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Section 10 of the Estate Duty Act, 1953 - Gift - Where donor not entirely excluded - M gifted certain amounts to his son and grand-daughter who, in turn, invested same in a firm in which donor was a partner - Said amounts continued to remain so deposited till death of donor - Whether mere fact of donor sharing enjoyment or benefit in gifted property was not sufficient for application of section 10 and as such gifted amounts were not includible in principal value of deceased's estate - Held, yes FACTS One M had gifted Rs. 50,000 each to his son and grand-daughter who deposited the said amounts in a firm in which M was a partner. The said amounts continued to remain deposited in that firm till the death of M. Applying section 10 on the ground that the donees had not taken possession of the amounts gifted to the exclusion of the donor and the donor derived benefits out of the amounts gifted owing to their having been left with the firm in which the deceased donor was a partner, the Assistant Controller held that the amounts gifted were subject to estate duty under section 10. On appeal, the Appellate Controller held that though the amount gifted to the son might have continued to remain as a deposit with the firm, the existence of a partnership of which the donor was a partner could not attract the provisions of section 10. In regard to amount gifted to the granddaughter, he held that the deceased did not have any control whatever over the funds gifted by him to his grand-daughter though the deceased continued to be a partner of the firm, as the control exercised by the deceased over the funds was referable to his position as a partner of the firm and not to the circumstances that he provided the funds or was the donor thereof. Accordingly, he deleted the additions made in respect of the said amounts. On further appeal, the Tribunal, however, set aside the order of the Appellate Controller and restored the order of the Assistant Controller. On reference: HELD In CED v. Kamlavati [1979] 120ITR 456, the Supreme Court has held that 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…

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