TMI Blog1993 (1) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... Joshi died on 23rd Aug., 1984. The accountable person Shri Phanindra V. Joshi filed an account of the estate on 1st March, 1985. The Asstt. CED determined the principal value of the estate at Rs. 13,62,571. In determining the principal value of the estate, inter alia, the Asstt. CED included a sum of Rs. 55,000 under s. 9 of the ED Act r/w s. 22 thereof being disposition of property which shall not have been made 2 years or more before the death of the deceased and hence it shall be deemed to pass on the death. 4. Late Shri Vithal Krishna Joshi created a trust known as `Nayana Trust' by a registered instrument dt. 21st April, 1974 for the sole benefit of his grand-daughter Miss Nayana Prabhakar Dhekephalkar whose date of birth is 25th Oct., 1968 by depositing a sum of Rs. 55,000 with Adarsha Shikshana Mandali, Pune. As per cl. 6 of the deed the trustees shall hold the trust fund in trust for the benefit of Nayana until she completes 21 years of age subject to other provisions of the instrument. 5. Clause 9(vi) provides that in the most unfortunate event of Nayana dying before she completes her 21 years the corpus fund shall be paid to the trustees. 6. Clause (vii) provides th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or failing him to his wife Smt. Snehalata and if she was not alive then to Dr. Phanindra, Nayana's uncle, though in normal course Nayana was to be paid corpus on completing 21 years. In case of emergency or in the event of her marriage before the age of 21 years, the trustees were empowered to spend the amount of corpus for that purpose. 12. In deference to the desire and request of the settlor, the trustees passed a Resolution on 13th Nov., 1983 agreeing to extinguish the trust and to hand-over the entire corpus to the sole beneficiary Miss Nayana on 1st Dec., 1983. The main reason for accelerating the payment to Miss Nayana was the advanced age of the settlor (84 years) and his wife Smt. Snehalata (78 years). The fixed deposit receipts were then transferred in the name of Miss Nayana who became the absolute owner thereof and was entitled to enjoy the interest also. 13. The Resolution passed on 13th Nov., 1983 reads as under : "RESOLUTION : The trustees of the NAYANA TRUST took note of the statement made by the Chairman of the Trust, who is also the author of the Trust, expressing his request that the trustees should agree to transfer all the trust fund at present held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the interest on the Trust Fund would be paid to the author of the Trust upto the end of Nov., 1983. The trustees also took note of the fact that the interest on the two new fixed deposit receipts from 1st Dec., 1983 would be credited to NAYANA's saving bank account No. 15658 which is a joint saving bank account in the names of NAYANA and her mother SAVITA to be operated by "EITHER OR SURVIVOR". A copy signed by all the trustees of this resolution should be sent to the Manager, Bank of India, Tilak Road Branch, Pune-411 002." 14. The Asstt. CED inferred from the aforesaid facts and circumstances of the case that the transfer of the corpus fund by premature dissolution of the trust and handing over of the trust fund to Miss Nayana were all done at the dictates of the author of the trust, who is the Chairman of the trustees. Though the transactions were routed through the trust, nonetheless, it is a case of gift to Miss Nayana by the deceased within two years prior to his death so as to attract the mischief of s. 9 of the ED Act r/w s. 22 of the ED Act so that the corpus amount shall be deemed to pass and included in the principal value of the estate of the deceased. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so anticipated his death 10 month prior to the date of the meeting of the trustees over whom he had complete control. Therefore, he held that the Asstt. CED was justified in including the corpus under s. 9 of the ED Act r/w s. 22 thereof. 17. At the time of hearing, the learned counsel for the accountable person filed a paper compilation and reiterated the written submissions dt. 27th Jan., 1988 made by the accountable person before the Appellate CED which is annexed to the paper compilation filed. These contentions were also reproduced by the Appellate Controller in the impugned order. Hence, they need not be stated again. He also reiterated the grounds taken by the accountable person. 18. The learned Departmental Representative, on the other hand, vehemently supported the reasons and conclusions drawn by the authorities. In particular, he pointed out that the trust could be wound up either on Nayana attaining the age of 21 years on 26th Oct., 1989 or Nayana dying before attaining the age of 21 years or on revocation of the trust by the author of the trust exercising the absolute right reserved in cl. 22 of the trust deed. According to him, when the trustees passed the Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has laid great emphasis on the resolution passed by the trustees on 13th Nov., 1983 and the minutes of meeting dt. 15th Nov., 1983 to come to the conclusion that it is at the dictates of the author of the trust the trust was wound up and the corpus was made over to the sole beneficiary so as to come to the conclusion that the gift was made by the author of the trust only and not by the trustees as contended by the accountable person so as to bring the transaction within the mischief of s. 9 of the ED Act as property deemed to pass on the death of the deceased because the relevant transaction took place within the vulnerable period of 2 years prior to the date of death of the deceased which took place on 23rd Aug., 1984. 21. In our considered opinion the Revenue must succeed in this appeal as the reasons advanced and the conclusion drawn by the authorities are unexceptional and do not call for any interference. The whole transactions viewed together lead to the irresistible conclusion that there is gift inter vivos made by the deceased himself though under the cloak of trust and backed by consent resolution passed by the trustees. It appears to us that the creation of the trust at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... causa as contemplated by s. 8 of the ED Act, as vehemently contended by the learned Departmental Representative, because such gift is always conditional in nature and takes effect on death and does not take effect if the donor survives and in that event the thing gifted shall be restored to him. However, there is immediate gift inter vivos as contemplated by s. 9 of the ED Act atleast w.e.f. 1st Dec., 1983 when the corpus of the trust has been handed over to Nayana for absolute enjoyment and benefit including the interest income arising therefrom, because there was a gift by delivery on 1st Dec., 1983. In order to attract the deeming provisions of s. 9 of the ED Act it should be shown that such immediate gift inter vivos shall not have been bona fide made two years or more before the death of the deceased. In the instant case, the resolution passed by the trustees on 13th Nov., 1983 clearly shows that the author of the trust is in advanced age (84 years old) and his wife Smt. Snehalata is 70 years old and both are declining in their health, vide para 1 of the resolution. Further, the author of the trust "expressed his desire to extinguish the trust by paying the whole of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for education, maintenance and upbringing, advancement or well being of Nayana and after expiry of 5 years from the date of instrument of the trust to withdraw deposits [cl. 9(vii)] and pay the amount to the author of the trust or his wife if they survived, to Mrs. Savita mother of Nayana, if she survived or his wife and to Dr. Phanindra, the son of the author of the trust in the said order of preference (cl. 19). The trustees were also required to pay interest accruing from the trust fund to the author of the trust during his lifetime and his wife Smt. Snehalata during her lifetime, if she survived the author of the trust (cl. 11). Certain ancillary powers were also conferred on the trustees to look after the education, maintenance, upbringing, advancement, benefit and well-being of Nayana. Beyond the powers conferred above, the trust deed does not empower the trustees other than the author of the trust to extinguish the trust. On the other hand, cl. 6 of the deed enjoins that the trustees shall hold the trust fund in trust for the benefit of Nayana until she completes her 21 years of age. The trustees are bound to give effect to the object of the trust and they are not empowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tees should be transferred from the names of the trustees to the name of the beneficiary as from 1st Dec., 1983 and Nayana Trust should be regarded as extinguished from that date. This is the catch in the resolution passed by the trustees on which the case turns. By relying on this specific statement in the resolution passed on 13th Nov., 1983, the contention of the accountable person is that the trust was extinguished only on 1st Dec., 1983 after handing over the corpus to the beneficiary Nayana on 1st Dec., 1983 and, therefore, the transfer was made by all the trustees taken together and not by the author of the trust individually. It is not known as to why the resolution has come to be passed on 13th Nov., 1983, but the interest from the corpus has been allowed to be enjoyed by the author of the trust upto 30th Nov., 1983 and the corpus has been transferred in the name of the beneficiary on 1st Dec., 1983. Both could have been done simultaneously also. It is also seen from para 5 of the resolution dt. 13th Nov., 1983 that prior to the resolution passed by all the trustees on 13th Nov., 1983 the author of the trust by his letter dt. 1st Sept., 1983 addressed to the Manager, Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the extinguishment of trust by the trustees taken as a whole is beyond the powers of the trustees, but is in accordance with the absolute right vested with the author of the trust to revoke the trust at any time before the stipulated date. The moment the resolution was passed by the trustees agreeing to extinguish the trust, the trust has extinguished from that date only. The fact that the date of 1st Dec., 1983 has been stipulated in the resolution for handing over the corpus to Nayana and extinguishing the trust by filfilling the object of the trust on that date is not legally valid, because once the trust is extinguished, the corpus of the trust reverted back to the author of the trust absolutely as contemplated by cl. 22 of the trust deed. Even if the corpus has been handed over to the beneficiary on the same date, but it is a subsequent event taking place after the moment of extinguishment of trust and the reversion of the corpus to the author of the trust. When once the trust is extinguished on 13th Nov., 1983, the trustees ceased to exist and they did not have any powers to direct that the trust would be extinguished on 1st Dec., 1983 by handing over the corpus to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for Rs. 9,000. It is for this purpose the accountable person has chosen not to produce the bills but made the claim of outstanding liability of Rs. 9,000. The Asstt. Controller, on the other hand, was of the view that the repairs which might have included reconditioning of the car also went to add to life to the car and increase the value of the car. In these circumstances, he preferred to adopt valuation of the car at Rs. 20,000. As a consequence of non-production of bills, the claim of outstanding liability of Rs. 9,000 made by the accountable person was rejected by the Asstt. CED. 27. On appeal, the Appellate Controller observed that even according to accountable person's own admission car repair expenses amounted atleast to Rs. 9,000 and the value could not be less than Rs. 16,500. Therefore, he did not interfere with the valuation of Rs. 20,000 fixed by the Asstt. CED. As regards the liabilities, he did not accept the claim of the assessee for want of production of bills to the satisfaction of the Asstt. Controller at the time of assessment proceedings. Therefore, he has confirmed the disallowance of claim of liabilities of Rs. 9,000 also. 28. At the time of hearing, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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