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Estate Duty Act 34 of 1953—Section 10–Gift of fixed deposit receipts –Donor retaining important benefits–If donee can be said to assume immediately bona fide possession and enjoyment within meaning of s. 10.

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PETITIONER:
SATYANARAYANA MODI

 Vs.

RESPONDENT:
THE CONTROLLER OF ESTATE DUTY, DELHI AND RAJASTHAN,NEW

DATE OF JUDGMENT:
31/07/1969

BENCH:
SHAH, J.C. (CJ)
BENCH:
SHAH, J.C. (CJ)
RAMASWAMI, V.
GROVER, A.N.

CITATION:
 1970 AIR 322 1970 SCR (1) 712
 1969 SCC (2) 380

ACT:
 Estate Duty Act 34 of 1953---Section 10--Gift of fixed
deposit receipts --Donor retaining important benefits--If
donee can be said to assume immediately bona fide
possession and enjoyment within meaning of s. 10.

HEADNOTE:
 P held, on April 1, 1953, three deposit receipts with
the State Bank of Bikaner. At her instance the receipts
were renewed in the joint names of herself and S (son of her
adopted son) payable to either or survivor. On August~16,
1953 P executed a deed of gift in favour of S in respect of
the three receipts. The gift deed contained a confirmation
by S's. father that he had accepted the gift for and on
behalf of and as the natural guardian of S "to the effect
that the said S shall be the absolute owner of the sum
gifted". P addressed a letter to the Bank enclosing a copy
of the declaration of gift and intimated the Bank that S was
the sole owner of the amount of the receipts and till S
attained the age of majority the receipts should remain in
the joint names. From time to time P presented the receipts
for renewal when they matured and obtained fresh receipts in
the joint names of herself and S. On August 25, 1955, the
third receipt was encashed and out of the amount realised a
part was invested in the name of S in National Savings
Certificates and the balance was deposited' in the name of S
alone with a firm. The other two receipts were renewed in
the joint names of P and S. After the death of P on
February 15, 1956, the two receipts were encashed by S.
 The Assistant Controller of Estate Duty held that
possession and enjoyment of the gifted property was not
assumed, by the donee to the entire exclusion of the donor
and on that account under section 10 of the Estate Duty Act,
1953, the amount of the two receipts and interest thereon
formed part of the estate of P and was liable to estate
duty. Regarding the third receipt it was held that even
though the earlier receipt was discharged on August 25.
1955, i.e. within 2 years of the death of P and the amount
was invested in the name of S. by virtue of the provisions
of the Act the amount held in the name of S alone was for
assessment of Estate Duty liable to be included in the
estate of P. The Central Board of Revenue and the High
Court confirmed this order.
 In appeal to this Court it was contended that P did
everything possible 10 divest herself of her
interest in the money held by her in deposit with
the Bank and retained no interest therein and that in
obtaining renewal of the receipts in the joint names of
herself and of S,P was merely a benamidar and in any event
was acting on behalf of S.
 HELD: Dismissing the appeal,
 (i) The question whether the amount of deposit receipts
was liable to estate duty must be determined on the true
effect of s. 10 of the Estate Duty Act, 1953. The section
clearly means that if in respect of any
713
property which is gifted, bona fide possession and enjoyment
is not immediately assumed by the donee and thenceforward
retained by him to the entire exclusion of the donor of any
benefit to him therein the property gifted shall not be
excluded from the estate subject to estate duty. [718 B]
 In the present case P retained important benefits in
herself in the fixed deposit receipts. There was also no
evidence that in obtaining the receipts in the joint names P
acted as a guardian of S nor that she was a benamidar of S.
[718 F]
 (ii) Though the third receipt was encashed during the
life time of P, and the amount was invested in the name of
S .alone, the encashment and reinvestment were within two
years of the death of P and the amounts so reinvested were
liable to be included in the estate of P. [718 G]JUDGMENT:
 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 438 of
1967.
 'Appeal from the judgment and order dated April 11, 1966
of the Rajasthan High Court in D.B. Civil Reference (Estate
Duty Act) No. 16 of 1963.
 M.C. Chagla, B.D. Sharma and M.. D. Bhargava, for the
appellant.
 Jagdish Swarup, Solicitor-General, T.A. Ramachandran,
R.N. Sachthey and B.D. Sharma, for the respondent.
 The Judgment of the Court was delivered by
 Shah, Ag. C.J. Purnabai widow of Sagarmal Mody held on
April 1, 1953 three deposit receipts of the aggregate face
value of Rs. 6,26,724-14-0 with the State Bank of Bikaner.
By her letter dated July 22, 1952 Purnabai informed the Bank
that she intended to make a gift of the amounts of two out
of the three receipts to Suryakant son of her adopted son
Satyanarayana, and requested that the receipts be renewed
for three months in the joint names of
 "Purnabai Sagarmal Mody and/or Surya Kant S.
Mody--payable to either or survivor."
and that the renewed fixed deposit receipts be sent to
Satyanarayana at Bombay. Pursuant to this letter two fresh
receipts were issued on August 3, 1953 for Rs. 5,00,000 and
Rs. 45,793/4/-. It 'appears that a receipt for Rs.
80,931 / 10/- was previously obtained in the joint names of
Purnabai and Suryakant on July 4, 1953.
714
 On August 16, 1953 Puranabai executed a deed of gift in
favour of Suryakant in respect of the three receipts
containing the following recitals:
 "Out of natural love and affection I have
 towards the said Suryakant son of
 Satyanarayana I hand over to the said
 Satyanarayana as the father and natural
 guardian of the said Suryakant Fixed Deposit
 Receipts total for Rs. 6,26,724/14/- . .....
 F.D.R.N. 222/ 8293 dated 3-8-53 for Rs.
 45,793/4/-, F.D.R.N. 221/ 8292 dated 3-8-53
 for Rs. 5,00,000/- of the Bank of Bikaner
 Ltd., Jaipur and F.D.R. No. 11446 dated 4-7-
 53 for Rs. 80,931/10/- of Bank of Bikaner
 Ltd., Jhunjhunu in the name of Purnabai
 Sagarmal and Suryakant Satyanarayana Mody
 payable to either or survivor as and by way of
 gift to the said Suryakant on the 15th day of
 August 1953 and that the said Satyanarayana
 for and on behalf of and as the. natural
 guardian of the said Suryakant accepted the
 said gift of Rs. 6,26,724/- . ..... gifted
 by me as aforesaid."
 The gift deed contained a confirmation by Satyanarayana
that he had accepted the gift for and on behalf of and as
natural guardian of Suryakant "to the intent and effect that
the said Suryakant shall be the absolute owner of the sum
gifted."
On August 17, 1953 Purnabai addressed a letter to the
Manager of the Bank enclosing a copy of the declaration of
gift and intimated that her grand-son Suryakant was the sole
owner of the amount of the two fixed deposit receipts and
till Suryakant S. Mody attained the age of majority the
receipts should remain in the joint names as they then
stood.
 From time to time Purnabai presented the receipts for
renewal when they matured and obtained fresh receipts in the
joint names of herself ,and Suryakant. On August, 25 1955
the receipt for Rs. S0,931/10/- was encashed and out' of
the amount of Rs. 86,732/- realized, Rs. 5,000/- were
invested in the name of Suryakant in National Savings
Certificates. The balance was also deposited alone with a
firm in Bombay also. in the name of Suryakant alone. The
other two receipts were renewed in the joint names of
Purnabai and Suryakant.
After the death of Purnabai on February 15, 1956, the two
receipts were encashed by Suryakant. The Assistant
Controller of Estates duty in procedings for assessment of
estate duty held inter alia that possession and enjoyment of
the gifted property was not assumed by the donee to the
entire exclusion of the
715
donor, and on that account the amount of the two receipts
and interest thereon formed part of the estate of Purnabai
and was, liable to estate duty. Regarding the third
receipt for Rs. 80,931/10/- the Assistant Controller
observed that even though the earlier receipt was discharged
on August 25, 1955 i.e. within two years of the death of
Purnabai and the amount was invested in the name of
Suryakant, by virtue of the provisions of the Estate Duty
Act the amount held in the name of Suryakant alone, was for
assessment of estate duty liable. to be included in the
estate. of Purnabai.
 In appeal the Central Board of Revenue confirmed the
order. The Board held that at all material times during the
currency of the fixed deposit Purnabai had the right to
receive the money from the Bank by giving discharge for the
same and that whenever the Fixed Deposit Receipts matured
during the lifetime of Purnabai, the receipts were, in fact,
discharged by her alone and in the circumstances it could
not be said that the property was held' by the donee to
the entire exclusion of the donor.
 The Board of Revenue referred the following question
the High Court of Rajasthan for opinion:
 "Whether on the 'facts and in the
 circumstances of the case the sum of Rs.
 6,85,193/- was correctly included in the
 estate of the deceased as property deemed to
 pass on her death under section 10 of the
 Estate Duty Act, 1953 ?"
The High Court of Rajasthan answered the question in the
affirmative. With certificate granted by the High Court
this appeal has been preferred.
 The deposit receipts were renewed from time to time
after August 16, 1953 in the joint names of Purnabai and
Suryakant till August 25, 1955 under their terms the
receipts could be encashed by either or the survivor. Even
after Purnabai made a gift of the amount represented by the
three receipts, she continued to obtain the receipts in the
joint names, presumably with the object of not parting with
control over those receipts.
 Counsel for the appellant however contended that the
fixed deposit receipts were held by Purnabai in her name as
benamidar for Suryakant. Counsel placed strong reliance
upon the letters dated July 22, 1953, August 17, 1953 and
the terms of the deed of gift dated August 16, 1953. By the
letter dated July 22, 1953 the Manager of the Bank was
informed that in respect of two out of the three receipts
Purnabai intended to make a gift and the .-
716
Manager was requested that the receipts be made in the
joint .names of Purnabai and Suryakant. It was expressly
recited in the letter:
 "I intend to gift the entire amount of
 the receipts to my grandson Mr. Suryakant S.
 Mody hence you are requested to prepare the
 receipts in joint names as under:
 "Purnabai Sagarmall Mody and/or
 Suryakant S. Mody payable to either or
 survivor."
The deed of gift also recites that Purnabai had made a gift
of the amount of Rs. 6,26,724/14/- represented by the
previous receipts in favour of Suryakant, and that the gift
was accepted by Satyanarayana on behalf of Suryakant. The
letter dated August 17, 1953 recites that a copy of the
deed of declaration of gift. was sent to the Bank for record
and information and proceeds to state:
 "Further I would like to state that
 now Suryakant S. Mody is the sole owner of the
 above Fixed Deposit Receipts in question till
 Suryakant S. Mody attains majority the
 receipts should remain in joint names as it
 stands now."
 is clear that Purnabai desired to make a gift of the
amount represented by the previous deposit receipts and did
in fact execute a deed of gift. The Bank had notice of
the gift deed. Counsel for the appellant contends that
Purnabai did everything possible to divest herself of her
interest in the money held by her, in deposit with the Bank,
and retained no interest therein and that in obtaining
renewal of the receipts in the joint names of herself and of
Suryakant, she was merely a benamidar 'and in any event was
acting on behalf of Suryakant. Counsel further contends
that the Bank having notice of the gift could not have
parted with the money except only for the benefit of the
minor and by obtaining renewal of the receipt in favour of
the minor Suryakant and Purnabai, the latter retained no
possession or enjoyment of the money represented by the
receipts. Counsel invited our attention to a decision of
the Madras High Court in Imperial Bank of India, Madras v.
S. Krishnamurthi and another(1) in which Beasely, C.J.
speaking for the Court observed that when a Bank having
notice that the administrators of the estate of the
depositor intended to commit a breach of trust by seeking to
invest monies contrary to express directions of the will
paid out the money, the Bank was liable to make good to the
beneficiary
(1) A.I.R. 1933 Madras, 628.
717
 the money deposited by the testator. In that case one
Naidu had deposited a sum of money with the Imperial Bank of
India in fixed deposits. Naidu died having bequeathed by
his will the amount deposited to Iris son Krishnamurthi who
was then a minor. Naidu had appointed by his will two
persons to be guardians of Krishnamurthi with authority to
receive the amount in fixed deposit with the Imperial Bank
and to apply the same for the maintenance and education of
Krishnamurthi. The guardians obtained from the High Court
of Madras grant of letters of administration with copy of
the will annexed. After the death of one of the guardians
the surviving guardian withdrew the money from the Bank on
the pretext that he wanted to invest it on more advantageous
terms in house property or some other form of in vestment
and misappropriated it. On attaining the age of majority
Krishnamurthi sued the Bank. It was held by the High Court
that the Bank knowing of the trust created by the will had
parted with and delivered the amount deposited to the
administrator who intended to commit a breach of the trust.
The learned Chief Justice quoted a passage from Hart's Law
of Banking (Edn. 3) at p. 159 that "A banker who receives
into his possession moneys of which his customer to his
knowledge became the owner in a fiduciary character,
contracts the duty and to part with them at the mandate of
his customer for purposes which are inconsistent with the
customer's fiduciary character and duty," and upheld the
claim of Krishnamurthi.
 It is unnecessary to consider whether. in the present
case the investment was made by renewal of fixed deposit
receipts after August 16, 1953 for a purpose which the Bank
knew was inconsistent with Purnabai's fiduciary character
and duty. We are not concerned in this case to decide
whether the Bank could have refused to pay the amount of the
renewed deposit receipts if demanded by Purnabai. Whether
the amount of deposit receipts was liable to estate duty
must be determined on the true effect of s. 10 of the Estate
Duty Act 34 of 1953. Section 10 of that Act provides:
 "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
718
 donor or of any benefit to him for at least
 two years before the death.
 Provided ........ "
The phraseology of the section is somewhat involved. The
purport of the section is however clear. The section
clearly means that if in respect of any property which is
gifted, bona fide possession and enjoyment is not
immediately assumed by the donee and thenceforward retained
by him to the entire exclusion of the donor or of any
benefit to him therein the property gifted shall not be
excluded from the estate subject to estate duty.
 The question which must be determined therefore is
whether in the present case the donee Suryakant did under
the deed of gift immediately assume bona fide possession
and enjoyment of the fixed deposit receipts gifted to him,
and thenceforward retained the same to the entire exclusion
of Purnabai or of any benefit arising to her by contract or
otherwise. The conduct of Purnabai clearly indicates that
she had no intention to part with control over the property;
the deposit receipts were obtained in joint names, and
Purnabai had authority to withdraw the amount from the Bank,
without consulting the guardian of Suryakant. The deposit
receipts were renewed on several occasions even after the
execution of the deed of gift in the joint. names of
Purnabai and Suryakant. Purnabai alone presented the fixed
deposit recepits for renewal. She could under the terms of
the receipts receive the moneys to the entire exclusion of
Suryakant. We are unable to hold, in the circumstances,
that bona fide possession and enjoyment of the property
gifted was immediately assumed by Suryakant and
thenceforward retained by him to the entire exclusion of
Purnabai. The right retained by Purnabai to have the
receipts made out in her name jointly with Suryakant and the
power to recover the amount from the Bank without the
concurrence of Suryakant clearly indicate that she was not
excluded, but she had retained important benefits in herself
in the fixed deposit receipts.
 It is true that the third receipt was encashed during
the life time of Purnabai, and the amount was invested in
the name of Suryakant alone. But the encashment and
reinvestment were within two years of the death of Purnabai
and the amounts so reinvested were liable to be included in
the estate of Purnabai.
 The argument that fixed deposit receipts had remained
exclusively in the possession of Satyanarayana as guardian
of Suryakant and they were obtained by him from Purnabai for
the purpose of renewal is not supported by any evidence.
There is
719
also no evidence that in obtaining the receipts in the joint
names Purnabai acted as a guardian of Suryakant nor that she
was a benamidar of Suryakant. We are of the view that the
High Court was right in answering the question against the
appellant.
The appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.
Sup C I/69 --2
720

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