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In the case of Clifford John Chick (supra) the question for consideration 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 without reservation or qualification or condition. In 1935, the deceased, his son Clifford John Chick and another son entered into an agreement 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 and conclusive 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 partnership continued for quite a good number of years until the 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 that the son had assumed bona fide possession and enjoyment of the property immediately upon the gift 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. Commissioner of Stamp Duties(1) on the ground that in Munro's case 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 and of no other right which was the subject matter of the gift. To start with, therefore, the ratio in Chick's case is that if the donor is allowed to be in possession 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 but to something outside it then no estate duty is chargeable in respect of such property.

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 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 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 property by the partnership firm long after the gift, while in Gounder's 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 Setty's case in relation to the gift of money in a partnership firm where the donor was a partner and the sons, the donees, 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 sufficient to bring the case within the ambit of Section 10 irrespective of the question whether that benefit was referable or not to the gift. In other words, if the benefit was referable to the gift then the property would be covered by Section 10, otherwise not. The same Bench which decided Gounder's followed it in the case of Commissioner of Income- tax and Controller of Estate Duty, Madras v. N. R. Ramarathnam and Others(1). In this case the fact in relation 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.
To avoid the conflict in the application of the ratio of the various Supreme Court cases as seems to 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 which is allowed to a partnership firm in which the donor is a partner, then the mere fact of 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 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 the donee had not retained the possession 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 difference whether the donee is a partner in the firm from before or is taken as such at the time of the gift or he becomes a creditor of the partnership firm by allowing it to make use 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 capital of the firm is no more increased than is the capital of an ordinary 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 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 otherwise, while a partner is entitled to get a share in the net assets of the property realized on the winding up 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.(1) A distinction was drawn after distinguishing the decision of this Court in Gounder's case between the gifts of Rs. 2,00,000 each in favour of the two donees and the gifts of the 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 assumed the character of first there being an absolute gift and thereafter parting with a portion of the enjoyment and benefit in the gifted property in favour of the donor by investing the money in the partnership. 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 to take a different view. In relation to the gifts of Rs. 1,20,000 it was possible to take a view that it was a part and parcel of the same transac-