# GEORGE DA COSTA v. CONTROLLER OF ESTATE DUTY IN MYSORE, BANGALORE October 28, I 966

- **Citation:** [1967] 1 S.C.R. 1004
- **Court:** Supreme Court of India
- **Decided:** 1964-11-17
- **Case number:** Civil Appeal No. 1098 of 1965
- **Bench:** J. C. Shah, V. Ramaswami, V. BHARGAVA. J.l
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/george-da-costa-v-controller-of-estate-duty-in-mysore-bangalore-october-28-i-966-3893
- **Pages:** 8

## Headnote

Es/Ille /July Act, 1953 (Act 34 of 1953), s. !(}-Donor continuing to
reside i11 house after making gift of it to his sons-R·!Sidence based only
oli filial affection-Donor whet~er 'entirely excluded from possession a11d
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enjoynzent' within meaning of sectio11-'By contract or otherwise', mean{ng
"
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The apr.ellant's fa1her purchased a house in the joint names of himselt
and his wife.
In 1954 the parents made a gift of the said property to
their two sons including the appellant.
The document recited that tho
donees had accepted the gift and they had been put in possession. Thereafler, the sons paid the municipal tax but the parents continued to reside
in the house and the father continued to look after its affairs as head of
the family. The father died in 1959, more than four years after the gift
and the question arose in &late Duty proceedings whether the said house
was to be included in the estate of the deceased fOI" the purpose of the duty
or not.
The Assistant Controller of &tale Duty and the Central Board
of Revenue decided against the appellant (who was the accountable person) and thereafter a reference was made to the High Court. That Court
also having
given an adverse verdict, the appellant came to this Court.
It was contended on bis behalf that the deceased had no enforceable right
against his sons and therefore s.
10 of the Estate Duty Act was not
attracted 10 the case.
HELD : The crux of s. 10 lies in two parts : (l) lhe donee must
bona fide have assumed possession and enjoyment of the property which
is the subject-matter of tho gift to the exclusion of the donor, immediately upon the gift, and (2) the donee must have retained such possession
and enjoyment of the property to the entire exclusion of the donor or any
benefit to him by contract or otherwise. Both these conditions are cumulative.
Unless each of Athem is satisfied the property would be liable to
estate duty und"r s. Iv of the Act.
(1007 OJ
Attorney-General v. Earl Grey, [18981 2 Q.B.D. 534, relied on.
(ii) The second part of s. 10 has two limbs : the deceased must be
entirely excluded (i) from the property and (ii)
from any benefit by
contract or otherwjse.
The word •otherwise· must be construed ejusd~m
gencris and must be interpreted to mean some kind of legal obligation or
•ome 1ransaction enforceable at law or equity which though not in the
form of a contract may confer a benefit oil the owner. (1008 BJ
But the words by con.tract or otherwise in the second limb of the
section will not control the words 'to the exclusion of the donor' in the
first limb. In other words to atlract the section it is not necessary that the
p05sessioo of the donor of the gift must be referable lo some contractual
or other arrangement enforceable in law or in equity.
Even if the
donor is content to rely upon the mere filial affection of his sons with a
view to enable him to continue to reside in the house it cannot be said
that he w3s 'entirely excluded from possession and enjoyntent' wit!lin the
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GEORGE DA COSTA v. CON.TROLLER (Ramaswami, I.)
1005
meaning·of the.first limb of the section, and therefore the 11roperty will be
deemed to have passed on the death. of the donor and will be subject to
the levy of estate duty. [1008 E-G]
Chick v. Commissioner of Stamp Duties of New South Wales, 1958
A.C. 435 and Commissioner of Stamp Duties of N•w South Wates v.
Owens, 88 C.L.R. 67, relied on.
Attorney-General v. Seccombe, [1911] 2 K.B. 688, referred to.
(iii) The appellant could not take advantage of the amendment made
by the Finance Act, 1965 in s. 10 of the Estate Duty Act, 1963. The said
amendment was effective only from April I, 1965 and was not retrospective.
(1010 Fl
(iv) It was the Board's finding that though the property stood. in the
joint names of the deceased and his wife she was only a name-lender and
the e.ntire property belonged to the deceased. In view of this finding it
was not possible to accept the argument of the appellant th

## Text

GEORGE DA COSTA
v.
CONTROLLER OF ESTATE DUTY IN MYSORE,
BANGALORE
October 28, I 966
(J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA. J.l.J
Es/Ille /July Act, 1953 (Act 34 of 1953), s. !(}-Donor continuing to
reside i11 house after making gift of it to his sons-R·!Sidence based only
oli filial affection-Donor whet~er 'entirely excluded from possession a11d
B
enjoynzent' within meaning of sectio11-'By contract or otherwise', mean{ng
"
~
c
The apr.ellant's fa1her purchased a house in the joint names of himselt
and his wife.
In 1954 the parents made a gift of the said property to
their two sons including the appellant.
The document recited that tho
donees had accepted the gift and they had been put in possession. Thereafler, the sons paid the municipal tax but the parents continued to reside
in the house and the father continued to look after its affairs as head of
the family. The father died in 1959, more than four years after the gift
and the question arose in &late Duty proceedings whether the said house
was to be included in the estate of the deceased fOI" the purpose of the duty
or not.
The Assistant Controller of &tale Duty and the Central Board
of Revenue decided against the appellant (who was the accountable person) and thereafter a reference was made to the High Court. That Court
also having
given an adverse verdict, the appellant came to this Court.
It was contended on bis behalf that the deceased had no enforceable right
against his sons and therefore s.
10 of the Estate Duty Act was not
attracted 10 the case.
HELD : The crux of s. 10 lies in two parts : (l) lhe donee must
bona fide have assumed possession and enjoyment of the property which
is the subject-matter of tho gift to the exclusion of the donor, immediately upon the gift, and (2) the donee must have retained such possession
and enjoyment of the property to the entire exclusion of the donor or any
benefit to him by contract or otherwise. Both these conditions are cumulative.
Unless each of Athem is satisfied the property would be liable to
estate duty und"r s. Iv of the Act.
(1007 OJ
Attorney-General v. Earl Grey, [18981 2 Q.B.D. 534, relied on.
(ii) The second part of s. 10 has two limbs : the deceased must be
entirely excluded (i) from the property and (ii)
from any benefit by
contract or otherwjse.
The word •otherwise· must be construed ejusd~m
gencris and must be interpreted to mean some kind of legal obligation or
•ome 1ransaction enforceable at law or equity which though not in the
form of a contract may confer a benefit oil the owner. (1008 BJ
But the words by con.tract or otherwise in the second limb of the
section will not control the words 'to the exclusion of the donor' in the
first limb. In other words to atlract the section it is not necessary that the
p05sessioo of the donor of the gift must be referable lo some contractual
or other arrangement enforceable in law or in equity.
Even if the
donor is content to rely upon the mere filial affection of his sons with a
view to enable him to continue to reside in the house it cannot be said
that he w3s 'entirely excluded from possession and enjoyntent' wit!lin the
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GEORGE DA COSTA v. CON.TROLLER (Ramaswami, I.)
1005
meaning·of the.first limb of the section, and therefore the 11roperty will be
deemed to have passed on the death. of the donor and will be subject to
the levy of estate duty. [1008 E-G]
Chick v. Commissioner of Stamp Duties of New South Wales, 1958
A.C. 435 and Commissioner of Stamp Duties of N•w South Wates v.
Owens, 88 C.L.R. 67, relied on.
Attorney-General v. Seccombe, [1911] 2 K.B. 688, referred to.
(iii) The appellant could not take advantage of the amendment made
by the Finance Act, 1965 in s. 10 of the Estate Duty Act, 1963. The said
amendment was effective only from April I, 1965 and was not retrospective.
(1010 Fl
(iv) It was the Board's finding that though the property stood. in the
joint names of the deceased and his wife she was only a name-lender and
the e.ntire property belonged to the deceased. In view of this finding it
was not possible to accept the argument of the appellant that only half
share of the property should be taken for the
purpose of estate duty
assistant. (1011 BJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1098 of 1965
Appeal by special leave from the judgment and
order
dated November 17, 1964 of the Mysore High Court in Tax
Referred Case No. I of 1964.
K. Srinivasan and R. Gopalakrishnan, for the appellant.
B. Sen, T. A. Ra111acha11dra11 and R. N. Sachthey,
for the
respondent.
The Judgment of the Court was delivered by
Ramaswaml, J. This appeal is brought, by special leave,
from the judgment of the Mysore High Court dated November 17,
1964 in Tax Referred Case No. 1 of 1964.
The property in question is house No. 34, Mahatma Gandhi
Road, Bangalore.
It had been purchased by the appellant's
father Dr. C. F. Da Costa (hereinafter called the 'deceased')
in the joint names of himself and his wife on February 14, 1940.
They made a gift of the house to their two sons on
October 20,
1954. The document recites that the donees had accepted the
gift and they had been put in possession.
But the parents continued to be in possession of the house though the municipal tax
was paid thereafter in the
names of the sons. The deceased
died on September 30, 1959 more than 4 years after the gift.
The appellant, the accountable person, then filed a return showing
the value of the estate left by his father at Rs. 93,750/• excluding
the value of the house No. 34, Mahatma ·Gandhi Road, Bangalore.
The Assistant Controller of Estate Duty however included the
sum of Rs. 1,50,000/- as the value thereof and determined the
aggregate value of the estate at Rs. 2,57,249/- and assessed ·the
estate duty payable at Rs 15,751.54 P by his order dated November
1006
SUPREME COURT REPORTS
(1967] l S.c.R.
30, 1959. The
appellant
thereupon
preferred
an
appeal
to the Central Board of Revenue (hereinafter referred to as
the 'Board') which dismissed the appeal and affirmed the view
taken by the Assistant Controller of Estate Duty. At the instance of the appellant the Board referred the following question of law for the determination of the High Court.
"Whether on the facts and in the circumstances of the
case, the property at No. 34, Mahatma Gandhi Road,
Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on his death
under section 10 of the Act?"
The High Court answered the question in the affirmative, holding that the appellant was liable to pay estate duty with regard
to the house.
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Under s. 5 of the Estate Duty Act, 1953' (Act No. 34 of 1953)
(hereinafter called the 'Acf), estate duty is payable on the principal value of the estate of every person dying after the commencement of the Act. Seaion 2(16) of the Act defines the expression
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"property passing on death" and is to the following effect :
"2. In this Act, unless the context otherwise requires,-
(16) "property passing on the death" includes property
passing either im:nediately on the death or after any
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interval, either certainly or contingently, and either
originally or by way of substitutive limitation, and 'on
the death' includes 'at a period ascertainable only
by reference to the death";
Section 10 of the Act included in the expression "passing on
death" even gifts made by a deceased in certain circumstances,
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The section reads as follows :
"Gifts whenever made where donor not entire!)
exc)uded.
Property taken under any gift, whenever made,
shall be
deemed
to
pass
on
the
donor's
death
to the extent that bone fide possession and enjoyment
of it was not immediately assumed
by the dance and
thenceforward
retained to the entire exclusion of the
donor or of any benefit to him by contract or other-
\vise :
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
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GEORGE DA COSTA v. CONTROLLER (Ramaswami, !.) 1007
donor or of any benefit to him for at least two years
before the death".
In the present case, the Board has found that though the
deceased had gifted the house in question to his children four years
before the date of his death, he still continued to stay in the
house till his death as the head of the family and also was looking
after the affairs of the house. It was contended on behalf of the
appellant that upon these facts· the High Court erred in holding
that s. 10 of the Act was attracted to the case and there was no
exclusion of the donor from the bona fide possession and enjoy:
mem of the gifted
property. It was said that the appellant's
father did not have any right of possession or enjoyment of the
gifted property either in law or in equity and as the deceased had
no enforceable right the High C-ourt should have held that estate
duty was not leviable under s. 10 of the Act and there was "entire
exclusion of the donor" within the meaning of that section. In
support of his submission Counsel for the appellant relied upon
the decision of Hamilton, J. in Attorney General v. Seccombe.(1)
The question involved in this appeal depends upon tne proper
interpretation of s. 10 of the Act. The intention of the legislature in enacting s. 10 of the Act was to exclude from liability to
estate duty certain categories of gifts. A gift of immovable property under s. 10 will, however, be dutiable unless the donee
assumes immediately exclusive and bona fide possession and enjoyment of the aubject-matter of the gift, and there is no beneficial
interest reserved to the donor by contract or otherwise. The
section must be grammatically construed as follows : "Property
taken under any gift, whenever made, of which property bona fide
possession and enjoyment shall not have been assumed by the donee
immediately upon the gift, and of which property bona fide possession and enjoyment shall not have been thenceforward retained by
the donee to the entire exclusion of the donor from such possession
and enjoyment, or of any benefit to him by contract or otherwise".
The crux of the section lies in two parts : (1) the donee must bona
fide have assumed possession av.d 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 enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract
or otherwise. As a matter 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 s. 10
of the Act. This view is borne out by the decision of the Court of
Appeal in Attorney General v. Earl Grey(2) with regard to an analogous provision under s. 38(2) of the Customs and Inland Revenue
(I} [1911) 2 K.B. 688.
(2) [1898] 2 Q.B.D. 534, 541.
1008
SUPRl!ME
COURT
Rl!PORTS
(1967) I S.C.R.
Act, 1881,asai:iended bys. II oftheCustomsandinland Revenue
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Act, 1889.
The second part of the section has two limbs : the deceased
must be entirely excluded (i) from the property and (ii) from any
benefit by contract or otherwise. It was argued for the appellant
that the expression, "by contract or otherwise" should be construed ejusdem generis and reference was made to the decision of
Hamilton, J. in Attorney General v. Seccombe.( 1) On this aspect of
the case we think that the argument of the appellant is justified.
In the context of the section the word "otherwise" should, in our
opinion, be construed ejusdem generis and it must be interpreted
lo mean some kind of legal obligation or some transaction enforceable at Jaw or in equity which, though not in the form of
a contract, may confer a benefit on the donor.
But it was
contended by Mr. Sen for the
respondent that the case
of the Revenue does not rest upon the second limb of the section
but upon the first limb which requires that the donor must have
been entirely excluded from possession and enjoyment of the property. It was pointed out that there was no such exclusion in the
present case and the finding of the Board is that the deceased continued to stay in the house till his death as the head of the family
and was looking after the affairs of the household. It was contended therefore that the first limb of the section is not satisfied in
this case and the property must be held to pass on the death of
the deceased under that section. In our opinion, the contention
of the respondent must be accepted as correct. As a matter of
construction we hold that the words "by contract or otherwise"
in the second limb of the section will not control the words "to
the entire exclusion of the donor" in the first limb. In other words,
in order to attract the section it is not necessary that the possession
of the donor of the gift must be referable to some contractual or
other arrangement enforcement in law or in equity. Even if the
donor is content to rely upon the mere filial affection of his sons
with a view to enable him to continue to reside in the house, it
cannot be said that he was "entirely excluded from possession and
enjoyment" within the meaning of the first limb of the section,
and therefore the property will be deemed to have passed on the
death of the donor and will be subject to levy of estate duty.
On behalf of the appellant strong reliance was placed upon the
decision of the Court of Appeal in Allorney General v. Seccombe(')
which has already been referred to. In that case, the deceased made
an absolute gift of a house and furniture to a relative, without any
stipulation, but continued to live there as the donec's guest until his
death more than five years later. Upon the death of the donor the
Crown claimed estate duty upon the value of the property upon
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(!) [l9t IJ 2 K.11. 688.
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GEORGE DA COSTA v. CONTROLLER (Ramaswami, J.) 1Q09
the ground that bona fide possession and enjoyment of the property
were not. assumed by the donor and thenceforward retained 'to
the entire exclusion of the donor, or of any benefit to him by con,
tract or otherwise'. It was qbserved by Hamilton, J. that there
was no legally enforceable arrangement permitting the deceased to
reside in the house and the deceased was simply the guest of the
donee and was fully content to rely upon the affection which the
donee bore towards him. It was therefore held in that case that
estate duty was not payable. It. was stated by Hamilton, J. in
the course of his judgment that the exclusion of the deceased from
the property itself (the first limb of the condition) would, like his
exclusion "from any benefit by contract or otherwise" (the second
limb), be achieved unless he had "some enforceable right". The
view taken by Hamilton, J. on this particular point is, however,
not consistent with the opinion of the' Judicial Committee in Chick
v. Commissioner of Stamp Duties of New South Wales(') which is a
decision on a similarly worded clause of a New South Wales Statute.
In that case, the deceased_gave his son a farming property, "Mia
Mia," in 1934; in 1935 the deceased, the son and another son
entered into a partnership agreement as graziers and stock dealers,
on the terms, inter alia, that the deceased should· be the manager
and that his decision should be final in all matters relating to the
conduct 'Of the business; that the capital should consist of the livestock and plant owned by the partners: that the business should
b~ conducted on their respective holdings (including "Mia Mia");
and that the land held by each partner should be his sole property
and he should have the sole and free right to deal with it as he might
think fit. The-partnership continued till the death of the deceased
in 1_952, and the property "Mia Mia" was held dutiable as a gift
not to his entire exclusion. There is a decision to a similar effect
in Commissioner of Stamp Duties of New South Wales v. Owens(2)
which was a case under the New South Wales statute. It appears
that there was a verbal partnership between the deceased and his
son under which they farmed two properties, owned ,by the deceased, the profits being shared as to two-thirds to the deceased and
one-third to the son. Some years later the deceased transferred
one of the properties to the son expressly free of all conditions,
so that the son could .. have farmed it independently; in fact they
farmed it and shared the profits equally for some eleven years up to
the date of death. The Australian Court found that "there was
a gift of an estate in fee simple, carrying the fullest right known to
the law of exclusive possession and enjoyment"; but that the farming
and profit sharing were in_consistent with the deceased's "exclusion",
and that duty was therefore chargeable. In an earlier case-0'
Connor v. Commissioner of Stamp Duties (South Australia)(')
(I) [1958] A.C. 435.
(2) 88 C.L. R. 67.
(3) 47 C.L.R. 601.
1010
SUPREME COURT REPORTS
[1967] I S.C.R.
which was a decision under a South Australian enactment couched
in a similar language, the deceased was given a power of attorney
by the donee and continued to farm the donated lands and was
not in fact required to account for the profits. though he could
evidently have been required to do so.
But it was again held that
duty was chargeable on the donated lands. It appears from all these
cases that the first limb of the section may be infringed if the donor
occupies or enjoys the property or its income, even though he has
no right to do so which he could legally enforce against the donee.
"Where the question is whether the dunor has been entirely excluded from the subject-matter of the gift. that is the single fact to
be determined. If he has not been so excluded, the eye need
look no further to sec whether his non-exclusion has been advantageous or otherwise to the donee" .-(Viscount Simonds in Chick
v. Commissioner of Stamp Duties of Nell' South Wales.(')
It was then pointed out on behalf of the appellant that the
Finance Act of 1965 has amended s. 10 of the Estate Duty Act,
1953 by introducing the following proviso :
"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 rc:sidencc 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."
It was argued that this proviso must be taken as legislative interpretation of the section as it stood previous to the amendment and
since no right of residence was reserved or secured to the donor
under the deed of gift or under any collateral disposition, the imposition of estate duty was not justified,.
We are unable to accept
this argument as correct: The amendment brought about by the
Finance Act, 1965 was effective only from April 1, 1965 and was not
retrospective.
We think that the insertion of the second proviso
to the section must he taken to have been made deliberately by
Parliament to be effective from the Jate of the amendment. We
therefore see no reason for holding that the earlier provision in s.
I 0 should be interpreted with reference to the language of the amendment brought about by the
Finance Act of 1965.
We accordingly
reject the argument of Mr. Srinivasan on this point.
It was lastly contended for the appellant that in any event
the property in question belonged jointly to the mother and father
of the appellant and the whole property could not be deemed to
have passed uron the death of the father under s. 5 of the Act.
The question was examined by the Board which found that the
(I) [t958) A.C. 435.
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GEORGE DA COSTA v. CONTROLLER (Ramaswami,. I.} 10 I J
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property was purchased entirely out of the funds of the deceased
that for the purpose of income tax the deceased had declared the
entire property as his own, and that the income therefrom was.
exclusively assessed in his hands. On these facts the Board held
that though the property stood in the joint names of the deceased
and his wife, she was merely a name-lender and the entire property
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belonged to the deceased and was rightly included in his estate for
the purpose of estate duty. In view of this finding of fact it is not
possible to accept the argument of the appellant that only half
the share of the property shouid be taken for the purpose of estate
duty assessment.
For the reasons expressed, we hold that the decision of the·
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High Court is correct and this appeal must be dismissed with
costs.
G.C.
Appeal dismissed