donor himself. But there is nothing on record to show that the same amounts, that is, the amounts which were gifted were re-deposited with the donor. The Department could have proved that the donees did not have other amounts. It could have thereafter proved that the amounts which were gifted were re-deposited with the donor. No such attempt was made in this case. As the Department failed to establish the identity of the amounts deposited by the donees with the donor, the Tribunal was right in holding that section 10 did not apply to the facts of this case.
5. In the result, the question referred to us is answered in the affirmative, that is, against the Revenue and in favour of the assessee. Reference is disposed of accordingly with no order as to costs.