JUDGMENT
M.N. Chandurkar, C.J.
1. This order will govern both T.C. No. 143 of 1978 and T.C. No. 520 of 1979. The four questions which have been referred at the instance of the Revenue to this court are as follows :
“1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 6,62,400 was not includible under section 10 of the Estate Duty Act in the principal value of the estate of the deceased ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 10 of the Estate Duty Act would not apply in respect of the properties covered by the settlement deeds dated December 11, 1953, and December 10, 1954 ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the entire value of all the properties given by the deceased under the partition deed cannot be included in the principal value of the estate of the deceased under section 9 read with Explanation 2 to Section 2(15) of the Act ?
4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 9 read with Explanation 2 to section 2(15) of the Act would not apply to the assessee’s case ?”
2. The first two questions are the subject-matter of T.C. No. 520 of 1979 and questions Nos. 3 and 4 are the subject-matter of T.C. No. 143 of 1978. The facts which are relevant as noticed by the Tribunal for the purpose of these reference petitions lie within a narrow compass. One Hariram was the son of a rich businessman by name Sokkalal Ram. Hariram was born on April 9, 1934. While he was still a minor, he married the accountable person the year 1951. Later on, he married the accountable person’s sister in March, 1955. Hariram’s father left a will dated May 11, 1942, where under after making some provision for his wives and temple, the rest of the properties were bequeathed to the then minor son, Hariram. On the death of Hariram which took place on February 9, 1964, he had two wives and several children.
3. During his lifetime, Hariram executed three settlement deeds which in substance have now been found to be gift deeds. By the first settlement deed dated December 11, 1953, he gifted 117.54 acres of wet land and dry land to the extent of 200.47 acres in favour of his minor son, Sokkalal, and the sons to be born through his first wife, Saroja. By the second document dated December 10, 1954, Hariram settled 36.62 acres of wet lands in favour of the first wife, Saroja. Then, by the third document dated March 9, 1955, he settled some wet lands and two buildings in favour of his second wife. Almost about nine years thereafter, a document which was styled as a family arrangement partition came to be made on January 20, 1964. The contents of the document are not known and could not be ascertained from any of the orders of the estate duty authorities or from the order of the Tribunal. But the document which is not available for construction seems to have been accepted as a document of partition. It is not known as to how these properties were described in this document and there is some doubt as to whether the properties are described as the absolute properties or the joint family properties, because while the Appellate Controller of Estate Duty referred to this document as mentioning that the properties, the Tribunal in paragraph 4 of its order while quoting the findings of the Appellate Controller has referred to this document dated January 20, 1964, as referring to the properties as absolute properties.
4. In the proceedings for computation of estate duty, the Assistant Controller treated all the properties as joint family properties and valued the 1/8th share of the deceased at Rs. 1,10,759. The accountable person filed an appeal against the order of the Assistant Controller.
5. The Appellate Controller of Estate Duty, however, took the review that the properties settled by means of the three settlement deeds were only the exclusive properties of the deceased, Hariram, and the settlement deeds were, therefore, valid, legal and operative. He, however, took the view that while the settlement deed dated March 9, 1955, was not hit by section 10 of the Estate Duty Act, the two earlier settlement deeds dated December 11, 1953, and December 10, 1954, were hit by the provisions of section 10. Applying the provisions of section 10, he held that a sum of Rs. 6,62,400, according to the computation, was includible in the principal value of the estate which passed on the death of the deceased. The accountable person then filed an appeal to the Tribunal and, that appeal was E.D.A. No. 93 (Mas)/1972-73. The Assistant Controller also filed an reduction of the value of the buildings which were settled by the document reduction of the value of the buildings which were settled by the document dated March 9, 1955.
6. The Tribunal took up for consideration first the appeal filed by the accountable person. On a perusal of the account books and the items of income from the settled properties and the expenditure incurred on behalf of the settlees, the Tribunal came to the conclusion that the deceased had not appropriated any income from the settled properties and that the deceased did not have for himself any benefit of the income accrued from the settled properties. The Tribunal went on to conclude that instead of acquiring any benefit from the settled properties, the deceased had become indebted on account of the fact that the expenditure incurred on the maintenance and the education of the settlees was more than the income from the settled properties. The Tribunal reached the positive finding that even though the settler as the natural guardian and trustee could have looked after the income and expenditure from the settled lands, there is no proof to show that the settler really exercised any dominion over the income from the settled properties. Taking into consideration the fact that the donees were minors, the Tribunal held that they could not have exclusive enjoyment themselves, but the accounts spoke of the expenditure out of the income from the settled properties being utilized for the benefit of the settlees. The Tribunal reached a positive conclusion that in respect of the two settlements dated December 11, 1953, and December 10, 1954, section 10 of the Act was not attracted.
7. There seems to have been an argument before the Tribunal that the entire value of all the properties given away by the deceased to his wife and children under the partition deed was liable to be included in the estate of the deceased having regard to section 9 read with Explanation 2 to section 2(15) of the Estate Duty Act. This contention was summarily disposed of by the Tribunal by observing that “we fail to understand how such a partition arrangement would be hit by section 9 read with Explanation 2 to section 2(15) of Estate Duty Act.” The Tribunal disposed of both the appeals by a common order. We are not concerned with the decision of the appeal filed by the Revenue. But the appeal filed by the accountable person was allowed in part. As a result of the order of the Tribunal, the Revenue had initially sought for reference of the four above mentioned questions. Questions Nos. 3 and 4 referred by the Tribunal, But it declined to refer questions Nos. 1 and 2. These two questions were ultimately directed to be referred by this court.
8. So far as questions Nos. 3 and 4 are concerned, they cover the same controversy and the answer to question No. 3 will conclude question No. 4 also. We will take up question Nos. 1 and 2 first.
9. Learned counsel for the Revenue contended the having regard to the fact that the grandfather of the sons of the deceased was appointed as the guardian under the first document dated December 11, 1953, the circumstances that the deceased himself managed the properties and disbursed the income from the properties as will be clear from the accounts referred to by the Appellate Controller and similar being the situation with regard to the property which was the subject-matter of the document dated December 10, 1954, the deceased must be treated as not having completely excluded himself from the income of the properties settled by those two documents. Consequently, according to learned counsel, the main part of section 10 of the Act will be attracted. Section 10 of the Estate Duty Act reads as follows :
“S. 10. 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 :
Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid; if by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death :
Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor’s death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition.”
10. We are not concerned with the two provisos. It is true that under section 10 of the Act if it is established that bona fide possession and enjoyment of the gifted property was not immediately assumed by the donees and it is not shown that the donee retained the gifted property to the exclusion of the donor or of any benefit to him by contract or otherwise, then notwithstanding the gift, the gifted property shall be deemed to pass on the donor’s death. There is considerable difficulty in the way of the Revenue because of the finding which has been recorded by the Tribunal which clearly appears to us to be a finding of fact. The Tribunal has gone into the question as to what was the income from the property and what was the expenditure incurred by the deceased in so far as the beneficiaries under the settlements were concerned. The Tribunal has considered the fact that the beneficiaries were minors living with the settler and it is clear that there was nothing improper for the donor to manage the property and incur the expenditure for the benefit of the donees, out of the income from the properties. On a consideration of the item of income and the items of expenditure which were clearly shown in separate pages of the ledger maintained by the deceased, the Tribunal had come to a specific finding that the deceased had not appropriated any income from the settled properties and there was no proof to show that the settler exercised any dominion over the income from the settled properties.
11. It is undoubtedly true that by the document dated December 11, 1953, the father of Saroja was appointed as the guardian of the minors. The fact still remains that the donees or the settlees were minors and the only proper person who would be able to take care of the minors and incur the necessary expenditure for the maintenance and education of the minors was the natural guardian, viz., the father. If in his capacity as the natural guardian, he incurs expenditure from out of the income from the properties which are settled for the benefit of the minors, it cannot be said that the settler has not excluded himself from either the settled properties or the income from the settled properties. Having regard to the finding recorded by the Tribunal for which there was ample material in the form of account books, it is difficult to accept the contention that section 10 of the Act was attracted to the facts of the present case. Accordingly questions Nos. 1 and 2 have to be answered in the affirmative and in favour of the accountable person.
12. So far as questions Nos. 3 and 4 are concerned, it is vehemently argued by Mr. C. V. Rajan on behalf of the Revenue that the Tribunal has proceeded to decide the contention with regard to the applicability of section 9 of the Act on the footing that the property was self-acquired property. The contention is that all the members of the joint family had acquired a right in the property which had fallen to their share by partition only as a result of the partition deed dated January 20, 1964, and the partition must, therefore, be treated as a disposition for the purpose of section 9 of the Act and the entire property which is the subject-matter of partition will be includible in the property which passed on the death of the deceased. It is difficult to appreciate this contention of learned counsel for the Revenue. In the first two questions which were referred at the instance of the Revenue, the common ground between the accountable person and the Revenue was that the documents dated December 11, 1953, and December 10, 1954, constituted gifts, and the only limited contention on behalf of the Revenue was that from the gifted property the donor had not excluded himself exclusively. If questions Nos. 1 and 2 proceeded on the common ground that the two documents were really gift deeds, then the limited question for consideration before this court as well as before the Tribunal was whether the donor had excluded himself either partially or wholly from the income out of the gifted property. Once we answer the two questions in favour of the accountable person, then the position as it transpires is that the documents dated December 11, 1953, and December 10, 1954, were valid gifts from which the donor was completely excluded. If the properties have been gifted by the documents dated December 11, 1953, and December 10, 1954, and title in the donees had vested by virtue of those documents, the properties cannot be re-gifted again and they cannot become the subject-matter of partition. Apart from this, we do not have the advantage of having the document dated January 20, 1964, before us. The order of the Tribunal does not make a reference to the recitals in the document. That document was not even relied upon before the Assistant Controller and the Appellate Controller. It is not, therefore, possible to ascertain with any certainty as to what was the need for the document dated January 20, 1964. It is, therefore, futile at this stage for the Revenue to canvass the includibility of any property on the basis of the document dated January 20, 1964. The contention of the Revenue that the property which was the subject-matter of the partition or the family arrangement dated January 20, 1964, was includible by virtue of the provisions of section 9 read with Explanation 2 to section 2(15) of the Act was, in our view, rightly rejected. Questions Nos. 3 and 4 also will have to be answered in the affirmative and against the Revenue.
13. The questions are answered as follows :
Question No. 1 in the affirmative and against the Revenue.
Question No. 2 in the affirmative and against the Revenue.
Question No. 3 in the affirmative and against the Revenue.
Question No. 4 in the affirmative and against the Revenue.
14. The Revenue shall pay the costs of these two references. Counsel’s fee Rs. 1,000 one set.