H.N Seth, J.:— This is a reference under section 64(1) of the Estate Duty Act at the instance of the accountable person, Sri Abdul Alim. The Central Board of Direct Taxes has referred the following question for the opinion of this court:

“Whether, on the facts and in the circumstances of the case, the sum of Rs. 44,000 gifted by the deceased to his minor sons on April 15, 1954, was correctly included in the estate of the deceased as property deemed to pass on his death under section 10 of the Estate Duty Act, 1953?”

2. The estate duty assessment concerned the estate of late Shri Hajee Abdul Haq who died on 15th of October, 1957. The accountable person filed a statement of account declaring the net principal value of the estate, passing or deemed to pass on the death of the deceased. While determining the total value of the estate left by the deceased, the Assistant Controller, Estate Duty, included a sum of Rs. 44,000 which the deceased had gifted to his minor sons on 15th of April, 1954. He held that the deceased held the money gifted to the minor sons as a trustee with effect from 15th of April, 1954, till the date of his death. Section 22 of the Estate Duty Act, therefore, became applicable and this amount also is deemed to pass on death of the deceased, and is liable to be included in the principal value of the estate left by the deceased.

3. The accountable person then went up in appeal before the Board. The Board did not agree with the conclusion of the Assistant Controller that the present case was covered by the provisions of section 22 of the Act. It, however, held that the amount is liable to be included in the estate of the deceased as property which is deemed to pass on his death under section 10 of the Act. According to it, the deceased had not entirely excluded himself from the money gifted. This money went to augment the assets of the firm in which the deceased was a partner. In the result, it upheld the order of the Assistant Controller, Estate Duty, including the amount of Rs. 44,000 in the estate of the deceased.

4. At the instance of the accountable person, the Board has referred the aforementioned question for the opinion of this court.

5. A perusal of the appellate order of the Board shows that the case of the accountable person was that the deceased had gifted a sum of Rs. 44,000 to his minor sons in cash. The order further shows that this money was subsequently brought in as capital of the firm in which the deceased was a partner. The two minors were also admitted to the benefits of the firm. According to the statement of the case, the deceased made a gift of Rs. 44,000 to his minor sons on 15th of April, 1954, by debiting his capital account with the firm. This indicates that perhaps the gift was not made in cash. Be that as it may, there is no dispute about the fact that the gift was in fact made and that the amount gifted was reinvested in the firm as its capital. The deceased was a partner in this firm and the two donees were admitted to its benefits.

6. section 10 of the Estate Duty Act, 1953, provides that property taken under gift, whenever made, shall be deemed to pass on the donor's death to the extent its bona fide possession and enjoyment is not immediately assumed by the donee and thenceforth retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise. The question that arises for consideration, therefore,: is whether, in the circumstances of this case, it can be said that the two donees retained the sum of Rs. 44,000 to the entire exclusion of the donor.

7. According to section 14 of the Indian Partnership Act, all property and rights and interest in property originally brought into the stock of the firm becomes, subject to a contract between the parties, property of the firm. Whole concept of a partnership is to embark upon a joint venture and for that purpose to bring in as capital, money or other property, including immovable property. Once this is done, whatever is brought in ceases to be the exclusive property of the person who brings it in. The property becomes trading asset of the partnership in which all the partners acquired an interest in proportion to their share in joint venture of the business of partnership. The person who brings in the asset cannot claim to exercise any exclusive right over such property. Capital contribution becomes an asset of the partnership in which every partner gets an interest and the asset ceases to exclusively belong to the person contributing the same. In the circumstances, it cannot be said that the person contributing the asset enjoys the same to the exclusion of the other partners of the firm.

8. In this case we find that the amount gifted to the two minors was brought in as capital asset of the firm in which the donor himself was a partner. This was done in consideration of admitting the minors to the benefits of the firm. The moment the amount gifted was contributed as an asset of the firm, the minor ceased to enjoy exclusive control and possession over the assets and the donor as a partner in that firm acquired interest and possession over that money. It follows that after the gift was made, the donee did not retain control over the property gifted to the exclusion of the donor. section 10 of the Estate Duty Act, 1953, therefore, became applicable and this amount will be deemed to pass on the death of the donor and is liable to be included in the principal value of the estate left by the deceased. The view which we have taken is in consonance with the decision of the Privy Council in the case of Clifford John Chick v. Commissioner of Stamp Duties of New South Wales [1958] A.C 435. section 102(2)(d) of the Stamp Duties Act of New South Wales, which is similar to section 10 of the Estate Duty Act, provided that “for the purposes of the assessment and payment of death duty …… the estate of a deceased person shall be deemed to include ….. any property comprised in any gift made by the deceased at any time, whether before or after the passing of the Act, of which bona fide possession and enjoyment has not been assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased, or of any benefit to him” of any kind whatsoever. In that case one John Chick made a gift of his pastoral property to his son. This was an absolute gift of property without any reservation. Subsequently, John Chick and his sons entered into an agreement to carry on the business of graziers and stock dealers in partnership. This business was to be carried on the respective holdings of the partners which were to be used for the purpose of partnership only. The property gifted by John Chick was so used in connection with the partnership business. After the death of John Chick, a question arose whether the value of the property gifted by him was liable, to be included in the dutiable estate under section 102(2)(d) of the Stamp Duties Act of New South Wales. The Privy Council held that, although the donee assumed bona fide possession and enjoyment of the property immediately on the gift to the entire exclusion of the deceased or of any benefit to him under section 102(2)(d), but since after the partnership agreement, the partners and each of them were in possession and enjoyment of the property so long as the partnership subsisted, the son did not retain the possession and enjoyment of the property to the entire exclusion of the deceased, its value was liable to be included in the dutiable estate.

9. Learned counsel for the accountable person relied upon another case of the Privy Council in H.R Munro v. Commissioner of Stamp Duties. In this case the deceased had four sons and two daughters. He possessed three holdings, total area being 33,501 acres. After one of his sons attained majority, the father and his six children entered into a partnership agreement (verbal) in the year 1909. According to this agreement the partnership was to carry on the business of graziers on the aforesaid land. Subsequently, the father transferred, by way of gift, to each of his four sons all his rights, title and interest in a part of the land comprised in the three holdings. Some more land was transferred for being held in trust for his two daughters. Thereafter the father and his children executed a ???ormal partnership deed incorporating the oral agreement under which the partnership business was already being run. After the death of the father, a question arose whether the value of the land gifted by him could be included in the value of the estate left by him. While considering this question their Lordships of the Privy Council observed as follows:

“It is unnecessary to determine the precise nature of the right of the partnership at the time of the transfers. It was either a tenancy during the term of the partnership or a licence coupled with an interest. In either view what was comprised in the gift was, in the case of each of the gifts to the children and the trustees, the property shorn of the right which belonged to the partnership, and upon this footing it is in their Lord-Ships' opinion plain that the donee in each case assumed bona fide possession and enjoyment of the gift immediately upon the gift and thenceforward retained it to the exclusion of the donor. Further, the benefit which the donor had as a member of the partnership in the right to which the gift was subject was not in their Lordships' opinion a benefit referable in any way to the gift. It was referable to the agreement of 1909 and nothing else, and was not therefore such a benefit as is contemplated by section 102, sub-section (2)(d).”

10. In Munro's case, their Lordships of the Privy Council considered the precise nature of the property gifted. They came to the conclusion that the property gifted was the right of the deceased shorn of the right of partnership to carry on the business on that property. The nature of interest already possessed by the partnership was either a tenancy during the term of partnership or a licence coupled with an interest. In other words, according to the Privy Council, the subject-matter of the gift was either the licensor's or the lessor's interest in the property. By continuing to carry on the partnership business over the land in question, neither the partnership nor any of its partners exercised any possession or dominion over the property gifted, i.e, the interest of a licensor or a lessor, which interest alone had been gifted by the donor. The donee thus retained the interest (property) gifted to him to the entire exclusion of the donor. Accordingly, the provisions of section 102(2)(d) did not apply. In this case the Privy Council recognized that property as contemplated by that section means the bundle of rights which goes to constitute ownership of a tangible property. In case the property comprised in a gift consists only of some of the rights from out of the entire bundle of rights in a tangible property, it has to be seen whether the donor had anything to do with those rights. In case it is found that after making the gift the donor had nothing to do with those rights, it will be considered that the property gifted was retained to the entire exclusion of the donor, irrespective of the fact that the donee exercised some control over the tangible property by virtue of the bundle of rights which did not form part of the gift. In Chick's case [1958] A.C 435, 445, as in the case before us, the position is different. In these cases the donors made a gift of their entire interest in the property. Thereafter, the property was brought in as an asset of the partnership business in which the donor was himself a partner. As soon as the property was brought in as partnership asset, the donor as a partner acquired dominion over the property (interest) gifted, and it could not be said that the same was retained by the donee to the entire exclusion of the donor.

11. While dealing with Chick's case their Lordships considered their earlier decision in Munro's case and brought out the difference between the two types of cases in the following words:

“In the first place it is not disputed that the property was given outright by the deceased to the appellant Clifford John Chick. As was said by Dixon C.J in Commissioner of Stamp Duties v. Owens [1953] 88 C.L.R 67, 88.: ‘If ever there was a gift of an estate in fee simple, carrying the fullest right known to the law of exclusive possession and enjoyment, surely this was such a gift.’ It follows that the decision of this court in Munro v. Commissioner of Stamp Duties, on which the appellants relied, Has no application to the present case. It must often be a matter of fine distinction what is the subject-matter of a gift. If, as in Munro's case, the gift is of a property shorn of certain of the rights which appertain to complete ownership, the donor cannot, merely because he remains in possession and enjoyment of those rights, be said within the meaning of the section not to be excluded from possession and enjoyment of that which he has given. This view of the section, which was reaffirmed in St. Aubyn v. Attorney-General [1952] A.C 15, 21, upon a consideration of a similar section in a British statute, need not be further elaborated. But the question may arise and, having arisen, may lead to a difference of opinion as to what is the subject-matter of the gift. It was, as it appears to their Lordships, for this reason that in Owen's case???, Williams and Taylor JJ. dissented from the majority of the court. In the present case, there is no room for any such difference.”

12. In this case before us, what was gifted was the entire bundle of rights which the donor had in the money. After, the money was reinvested as capital of a firm in which the deceased was partner, the donees did not retain possession over the gifted property to the entire exclusion of the donor.

13. Reliance was also placed on the case of Controller of Estate Duty v. Birendra Kumar Sen [1964] 53 I.T.R E.D 1 Ass???m.. In that case the deceased was the sole proprietor of a pharmacy business. He made an absolute gift to his eldest-son, who had been actively associated with that business and had been devoting his labour and skill in its development, of half of his right, title and interest in the pharmacy business including its stock-in-trade, furniture and goodwill, etc. On the same date, a partnership deed was executed whereby the pharmacy business was carried on in partnership, the deceased and his son dividing the profit and loss of the partnership equally. The deed gave a right to each partner to take part in the conduct of the partnership business. On the death of the deceased, more than two years after the date of the gift, a question arose whether section 10 of the Estate Duty Act, 1953, applied on the ground that the deceased was not entirely excluded from possession and enjoyment of the subject-matter of the gift. The Assam High Court held that in the circumstances of the case the Tribunal was justified in holding that the donor was entirely excluded from possession and enjoyment of the subject-matter of the gift, viz., a half share of the partnership business and accordingly the provisions of section 10 of the Estate Duty Act were not attracted. Learned judges of the Assam High Court considered the decision of the Privy Council in Clifford John Chick's case as also in Munro's case. They also analysed the ratio of the two decisions in the manner as mentioned by us above. At page 11, after noting the findings of the Tribunal, they observed as follows:

“On this finding the principles laid down in Munro's case are attracted and not Chick's case. As we have already pointed out, in Chick's case the Privy Council said that if the gift was an absolute one, the question was whether the subsequent partnership was an independent transaction and a mode of enjoyment of his property by the donee will not affect the applicability of the section. But, if the gift itself is of the property shorn of the rights of partnership, section 10 will not be attracted. If the argument is advanced that the benefit of partnership was enjoyed by the donor, and thus the third limb of the section is attracted, the answer is that the benefit is not referable to the gift itself. It is not necessary to deal with the other cases dealing with the gift of shares of a limited company or the execution of the deed of lease in favour of the donor by the donee or where the enjoyment of the donor is on account of his fiduciary relationship with the donee.”

14. In our opinion, the ratio underlying the decision does not in any way help the argument of the learned counsel for the accountable person.

15. Similarly, the case of Controller of Estate Duty v. C.R Ramachandra Gounder is a case where by means of a registered document the deceased settled property in which the firm in which he was a partner was a tenant absolutely and irrevocably on his two sons. After the settlement, the firm continued to be in the occupation of the premises and the rents therefrom were credited equally to the accounts of the sons in the firm. The Madras High Court held that the subject-matter of the gift being the donor's interest, it could not be said that by reason of the fact that the firm of which the donor was a partner continued to be in possession and enjoyment of the premises as a lessee by paying rents therefor there was non-exclusion of the donor to any extent and hence section 10 was not attracted. It will be seen that the decision in this case turned on the finding with regard to the extent of the property gifted by the deceased. It was held that the right which the donor possessed in the property at the time was the interest of the lessor and that interest alone had been gifted by the deceased to his sons. Continued occupation of the premises by the lessee-firm in which the deceased was a partner did not mean that the donor was not excluded completely so far as the lessor's interest which had been gifted to the sons was concerned. Decision in this case is in line with the decision of the Privy Council in Munro's case and is of no help to the accountable person.

16. Learned counsel for the accountable person then urged that the facts of the present case are similar to a case where the donor who is a partner in a firm makes a gift by directing his account in the firm to be debited and getting corresponding credit entry being made in the accounts of the donee, maintained with that firm. In the case of Behari Lal Matanhelia v. Controller of Estate Duty, E.D.R No. 136 of 1966 decided on 28-7-1971, this court took the view that where a gift has been effected by making transfer entries, the deceased did not retain any control or possession over the gifted property. He urges that on the same principle, even in the present case, it cannot be held that the deceased retained any control or possession over the gifted property and, therefore, the provisions of section 10 of the Estate Duty Act did not become applicable. We are unable to agree with this submission. In the case pointed out by the learned counsel, the property gifted was an actionable claim and after making the gift the donor did not retain any control over that claim. The amount under that claim was not considered as a part of the capital of the firm. In the case before us, the property gifted was brought in as the capital of the firm in which the donor was also a partner. The moment the money was brought into the firm as capital, the deceased, as a partner, had similar possession and control over that money as any partner has over any other asset of the firm.

17. In view of the aforesaid discussion, we answer the question in the affirmative and in favour of the revenue. The accountable person shall pay a sum of Rs. 200 as costs of this reference to the Controller of Estate Duty. Counsel's fee is assessed at the same figure.