1980 PLP (Trio (PTD)

S. M. Sibtain, D. R. for Respondent. M. T. SIDDIQUI (PRESIDENT).‑--This Estate Duty appeal questions before only the inclusion of a gift of Rs. 55,000 in the property passing as also joss of Rs. 70,000 declared in the original account statement and the valu ation of Consul 4 car. 2. We shall first deal with the objection. The deceased in this case Aired on 16‑5‑1977. She possessed a 1965 Consul 4 car, of which the value was declared at R. 10,000 but was adopted by the Deputy Controller Rs. 12,000. The appellant's contention is that the valuation adopted excessive and without any basis and we agree with this that having regard the make and model of the car the price disclosed by the appellant was reasonable and called for no enhancement. 3. The second objection concerns a gift of Rs. 55,000 allegedly made the deceased to her husband to the tune of 55,000. The gift was admittedly made on 19‑6‑1975 (erroneously taken as 19‑6‑1976 by the D. C.) and no gift‑tax was paid either. The appellant had claimed before the Deputy Controller that notwithstanding the amendment brought about in section 9 of the Estate Duty Act by the Finance Act, 1974 requiring payment of gift‑tax on such gifts as are claimed exempt, the gift still could not be treated as property‑passing, because, (i) Rs. 50,000 of the gift was exempt having been made to the husband of the deceased under the provisions of section 5(l)(vi) of the Act while the next Rs. 5,000 was exempt under sec tion 5(2) of the Gift Tax Act and, therefore, no gift tax was payable on this entire amount of Rs. 53,000. The Deputy Controller of Estate Duty, however, included the same in the property passing in view of the instructions of the Central Board of Revenue vide their Circular No. I of 1971 in C. No. 14 (22) E. D./74, dated 6‑7‑1974. The appellant in this behalf places reliance on a decision of the Tribunal in E. D. 28/KB of 1975‑76, dated 24‑10‑1971 and contends that the present gift could not be hit by the said amendment, because the gift tax could be paid only if it was leviable. The gift‑tax was not leviable in the present case and, therefore, the amended provisions could not hit it. The Departmental Representative again places reliance on the same amendment. His contention is that all gifts which are not made bona fide five years or more before the death of the deceased and on which the gift tax has not been paid, shall be deemed to pass o the death. Therefore, the Deputy Controller of Estate Duty has correctly included the same in the property‑passing. We, however, find that under the scheme of the Estate Duty Acts gifts are always deemed to be property, passing unless they fulfil the following three conditions :‑ (a) Gifts should have been bona fide. (b) The gifts should have been made more than five years before the death of the deceased. (c) Gift‑tax should have been paid thereon. All these conditions appear to u.: to be cumulative in nature and, therefore if the gift does not fulfil condition (a) i.e. the gift is not found to be bona fide, it will be deemed to be property‑passing and the other two tests of time limit and the payment of gift‑tax would not be required 4o be applied. However, such of the gifts as are mad bona fide will have to undergo the other two tests in order to attract the exemption, so that with the fulfilment of the first condition of the gift being bona fide, the remaining two conditions would be the limitation with, which they have been made, and the payment of the gift‑tax thereon. Such gifts are bona fide and fulfill the first condition but are not mad beyond the limitation of time will still not attract the exemption and it would not be necessary to test the fulfilment of the third condition in respect thereof. Now the gifts which fulfil the first two conditions of having bee made bona fide and also more than five years before the death of the deceased will still be deemed to be property‑passing unless the third condition regarding the payment of, gift‑tax is also fulfilled. It would, therefore, become necessary that the third condition is also fulfilled to avail of the exemption provided. These are all three negative conditions and must fulfilled cumulatively. The tests have to be applied as mentioned in t above order. If we look to the scheme of the Estate Duty Act we filed that even on the fulfilment of these three conditions some of the gifts are still to be treated as `property‑passing'. Such gifts are mentioned in sections 10 and 11, so that even where all the three conditions, including the payment of the gift‑tax are fulfilled the gifts can still be deemed to be property‑passing, if they come within the clutches of sections 10 and 11 etc In order to provide relief to such property‑passing, the provisions of sec tion 11 have been enacted whereby such gifts as are subjected to the levy of Estate Duty in spite of the payment of the gift tax, necessary credit in respect of the taxes paid under the Gift Tax Act is allowed. The question of chargeability or otherwise of the gifts tax in these circumstances does no arise; as, in our opinion unless three negative conditions are fulfilled, the gifted property shall be deemed to pass on death. Attention in this case may also be invited to a decision, reported as (1978) 37 Taxation 125, wherein, due to restrictive and rejected conditions imposition of payment made to a none‑resident without deduction of tax although no tax was chargeable on the payments even held to be an inadmissible deduction unless the condition of deducting the tax was fulfilled. Under the identical circumstances it was held that where a condition is imposed on which the exemption or a deduction is dependent then that condition must be fulfilled before an exemption or a deduction can be allowed was a legitimate exemption or deduction also that, when the law lays down the payment of a gift tax on the gifts made bona fide and outside a certain period to incumbent to take out the gifts from the ambit of property passing, the exemption is clearly dependent on the pay ment of the gift tax. The exemption would be available only if the gift tax has been paid and if for some reason or the other, the gift tax is not chargeable as, for example, in this case because of certain exemptions available under the Gift Tax Act, the appellant would not be able to satisfy the third essential condition laid down and, therefore, such gifts will continue to be treated as property‑passing on death. 4. The next objection concerns the loan of Rs. 70,000 shown in the original return as due against one M . . . . In the revised return it was claimed that this loan actually comprised of a sum of Rs. 55,000 which was gifted by the wife to the husband who in his own turn had advanced this very amount by way of loan to the said M. Therefore, from the total amount of Rs. 70,000 this amount to the extent of Rs. 55,000 should be excluded as otherwise it would fall for inclusion twice. An affidavit appears has been filed in this connection wherein it is stated that the husband had received this sum of Rs. 55,000 from the wife as a gift on 19‑6‑755 and has advanced the same as a friendly loan to M . . . . . . Project Director, . . . . . Power Station. A further sum of Rs. 15,000 was also advanced by the deceased wife, that the total loan against this gentleman stood at Rs. 70,000. It is stated that this loan was free of interest. In a nutshell the appellant's claim is that the gift having become the property of the husband the loan advanced to M . . . . . to the extent of Rs. 55,000 could not be considered as the property of the wife which could pass on the death specially when the gift is also being treated as property passing. Therefore, only a sum of Rs. 15,000 should be so treated. The Departmental Representative, in our opinion rightly contends that no such contention was raised before the Deputy Controller of Estate Duty where the entire amount of Rs. 70,000 was simply shown under the head "debts to realise" from the deceased lady. The present contention, therefore, appears to be only as afterthought. We find that except for an affidavit shown in favour of the appellant, there is no other evidence produced before us. On this issue, therefore, we shall remit the case back to the Deputy Controller to re‑examine this position afresh in the light of the wealth statements etc. of deceased available to him before taking a decision one way or the other. 5. The appeal will be disposed of accordingly. Order accordingly.