Holding

Section 10 of the Estate Duty Act does not apply; the gifts are not dutiable because the donor was not entirely excluded from possession or enjoyment of the gifted property.

Summary

Maharaj Mal, a half‑partner in a firm, gifted Rs 1,00,000 to his son and Rs 50,000 to his wife in 1957 and simultaneously admitted his son as a partner, transferring half of his share. After the donor's death in 1962 the remaining partnership shares were re‑allocated. The Revenue argued that the gifts were dutiable under Section 10 of the Estate Duty Act, 1953 because the donor was no longer in possession of the gifted sums. The Tribunal and the Punjab & Haryana High Court held that Section 10 did not apply, reasoning that the donor was not entirely excluded from possession or enjoyment of the money, which continued to be used as capital of the partnership. The Supreme Court affirmed this view, stating that a donor’s continued benefit in a partnership does not attract Section 10 unless that benefit is directly referable to the gift. Consequently, no estate duty was payable on the Rs 1,00,000 and Rs 50,000 gifts.

Issues considered

Whether Section 10 of the Estate Duty Act, 1953 applies to gifts of money made by a donor who remains a partner in the partnership firm where the gifted money is invested as capital.
Whether the donor’s continued possession, enjoyment or benefit from the partnership property excludes the gift from estate duty liability.

Legislation cited

Estate Duty Act, 1953s. 10

Subjects

Estate dutySection 10GiftPartnershipPossessionEnjoymentCapitalDonorDonee

Judgment

-
527

CONTROLLER OF ESTATE DUTY A
v.
KAMLAVATI AND SHRI JAI GOPAL MEHRA
.:,·
. i·.·
'·f. . ...
-••
. . September 5, 1979
'%1 [N. L. UNTWALIA, R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.] B
"4. Estate Duty Act, s. 10-Scope of-Deceased gifted n1oney to son-Son
.J became partner of the finn in which donor continued to be partner-Gift-
Whether dutiable on the death of father.

The deceased was a partner in a partnershtp firm with a half share in it.
On March 27, 1957 he made a gift of Rs. 1,00,000/- to his son and C
Rs. 50,000/- to his wife, the respondent. Almost simultaneously his son was
taken as a partner by giving him half share of the deceased, so that from that
time onwards there were four partners of whom the deceased and his son. had
t share each. On the death of the deceased in 1962 his i share was taken by
his wife and son equally.

The Reveriu'e Authorities included the sum of Rs. 1,50,000/ in the estate- D
of the deceased for the purposes of estate duty. On appeal the Tribunal was
of the view that s. 10 of the Estate Duty Act was not attracted to the gifts.
The High Court answered the reference in favour of the assess'ee.

Dismissing the Revenue's appeal

HELD : The Tribunal as well as th~ High Court \Vas right in holding that E
, no estate duty was payable in respect of the t\VO sums. [537B]

1. When property is gifted' by a donor, possession and enjoyment of which
is allowed in a partnership firm in \Vhich the donor was a partner, the mere
fact that the donor was sharing the enjoymeD.t or benefit in the property is not
sufficient for the applicatian of s. 10 of the Act unless such enjoyment or bene-
fit is clearly referable to the gift. If possession, enjoyment or benefit of the F
.. ,",
donor in the property is consistenti with the facts and cirCumstances of the case,
other than those .of the factum of gift, th'en it cannot be said that the donee
had not retained possession and enjoyment of the property to the entire exclu-
···*···.·.·
... · sion of the donor, or, to the entire exclusion of the donor in any benefit to
him by contract or otherwise. It makes no difference whether th'e donee is a
partner in the firm from before or is taken as such at the time of the gift
or he becomes a cr'editor of the partnership firm by allowing the firm to make G
use of the gifted property for the purposes of' the partnership. [535G-HJ

(a) Although in a given case the donee assumes bona fide Possession and
enjoyment of the property immediately upon the gift to the entire exclusion of
the donor, if the donee thenceforth does not retain it to the entire exclusion of
the donor the gift is dutiable. In Chick's case the gift was without reservation
and qualification and the sons assumed and enjoyed the property to the exclu- H
sion of the father. Yet a few yea.rs later when the donor-failier and the donees
entered into partnership, each partner's property, including the one gifted by
528 SUPREME COURT REPORTS [1980] 1 S.C.R.

the father, was made available as the· capital of the business and property of
the partnership. Each of the partners was in possession and enjoyment of the
property and allowed the others to derive benefit out of the property gifted, so
long as the partnership subsisted. The gift was, therefore, dutiable. In
Munro's case on the other hand the gift was of a property shorn of certain
of the rights which appertain to complete ownership and after the gift the
donor had remained in 'possession and enjoyment Of those rights which Were
not the subject matter of the gift. The gift was, therefore, not dutiable.
[531 E-H)

(b) Interpreting s. 10 of the Estate Duty Act (before the second proviso
was <)dded) this Court held in Da Costa's case that the donor-father who stayed
with his sons in the house till his death after the house was gifted to them, the
donor had not been entirely excluded from possessio'n and enjoyment of the
c giftc<l property and, therefore, s. 10 was attracted. It was further held that the
expression "by contract or otherwise" in second limb of the section did not
control the words. "to the entire exclusion of the donor" in the first limb.
[533A-B]

(c) In Gounder's case the donor who was a partner of a firm gifted to his
two sons house property which was under the occupation of the firm as a tenant
D at will and the firm thereafter paid' rent to the donees. In addition, a. sum of
Rs. 1 lakh transferred by the donor in the firm's books of account and credited
to the accounts of the donor,s five sons, remained invested with the firm on
which th'e firm paid interest to the sons. This Court applying the tule in
Munro's case held that what was gifted by the donor was the whole of the
property minus the rights of the partnership which were shared and enjoyed by
the donor as well. The donor was enjoying that bnndle of rights in the part·
E nership which he was enjoying before the gift and this did not bring the case
within the ambit of s. 10. In the case of the house property the possession
which the donor conld give was the legal possession. The benefit which the
donor had as a member of the partnership was not the benefit referable in any
way to the gift' but is nnconnected therewith. [534E-F)

(d) But in Gounder's case the implicit departure from Chick's case wa9
r when it was said that the benefit the donor had received as a member of the
partnership was not a benefit referable in any way to the gift but is uncon-
nected therewith. This departnre can be attributable to the very subtle distinc-
tion in the facts of the two cas'es : whereas in Chick's case the donor 88 a
partner came to share possession and enjoyment of the property by the partner·
ship firm long afte~ the gift, in Gounders case the benefit which the donor was
enjoying as a partner in the property gifted was existing' at the time of the gift
G itself and continued to exist eyen thereafter. It was not exactly on the· basis •
of Munro's case that it was said so. [534G)

(e) Where the gift of money was in a partnership firm in which the donor
was a partner and the donees were taken as partners it was held that the benefit
in the property viz. the money Eifted which the donees were enjoying and con~
tinued ·to enjoy as partners was not sufficient to bring the case within the ambit
e of s. 10 irrespective of the question whether that benefit was referable to the
gift or not. In other words if the benefit was referable to the gtft then the
property would be covered by s. 10, otherwise not. [S35A-BJ
CONTROLLER OF ESTATE DUTY v. KAMLAVATI (Untwalia, !.) 529

(f) In Controller of Estate Duty v. R. V. Viswanathan & Ors. the transfer A
of tlle gifted sums v.'as made subject to the condition that the sons would use
them as capital, not for any benefit of the deceased donor, but for each of them
becoming entitled to 1/7th share in the business. The fact that the partner-
ship may make use of the sumS of money gifted in which the donor also was
a partner, did not mea.n that he \Vas allowed to enjoy or derive any benefit in the
money ~ifted which could be referable to the gift itself. [535D-E]
B
2. (a) \Vhere the sums gifted by the donor were invested in the firm in
which the donor ~'as a partner, the donees remained creditors of tqe firm. The
rule in Munro's is applicable. [537G]
(b) If a firm borrows money so as to be: itself liable for it to the lender the
capital of the firm is no more increased than is the capital of an ordinary
individual is increased by his getting into debt. The capital of a partnership
is not, therefore, the same as its property even treating it as the partnership
c
property. The partnership property does not belong to a co·partner in the
sense of his being a co.owner. The partnership firm is not a legai entity in
the sense of having a legal personality of its own, different from that of the
partners. But no partner can claim a share in the partnership property
according to his share in the partnership. A creditor of the partnership is
entitled to get back the whole of his property on dissolution of the firm or D
otherwise, while a partner is entitled to get a share in the net assets of the pro-
perty realised on the winding up of the partnership. [536C-E]
Clifford John Chick and Another v. Commissioner af Stan1p Duty 37 I.T.R.
89 (ED), Munro v. Commissioner of Stamp D1~tles [1934] Appeal Cases 61,
George Da Costa v. Controller of Estate Duty, Mysore 63 I.T.R 497=[1967]
1 S.C.R. 1004, Controller of Estate Duty, Madras v. C. R. Ramaclzandra
Gounder 88 I.T.R. 448=[1975] 3 S.C.R. 554, Commissioner of Income Tax and -£
Controller of Estate Duty, Madras. v. N. R. Ramaraihnam and Others, 91
I.T.R. 1=[1974] 1 S.C.R. 372, Controller of Estate Duty, Kera/a v. R. V.
Viswanathan and Others, 105 l.T.R. 653 explained.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2527 and
25 28 of 1972.
From the Judgment and Order dated 10-3-1971 of the Punjab
and Haryana High Court in ·Income Tax ·Reference No. 12/68 and
5/69.
S. T. Desai, S. P. Nayar and Miss A. Sublzashini for the Appellant
in both the appeals.
G
Bhagirath Das, B. P. Maheshwari and Suresh Seth for the Res-
pondent in CA No. 2528/72.
Ex-parte against respondents in C.A. 2527/72.
The Judgment of the Court was delivered by
UNTWALI.1 J. These two appeals by certificate filed by the Control- · H
Jer of Estate Duty are from the Jndgments of the Punjab & Haryana
High Court. Both the appeals have been heard together as a common
!

530 SUPREME COURT REPORTS [1980] 1 S.C.R.

A quei;tion of Jaw is involved in them. It relates to the interpretation
and applicability of Section 10 of the Etate Duty Act, 1953, herein-
after called the Act.
We shall first proceed to state the facts and discuss the law in
.
Civil Appeal 2527 of 1972. Even though the respondent, Smt. Kamla-
B . vat~ was not represented in this appeal, Mr. S. T. Desai, learned
counsel for the appellant, assisted the court very ably oand fairly. In
the other appeal, being Civil Appeal 2528 of 1972, Shri Jai Gopal
Mehra, the respondent, was represented by Mr. Bhagirathi Das.
The main judgment of the Full Bench of High Court is in this Civil
Appeal, and it has followed the ratio o( this decision in the other
c appeal also. We, however, find it convenient to first discuss the
question of law with reference to the facts of Civil Appeal 2527 of
1972.
Maharaj Mal, the deceased, with whose estate we are concerned
in this appeal, was a partner in a partnership firm styled as M/s
Maharaj Mal Hans Raj. Mahraj Mal had a half share in the partner-
D ship. The other two partners namely Jialal and Hansraj had each l/4th
share. On the 27th March, 1957 Maharaj Mal made a gift of

,
Rs. 1,00,000 to his son, Lalit Kumar, and of Rs. 50,000 to his wife,
Kamlavati. In the books of the partnership firm the sums of
Rs. 1,50,000 were debited in the account of Maharaj Mal and credited
to the accounts of Lalit Kumar and Kamlavati, Rs. 1,00,000 in the
E name of Lalit Kumar and Rs. 50,000 in the name of Kamlavati. Al-
mos~ simukaneously with effect from 28th March, 1957 as per the
instrument of partnership dated the 2nd April, 1957 Lalit Kumar was
taken as a partner in the firm of M/s Maharaj Mal Hans Raj by giv-
ing him 1I4th share out of the half share of Maharaj Mal. In other
J words, with effect from the said date there were four partners in the
firm each holding l/4th share.
On the 17th December, 1957, Harts Raj died and in his place bis
widow Smt. Rup Rani was taken as a partner in the firm getting l/4th
share, the share of her husband. Maharaj Mal died on the 9th January,
1962. On his death the firm was again reconstituted with Jialal and
G Rup Rani each retaining 1/4th share, Lalit Kumar getting 3/8th
share, i.e., 1/4th his own share augmented by lralf of 1/4tb share of
"
deceased Maharaj Mal. The remaining half of Maharaj Mal's share
i.e, !/8th was given to K'amlavatL .
The Revenue Authorities relying upon the judgment of the Privy
,H Council in the case of Clifford John Chick and Arwther v. Commis-
sioner of Stamp Duty(') as also the judgment of the Calcutta High
(I) 37 I. T. R. 89 (E.D.)
CONTROLLER OF ESTATE DUTY v. KAMLAVATI (Untwalia, J.) 53 !

Court in the case of Rash Mohan Chat\erjee v. Controller of Estate
Duty, West Bengal('), held that the said sums of Rs. 1,50,000 were
includible for the purposes of the esrate duty. The accountable per-
son took the matter in further appeal before the Appellate Tribunal,
which took the view that the provisions of Section 10 of the Act were
not attracted to the two amounts of gifts made by the deceased to his
wife and son and, therefore, the accountable persons were not liable
to pay any estate dnty on them. The Tribunal on being asked by the
revenue made a reference to the High Court under Section 64 ( 1) of
the Act and referred the following question of law for its opinion : -
"Whether on the facts and in the circumstances of the
case, the provisions of section 10 of Estate Duty Act did C:
apply lo the gifts of Rs. 1,00,000 and of Rs. 50,000 made
by the deceased to his son and wife respectively ?"
On a consideration of the various authorities the Hjgh Court has
affirmed the view of the Tribunal and hence the appeal.
Although Section 10 of the Act came up for consideration of this D
Court in many cases wherein several English decisions were reviewed
and the law was laid down 11s precisely as was possible to be done on
the facts of each case, in the application of the principles, Courts are
still faced with difficulty resulting in some cleavage of opinion. We,
therefore, think .it necessary to review some of those cases over again.
E
In the case of Clifford John Chick (supra) the question for consi-
deration before the. Judicial Committee of the Privy Council related
to the interpretation and applicability of Section 102 of the New South
Wales Stamp Duties Act, which was in pari materia with Section 10
of our Act. In 1934 father of Clifford John Chick transferred by
way of gift to his son the property in question. The gift was made F
witll1out rnservation or qualification or condition. In 1935, the
deceased, his son Clifford John Chick and another son entered into an
·~. 11greement to carry on·in partnership the business of graziers and stock
dealers. The agreement provided, inter alia, that the father should be
the manager of the business and that his .decision should be final itnd
G
• conclusiv? in connection with all matters relating to its conduct. Each
partner's property including the one gifted was made available as the
capital of the business and property of the partnership. The partner-
Jt
ship continued for qnite a good number of years until th" donor died
in 1952. In such a situation the Privy Council held that although the
first part of sub-section 2(d) of Section 102 had been satisfied in B
that the son ood assumed bona fide possession and enjoyment! of the
(I) 52 I.T.R. I (E.D.)
532 SUPREME COURT REPORTS [1980] 1 S.C.R.

,A property immediately upon the gjft to the entire exclusion of the father,
he had not thenceforth retained it to the father's entire exclusion, for
under the partnership agreement, the partners and each of them were
in possession and enjoyment of the property so long as the partnership
.
subsisted. Viscount Simonds delivering the opinion of the Board
distinguished an earlier decision of the Privy Council in Munro v.
,B Commissioner of Stamp Duties(') on the ground that in Munro's cas.e
the gift was of a property shorn of certain of the rights which apper-
tain to complete ownership and after the gift the donor had remained
in possession and enjoyment of those rights and of no other right
which was the subject matter of the gif1!. To start with, therefore,
c the ratio in Chick's case is that if the donor is allowed to be in pos-
session and enjoyment of or derive any benefit out of the property
gifted then Section 10 of the Act will make such property, dutiable.
If, on the other hand, the donor's possession, enjoyment or benefit
is not relatable to the property gifted bnt to something outside it then
no estate duty is chargeable in respect of such property.
I> Section 10 came up for consideration before this Court in the
case of George Da Costa v. Controller of Estate Duty, Mysore('). The
said decision was given in respect of a period when the second pro-
viso to Section 10 was not in the Act as the same was introdnced by
Central Act 10 of 1965 with effect from 1-4-1965. This was a clear
case where the donor had been allowed. to stay in the gifted house till
E
his death even after the house was gifted to his sons. Ramaswami J.
delivering the judgment on behalf of the Court analysed Section 10
with reference to some other provisions of the Act and said at page
501 : -

ll'
"The crux of the section lies in two parts : ( 1) 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 (2)
...
the donee must have retained such possession and enjoy-
ment of the property to the entire exclusion of the donor or
of any benefit to him, by contract or otherwise. As a matter
G of construction we are of opinion that both these conditions
are cumulative. Unless each of these conditions is satisfied,
the property would be liable to estate duty under section 10
of the Act." •
The learned Judge further pointed out that the "second part of the
D section has two limbs : the deceased must be entirely excluded, (i)
(I) [1934] Appeal.Cases 61.
(2) 63 I.T.R. 497·[1967] 1 S.C.R. 1004.

·~.
CONTROLLER OF ESTATE DUTY v. KAMLAVATI (Untwalia, J.) 533

from the property, and (ii) from any benefit by contract or otherwise, A
the word 'otherwise' tO' be construed ejusdem generis." But it would
be no:iced that in the opinion of the Court the case of the Revenue
rightly rested upon the first limb as the deceased had not been entirely
excluded from the possession and enjoyment of the property gifted.
The expression "by contract or otherwise", occurring in the second
limb of the section did not control the words "to·the entire exclusion
B
of the donor" in the first limb.

In the case of Controller of Estate Duty, Madras v. C. R. Rama-
chandra Gounder(') the donor who was a partner in a firm owned
a properly which the firm was occupying as tenant-at-will. He exe- c
cuted a deed of settlement under which he transferred the property
leased out to the firm to his two sons. But the firm continued to be
in occupation of the premises paying rent to the donees after the deed
of settlement. The deceased had further directed the firm to transfer
from his account a sum of Rs. 20,000 to the credit of each of his five
sons in the firm's books with effect from April 1, 1953. In the D
account of each of the sons, the sum of Rs. 20,000 gifted to him was
credited. The amounts remained invested with the firm on which
interest was paid to the sons. The deceased continued to be a partner
of the firm till April 13, 1957, when the firm was dissolved and there-
after he <lied on May 5, 1957. The question was whether the value
of the honse property and the sum of Rs. 1,00,000 could be included
in the principoal value of the estate of the deceased as property deemed
to pass under Section 10 of the Act. This Conrt held that no estate
duty was liable to be charged on either of the properties. The main
principle is discussed with reference to the house property and approv-
ing the decision of the Mysore High Court in the case of Controllel\ F
of Estate Duty v. Aswathanarayana Setty(') the same principle was
applied with reference to the sum of Rs. 1,00,000 also. The ratio in
Munro's case as also in another decision of the Privy Council in Com-
missioner of Stamp Duties of New South Wales v. Perpectual Trustee
Co. Ltd.(') was applied and it was held : -
G
"The donor could; therefore, only transfer possession of
the property which the nature of that property was capable
• of, which in this case is .subject to the tenancy. He could
do nothing else to transfer the possession in. any other
(1) 88 !..T.R 448~[1975] 3 S.C.R. 554. H
(2) 72 J.T.R. 29.
(3) (1943] A.C. 425.
534 SUPREME COURT REPORTS [1980] 1 s.c.R.

A. manner unless he was required to effectuate the gift for· the
purpose of section 10 of the Act by getting the firm to vacate
the premises and handing over possession of the same to the
donees leaving the donees thereafter to lease it out to the
firm. Even then the objection of the learned advocate that
since the donor was a partner in the firm which had taken
B
the property on lease, he derived benefit therefrom and wa~,
therefore, not entirely excluded from the possession and en-
joyment thereof, will nevertheless remain unsatisfied. To
get over such on objection, the donees will have to lease out
the property after getting possession from the firm to some
c other person totally unconnected with the donor. Such
an unreasonable requirement the law does not postulate.
The possession which the donor can give is the legal posses-
sion which the circumstances and the nature of the property
would admit. This he has given. The benefit the donor had
as a member of the partnership was not a benefit referable
D in any way to the gift but is unconnected therewith.

It should be noticed that, though not explicitly but implicitly, some
departure was made from the ratio of the Privy Council case in Chick's.
When the principle of Munro's case was applied it was on the basis
that what was gifted by the donor was the whole of the property
E minus the rights of the partnership which were shared and enjoyed
by the donor also; the donor enjoying the same bundle of rights in
the partnership which he was enjoying before the gift did not bring
the .case within the ambit of section 10. But the implicit departure
from the Chick's case was when it was said that the benefit the donor
I' had had as a member of the partnership was not a benefit referable
in any way to the gift but is unconnected therewith. This departure
can be attributed to the very subtle distinction in the facts of the two
cases and it is necessary to highlight them. In Chick's case the donor
as a partner came to share the possession and enjoyment of the pro-
perty by the partnership firm long after the gift, while in Gounder's
G the benefit which the donor was enjoying as a partner in the property
gifted was existing at the time of the gift itself and continued to exist •
even thereafter. It was not exactly on the basis of Munro's case
that it was said so. Similar was the view expressed by the Mysore
High Court in Settys case in relation to the gift of money in a
partnership firm where the donor was a partner and the sons, the
H douees, were also taken as partners. Even then, it was pointed out
that the benefit in the property namely the money· gifted which the
donor was enjoying and continued to enjoy as a partner was not
CONTROLLER OF ESTATE DUTY v. KAMLAVATI (Untwalia, !.) 535

sufficient to bring the case within the ambit of Section 10 irrespective A
of the question whether that beuefit was referable or not to the gift.
In other words, if the benefit was referable to the gift then the pro-
perty would be covered by Section 10, otherwise not. The same
Bench which decided Gounder's followed it in the case of Commis-
sioner of Income-tax and Controller of Estate Duty, Madras v.
N. R. Ramarathnarn and Others('). In this case the fact in relation B
to the gifts of money by the donor in favour of his three sons and
the daughter were almost identical to those of Gounder' s except
that the three sons and daughter were also partners in the firm. Yet
applying the ratio in Gounder's it was held that the amounts gifted
were not chargeable to estate duty under section 10. C-
We may now refer to the' decision of a Bench of this Court to
which oner of us (Untwalia J.) was a party in the case of Controlle~
of Estate Duty, Kerala v. R. V. Viswanathan and Others('). The
deceased was the sole proprietor of the business. He gifted the sums
of Rs. 2,70,000 to his four major and two minor sons each son
D
getting a sum of Rs. 45,000. The transfers were made by book
entries. It was held that there was no 11bsolute transfer of the sum
of Rs. 2, 70,000. It was a part of the scheme to transfer 6 /7th shares
in the business in favour of the sons. The transfer was made subject
to the condition that the sons would use it as Cllpital not for any bene-
fit of the deceased donor but for each of them becoming entitled to E
1/7th share in the business. In other words, the mere fact that the
partnership may make use of the sums of money gifted in which the
donor also was a partner did not me-an that he was allowed to enjoy
or C:rive any benefit in the money gifted, which could be referable to
the gift itself.
To avoid the conflict in the application of the ratio of the various
F
Supreme Court cases as seems fo have been done by some of the
High Courts, we would like to clarify and elucidate some of the aspects
and facets of the matter a bit further. When a property is gifted by
a donor the possession and enjoyment of wh,ich is allowed to a part-
nership firm in which the donor is a partner, then the mere fact of
• G
the donor sharing the enjoyment or the benefit in the property is not
sufficient for the application of Section 10 of the Act until and unless
such enjoyment or benefit is clearly referable to the gift, i.e., to the
parting with such enjoyment or benefit by the donee or permitting the
donor to share them out of the bundle of rights gifted in the property.
If the possession, enjoyment or benefit of the donor in the property H
(1) 91 I.TR. 1~(1974] I S.C.R. 372.
(2) 105 !.T.R. 653.
536 SUPREME COURT REPORTS [1980] 1 s.c.R.

A is consistent with the other facts and circumstances of the case, other
than those of the factum of gift, then it cannot be said that t'he donee
had not retained the po~session and enjoyment of the property to the
entire exclusion of the donor, or, to the entire exclusion of the donor
in any benefit to him by contract or otherwise. It makes no differ·
ence whether the donee is a partner in the firm from before or is
'B taken as such at the time of the gift or he becomes a creditor of the
partnership firm by allowing it to make nse of the gifted property for
the purposes of the partnership. It should be remembered as pointed
out by Lindley on Partnership Twelfth Edition at page 178 :-"If a
firm borrows money so as to be itself liable for it to the lender, the
·c capital oi the firm is no more increased than is the capital of an
ordfnary individual increased by his getting into debt." Although as
pointed out at page 357 "The capital of a partnership is not therefore
the same as its property," even treating it as the partnership.property,
'the partnership property does not belong to a co-partner in the sense
of his being a co-owner. The partnership firm is not a legal entity in
D the sense of having a legal personality of its own different from that
of the partners. But no partner can claim a share in the partnership
property according to his slrare in the partnership. A creditor of
the partnership is entitled to get back the whole of his property on
dissolutiou of the firm or otherwise, while a partner is entitled to get
a sllare in the net assets of the property realized on the winding up
E of the partnership.
Mr. Desai heavily relied upon the decision of the Gujarat High
Court in the case of Sekarlal Chunilal and Others v. Controller of
Estate Duty, Gujarat.(') A distinction was drawn after distinguish-
ing the decision of this Court in Gounder's case between the gifts of
Rs. 2,00,000 each in fayour of the two dol)ees and the gifts of the
- F sums of Rs. 1,20,000 and the sum of Rs. 1,99,500 gifted to the other
donees on the ground that the former was not an absolute gift but
was subject to the right of the partnership firm while the latter assum-

'
ed the charact'er of first there being an absolute gift and thereafter
parting with a portion of the enjoyment and benefit in the gifted pro- \.
perty in favour of the donor by investing the money in the partilership.
G In the enunciation of the principle of law there is no appreciable;-as
there could not be any, difference between what was said in Gounder's
case by this Court and what has been said by the learned Chief
Justice in the Gujarat case. But in the application of the principle to
the facts of the two aggregate sums of money it was possible fo take
B a different view. In relation to the gifts of Rs. 1,20,000 it was possi-
ble to take a view that it was a part and parcel of the same transac-
(1) 96 I.T.R. 610.
CONTROLLER OF ESTATE DUTY v. KAMLAVATI (Untwalia, !.) 537

tion namely the receipt of the money by the donees by gift and their A
investing the same in the partnership firm. So was it possible in
regard to the sum of Rs. 1,99,500. However, a different view was
taken by the High Court. But in the instant case it is clear that the
ratio of the decisions of this Court referred to above' is squarely appli-
cable and the Tribunal as well as the High Court was right in
B
holding that no estate duty could be charged in respect of the two
sums of money viz. Rs. 1,00,000 and Rs. 50,000.
Similarly in the application of the ratio some difference of opinion
will app~ar to have been expressed by the High Conrts in the case of
Controller of Estate Duty v. Chaman Lal Bery('); Controller of Estate
Duly v. B. V. Kapadia('), Controller of Estate Duty, Madras v. S. R. c
Beevi Rahman(') and Controller of Estate Duty, Madras v. V. S.
Suryanarayanan(4). It is not necessary for us to enter into the fine
distinction drawn by the High Courts in each of the cases referred to
above. But we want to emphasise that the principles of law laid down
by this Court in several decisions which we have reviewed in this
judgment with some further clarification and elucidation should be D
carefully and broadly applied to the facts of each case without doing
too much of dichotomy and hair splitting of facts so as not to easily
apply or not to apply the provision of law contained in Section 10 of
'the Act.
The facts of Civil Appeal 2528 of 1972 are that in April or May, E
1958, Jiashi Ram. the deceased made gifts of Rs. 20,000 each in
favour of his son Jagdish Chand and his four daughters-in-law. The
donees invested the entire sum of Rs. 1,00,000 gifted to them in the
firm in which Jaishi Ram was a partner. Jaishi Ram died on Octo-
ber 23, 1961. It appear~ these donees were not partners in the firm
nor were·they taken as such after th.e gifts were made in their favour. F
Yet, applying the same principle of law the Tribunal as well as the
High Court has held that the accountable person is not liable to pay
estate duty on the sum of Rs. 1,00,000. Here the donees remained
creditors and the sums gifted were already being utilised by the firm.
The same remained being utilised. Squarely Munro's ratio is appli-
• cable. In our opinion, this case is on a stronger footing than that of G
Civil Appeal 2527, as was rightly conceded by Mr. S. T. Desai also.
We, therefore, uphold tbe decision of the High Court in this appeal
aho.
(1) 106 I.T.R. 865.
(2) 108 I.T.R. 1008.
(3) 111 I.T.R. 422.
(4) 114 J.T.R. 599.
538 SUPREME COURT REPORTS [1980) 1 S C.R. '

A For the reasons smted above, both the appeals are dismissed. ~
Civil Appeal 2528 is dismissed with costs but there will be no order
as to costs in Civil Appeal 2527 of 1972 as the hearing of this appeal ,..
proceeded ex-parte.

B P.B.R. Appeals dismissed.

"