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TMI Blog1958 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... d until the extinction of the descendants of the wakif. There is the usual provision relating to maintenance and support of the settlor during her lifetime and for the maintenance and support of her family consisting of her daughter and the children of that daughter from generation to generation. Mutavalis were appointed, the settlor herself being one, and the property was conveyed and transferred to them. The property settled by the wakifnama consisted of 12 immoveable properties of large value and a sum of ₹ 1 lakh. It is the provisions for maintenance contained in the deed that have given rise to the dispute between the Revenue and those who represent the estate of Aishabai. The settlor reserved for her maintenance during her lifetime 62?% of the net income, 3 1/8% of the income was given to her daughter Khatizabai for her maintenance and the remaining 34 3/8% was given of the maintenance of Khatizabai's children, the share of each male child being double that of each female child. Clauses 5 and 6 of the deed are material and relate to reservation and dispositions after the demise of the settlor: "5. From and after the demise of the wakif, the mutavalis shall ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd we shall presently examine them. The Board rejected the appeal and the applicant has come before us on this reference. The question we are asked to determine is: "Whether in the facts and circumstances of the case, the entire wakf property (including the sum of ₹ 1 lakh) or only 62? per cent. of the wakf property (including 62? per cent. of ₹ 1 lakh) is chargeable to estate duty?" On this question, numerous points arise for discussion. To state it without refinement, the principal and the crucial question is what property passed on the death of the settlor? The contention in the forefront of the argument of Mr. Palkhivala, learned counsel for the applicant, has been that there was actual passing of the interest of Aishabai, the settlor, on her death. That interest being 62? per cent. of the income, the property that can be brought to death duty can only be 62? per cent. of the corpus and not the whole of it as held by the Board. Reliance has been placed on section 5 of the Act and the main argument is that section 12 on which the Revenue has taken its stand--and which is one of the provisions relating to "property which is deemed to pass"--has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of property to be ascertained in accordance with certain other provisions of the Act. It embraces property settled as well as not settled and it touches property on the death of a person. The expression "property" is defined in section 2(15) as including "any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes and property converted from one species into another by any method." The expression "settled property" is defined in section 2(19) to mean: "Property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession, whether the settlement took effect before or after the commencement of this Act." The expression "property passing on the death" has been defined in section 2(16) which is as under: "Property passing on the death' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and 'on the death' includes 'at a period ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subject to the provisions of this section, property in which the deceased or any other person had an interest ceasing on the death of the deceased shall be deemed to pass on the deceased's death to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law. 8. Gifts mortis causa.--Property taken as a gift made in contemplation of death shall be deemed to pass on the donor's death. 9. Gifts within a certain period before death.--(1) Property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide made two years or more before the death of the deceased shall be deemed to pass on the death:... (2) the provisions of sub-section (1) shall not apply to gifts made in consideration of marriage or which are proved to the satisfaction of the Controller to have been part of the normal expenditure of the deceas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some part of that property passes or accrues by survivorship on his death to the other person, the whole of that property shall be deemed to pass on the death." Section 11 deals with limited interest disposed of within a certain period before death. Section 14 deals with policies kept up for a donee. Section 15 relates to annuity or other interest purchased or provided by the deceased. Section 16 relates to annuity or other interest purchased or provided out of property derived from the deceased. Section 17 brings within the field of taxation property transferred to a controlled company. Although, the sections 6 to 16 were headed "property which is deemed to pass" and proceeded to embrace all types of property and interest in property, there was no express provisions in the Act when enacted in 1953, that duty was leviable on property deemed to pass. A plain reading of section 5 would have meant that the section only touched property which would ordinarily pass on the death of a person under the general law. In a taxing statute this was a serious lacuna and that was amended by the Finance Act of 1954, by adding sub-section (3) to section 3: "For the avoidanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estate Duty Act. On analogous provisions of the Indian law unaffected by the specialities of the English law and on fundamental concepts and on broad general principles, decisions of courts in England can, therefore, be useful and of considerable guidance if utilised with due care and caution. While we do not accede to the argument of Mr. Joshi that the scheme of the two Acts is different, we agree that the provisions of our Act must be understood in their background and setting and in interpreting them regard must be had to the conditions, customs and religious beliefs of those affected by the provisions. In a branch of the law, rules of which are inspired by the broad general principles of the English law on the subject and are so adopted as to be in pari materia, reference to the decisions under that law can be of great importance. Danger, however, lies in phrases used aptly enough, no doubt, in a particular context and opinions weighty and useful in their own sphere and context being treated as expressing doctrines of universal application or adopting those principles as riders to the actual statutory language. The rule of construction relating to provisions of enactments in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is in the light of these observations that we shall in the first instance proceed to read the vital clauses of the statute relevant to our enquiry and see if we can ascertain the intention of the law-maker in enacting sections 5 and 12 uninfluenced by any extrinsic evidence. Now, we have already set out section 3(3) and sections 5 and 12 of the act and it is evident that for the purpose of the present reference, they must be read together. It will be convenient to write out the material part of section 5 with the rule of interpretation enacted in sub- section (3) of section 3 and then consider it with section 12. In that way the material part of section 5 would read as under: "In the case of every person dying after the commencement of this Act, there shall,...be levied and paid upon the principal value ascertained...of all property, settled or not settled,...which passes on the death of such person-including property deemed to pass on the death of that person--a duty called 'estate duty' at the rates fixed in accordance with section 35." Section 5 to 17 are in Part II of the Act and that Part is headed "imposition of estate duty." The heading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served any interest, for life, shall none the less be deemed to pass. The language of the section and the plain, fair and literal meaning of it does not present any doubt or difficulty. We have, therefore, to see if there is any overriding principle which requires that we should depart from the cardinal rule of interpretation according to which the grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or some inconsistency with the rest of the enactment. The principal contention pressed before us by Mr. Palkhivala, learned counsel for the applicant, is that distinction has to be drawn between "actual passing" of property or any interest in such property and "deemed passing of property". In the former case, it is said, section 5 must be applied to the exclusion of any of the provisions relating to all property which is deemed to pass under any of the sections 6 to 16; and this must be so even if the case falls wholly within the ambit of any such provision contained in any of those sections. If the property or any part of the property passes on death, it is not permissible to refer to any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the mortgage to the company or of the annuity which ceased with the father's life. It was held that the settlement which passed to the son on the father's death was not the entire estate but only the equity of redemption and the estate duty was, therefore, payable only on the equity of redemption. The ratio decidendi of that case evidently is that in case of a deed of settlement of the nature which was under consideration, if there were prior encumbrances and an annuity reserved what would pass on the death of the annuitant cannot be the whole estate but only the equity of redemption. In the course of this speech in that case Lord Macnaghten, however, made certain observations which dicta have been considered thereafter in a number of cases. Since so much reliance has been placed on the dicta of Lord Macnaghten in that case, we shall first turn to the observations made by that eminent Law Lord at pages 212-213 of the report: "But section 2 does not apply to an interest in property which passes on the death of the deceased. That is already dealt with in the earlier section. For property in the lifetime of the deceased subject to a charge or interest which ceased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. This decision was also cited for the purpose of showing that a percentage of income of a property, the subject-matter of the settlement, can be reserved by a settlor and it is not necessary that he should reserve to himself any specific parcel of the property, the subject-matter of the trust deed, to invite the operation of section 1. In re Northcliffe [1929] 1 Ch. 327 was another decision cited before us. That case also was cited for the purpose of showing that a specific percentage of income as residuary may be reserved by a settlor in the subject-matter of the trust and it was not necessary that any specific parcel of the property should be reserved. Another case to which out attention was drawn by Mr. Palkhivala was In re Duke of Norfolk [1950] 1 Ch. 467. The facts of this case were somewhat peculiar. One continuing annuity was given to two or more persons in succession and charged on that property on the death of the annuitant. The dicta or Lord Macnaghten were considered in that case by the Court of Appeal. It was held that an annuity charged on property is not, nor is it equivalent to, an interest in proportion of the capital of the property charged sufficient to produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who leaves property behind him, that had that section stood alone it is reasonably clear that much property would have escaped which the framers of the Act wished to tax. Accordingly we have section 2. That section was authoritatively discussed in your Lordships' House in the case of Earl Cowley*. Whether Lord Macnaghten was strictly correct or not in saying that the two sections were mutually exclusive seems to me to matter little. At any rate--and that is all that is material--section 2 sweeps into the net various things which section 1 would have failed to secure, or, as Lord Watson put it in the case of Attorney- General v. Beech [1899] A.C. 53, 59, 'it extends it to all cases where a survivor of the deceased takes a succession, or I should say rather, derives a benefit by reason of the death of the deceased dependent upon and emerging upon the death of the deceased.' How does section 2 do this? It does not do it by being conceived in the words of a taxing section imposing the duty on certain specified kinds of property. It does it by saying that property passing on the death of the deceased--which is already taxed by virtue of section 1--shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erving: "I think that we may safely resign these passages to the list of the many minor mysteries of the law." The passage referred to by Lord Radcliffe are the passages which we have quoted. But the suggestion is that the observations made in those passages were not in harmony with the dicta of Lord Macnaghten and those dicta may desirably be forgotten. The question cropped up once again in a very recent case before the Court of Appeal in Public Trustee v. Inland Revenue Commissioners [1958] 2 All E.R. 720; 37 I.T.R. (E.D.) 43. That also we may point out was a case not under clause (1)(a) of section 2 or clause (1)(c) or clause (1)(d) of section 2 but clause (1)(b) of section 2. Lord Evershed M.R. it seems was considerably impressed with the arguments which went counter to the dicta of Lord Macnaghten. He observes at page 722 of the report: "It cannot, I think, be disputed that the argument of counsel for the trustee has formidable and attractive points in its support." The argument put for ward on behalf of the trustees was characterised by the Master of the Rolls as a forceful contention. He also referred to the opinion expressed by Lord Radcliffe in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the same basis as if it actually passed." It is to be noted that the practical importance of the distinction drawn between section 1 and section 2(1)(b) is regarded in England as of little practical importance. It is now treated as of theoretical rather than practical importance. Again at page 104, Dymond observes in examining the distinction between section 1 and section 2(1)(b): "It is not entirely clear how far this principle goes, but it does not apply to a life interest in an aliquot share of income..." There is a case to which we have so far not made any reference and that is the case of Attorney-General v. Grey [1898] 1. Q.B. 318. Mr. Palkhivala himself drew our attention to this case and observed that presumably the Department would strongly rely on the same. In that case section 38(2)(c) of the Customs and Inland Revenue Act, 1881, as amended by section 11 of the Customs and Inland Revenue Act, 1889 (and which corresponds to section 12 of out Act) came up for consideration and at page 325 of the report Channel, J., said that any reservation of interest however small was sufficient to bring the property within the ambit of section 38(2)(c) provided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disdained of Cowley's case [1899] A.C. 198 is that in case of a settlement made by a tenant for life and a tenant in tail of property on which prior incumbrances exist what passes on the death of the tenant for life is not the entire estate but only the equity of redemption and estate duty is payable only on the equity of redemption under section 1 of the Finance Act, 1894. The celebrated dichotomy between section 1 and section 2(1), it is true, is "enshrined" in the speech of Lord Macnaghten. But the dicta should be confined to a case under section 1 and section 2(1)(b) of the English enactment. They were certainly not made in considering or in the context of the other sub-clauses in section 2. But that is how Mr. Palkhivala wants us to read the English decisions. It has been observed that there are formidable considerations which support the other view that section 1 and section 2(1)(b) are not mutually exclusive. In the case reported in Public Trustee v. Inland Revenue Commissioners [1958] 2 All E.R. 720; 37 I.T.R. (E.D.) 43. Lord Evershed speaks of the wellrecognised principle of finality for feeling compelled to reach the conclusion that the applicability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly mention one or two answers since we are only concerned with the interpretation of section 12 of our Act read with section 5 of it. Firstly, no such analogy is really permissible in interpretation of statutes. Secondly, the argument assumes many points. Section 12 speaks of property to be deemed to pass and it is of vital importance to note what is it that is to be deemed to pass. The expression "deemed" is used a great deal in many modern statutes and for many purposes. It is at times used to give a special glossary or paraphrase to an expression or artificial construction to a word or a phrase. It is at times used to introduce artificial conceptions which are intended to go beyond settled legal principles. It is at times used to remove uncertainly or leave no scope for doubts and debates which may involve refined and ingenuous points. At times it is used to give extended or restricted operation to a rule which cannot be given to it if it be read as enacted. This last is of considerable importance when the Legislature lays down a rule the extent and operation of which according to ordinary canons of construction would be confined we shall take an illustration close to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest howsoever slight it may be. We do not think that the contention is sound. Nor do we think that the decisions so strongly relied on point to any such broad general principle applicable to all the provisions of our Act enacted in section 6 to 16 and in particular section 12. The intention of the law-maker has been expressed in language of sufficient clarity and precision and effect must be given to it. There is neither principle nor authority for departing from the fundamental rule of interpretation and we see no reason for doing so and launching into a sea of difficulties not easy to fathom. The sure conclusion seems to us to be that section 12 wholly governs the case before us. Another contention urged before us by learned counsel for the applicant was that section 10 and not section 12 should apply to the settlement before us. The argument here was rather feeble and somewhat involved. It was said that section 9 in dealing with gifts includes any category of gifts inter vivos actual gifts as well as those made through the instrumentality of trusts and settlements. Now, section 9 cannot possibly be relied upon as foundation for any argument of the nature before us. That se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be delivered to the trustees. Life interest and vested remainders are unknown to Muslim law but life interest can be construed as an interest in the usufruct. Successive life interests, however, may be created both under the Sunni and the Shia law in favour of even unborn persons by means of a wakf. Wakfs are a speciality of Muslim law. There is no element of gift in a wakf. The primary concept is that it is a permanent dedication by a person professing the Mussalman faith of any property for any purpose recognised by the Mussalman law as religion, pious or charitable. The concept of retention or detention is not wholly absent and is even permissible. A wakf extinguishes the right of the wakif and transfers ownership to God. The mutavali is the manager of the wakf, but the property does not vest in him as it would in a trustee in the case of an ordinary settlement. Of course, as we have already mentioned in the case before us, there is the vesting of the property in the trustees. When we refer to the basic principles of the law of wakf and the provisions of the relevant statute validating certain wakes, it is extremely difficult to see how it can be said that there is any gift in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the sum of ₹ 1 lakh mentioned in the deed. In the result, our answer to the question will be that the entire wakf property including the sum of ₹ 1 lakh is chargeable to estate duty. Applicant to pay the costs. K.T. DESAI, J.--This reference under section 64(1) of the Estate Duty Act, 1953, raises an interesting question concerning the application of section 12 of the Estate Duty Act, 1953. One Aishabai, widow of the Mahomed Saleh Haji Jackeria Patel, a Sunni Hanafi Mahomedan, died on 12th August, 1954. Prior to her death, on 31st March, 1951, she executed a deed of wakf. By that deed of wakf she appointed herself and two other persons as the mutavalis and transferred to them 12 immovable properties and a sum of Rs. one lakh. By the said deed of wakf she provided that after making all disbursements and meeting all out goings in connection with the properties, 10% of the net income of the said 12 immovable properties was to be set apart every year for repairs that may be required to be done to the wakf properties and was to be credited in an account to be called the "repairs fund account". In connection with the balance of the income, she provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1 lakh and of the investments representing the same has been utilised in the same manner as the income of the immovable properties settled upon trust. It is not disputed before us that for the purpose of estate duty the said sum of Rs. one lakh stands on the same footing as the said 12 immovable properties settled upon trust. The Central Board of Revenue considered that all the properties settled upon trust, viz., the 12 immovable properties and the sum of Rs. one lakh, passed on the death of the said Aishabai and that estate duty was payable thereon. The applicant being the accountable person within the meaning of sub-section (1) of section 53 of the Estate Duty Act, 1953, contends that only 62?% thereof passed upon Aishabai's death and that estate duty is payable only in respect thereof. Mr. Palkhivala, the learned counsel for the applicant, very ably urged before us all that could possibly be urged in support of the contention that only 62?% of the corpus of the trust properties existing at the date of death of Aishabai passed on her death and said that it would be inequitable to hold that all the trust properties held under the said deed of wakf should be deeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserved to himself the right by the exercise of any power, to restore to himself or to reclaim the absolute interest in such property shall be deemed to pass on the settlor's death: Provided that the property shall not be deemed to pass on the settlor's death by reason only that any such interest or right was so reserved if by means of the surrender of such interest or right the property is subsequently enjoyed to the entire exclusion of the settlor and of any benefit to him by contract or otherwise, for at least two years before his death. Explanation: A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in section 27) shall be deemed to reserve an interest for himself within the meaning of this section. (2) Notwithstanding anything contained in sub-section (1) where property is settled by a person on one or more other persons for their respective lives and after their death, on the settlor for life and thereafter on other persons and the settlor dies before his interest in the property becomes an interest in possession, the property shall not be deemed to pass on the settlor's death within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord observes as follows: "To answer that question a comparison must be made between the persons beneficially interested in that fund the moment before the death, and the persons so interested the moment after the death." This view of the matter has not been the subject of any controversy before us. The expression "property passing on the death" has been defined by section 2(16) of the Estate Duty Act, 1953, which runs as under: "2. (16) 'Property passing on the death' includes property passing either immediately on the death or after any 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'." The corresponding provision in England is contained in section 22(1) of the Finance Act, 1894, which runs as follows: "22. (1) The expression 'property passing on the death' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and the expression 'on the death& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act 1894. By section 4 of the Indian Finance Act, 1954, the Legislature has added section 3(3) to the Estate Duty Act, 1953, which runs as under: "3. (3) For the avoidance of doubt, it is hereby declared that references in this Act to property passing on the death of a person shall be construed as including references to property deemed to pass on the death of such person." There is no such provision in the English enactment. Under the Estate Duty Act, 1953, section 5 is the charging section. Under it duty is leviable in respect of all property passing and deemed to pass on the death of a person. As Aishabai had reserved 62?% of the net income of the wakf properties for herself during her lifetime, 62?% of the corpus of the wakf properties passed on her death within the ordinary natural meaning of the words "property....which passes on the death of such person" appearing in section 5(1) of the Act. It is urged on behalf of the respondent that as Aishabai had reserved for herself an interest in all the properties settled upon trust under the said deed of wakf for life, all the wakf properties are deemed to pass on the death of Aishabai under section 12 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 212 of the report appear the following celebrated dicta of Lord Macnaghten: "Now, if the case falls within section 1 it cannot also come within section 2. The two sections are mutually exclusive. Section 1 might properly, I think, be headed 'with regard to property passing on death, be it enacted as follows.' Section 2 might with equal propriety be headed, 'And with regard to property not passing on death, be it enacted as follows.' I cannot, therefore, agree with Rigby L.J. when he says that section 2 is a provision 'explanatory' of section 1. In my opinion, the two sections are quite distinct, and section 2 throws no light on section 1. But, then, no doubt section 2 speaks of 'property in which the deceased...had an interest ceasing on the death of the deceased.' And that, it may be said, was just the position of the second Earl with regard to the Mornington settled estates. So it was. But section 2 does not apply to an interest in property which passes on the death of the deceased. That is already dealt with in the earlier section. For property in the lifetime of the deceased subject to a charge or interest. And, so passing, it must o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no benefit accrues or arises by the cesser of his interest within section 2, sub-section 1(b). In that case the Master of the Rolls, after dealing with some of the earlier cases in England observes at page 475 as follows: "But they are, in my judgment and for reasons which I will later give, no authority for the view that on the death of the first taker of a continuing annuity there is a passing of any part of the corpus of the property out of which the annuity is raised or on which it may be charged." At page 473, the Master of the Rolls has observed as follows: "Wynn-Parry J. was of opinion that the simultaneous existence of a right to tax under section 1 and section 2 was inconsistent with the well-known statement of Lord Macnaghten in Cowley (Earl) v. Inland Revenue Commissioners**, and could not, therefore, be sustained. I agree with him. It is true that the actual language used by Lord Macnaghten, and particularly his words 'Section 2 does not apply to an interest in property which passes on the death of the deceased' was used in reference to a case in which only one possible subject-matter of taxation was under consideration; and that it is of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as was conceded, an allowance for the burden of the annuity could be taken equivalent to the actuarial value of the annuity. That again was a case where the whole settled property passed under the Finance Act, 1894, section 1. That case is not an authority of the proposition that where the whole settled property did not pass under section 1, the deeming provisions cannot be invoked. In that case in connection with the deduction that had been allowed, Wynn-Parry, J., observes at page 937 as follows: "As the Crown concedes that there should be a deduction, in my view, I can do nothing else but accept the effect of that concession and direct that the value of the deduction must be the value of annuity at the date of the death calculated on actuarial principles." The deduction in that case based on a concession and was not the result of any judicial pronouncement on the subject. The next case to which reference may be made is that of Sanderson v. Inland Revenue Commissioners[1956] A.C. 491; 30 I.T.R. (E.D.) 67, 73. In that case, the settlor had voluntarily settled on trust for his son and daughter shares in a private company in which he held a controlling interest. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956] 30 I.T.R. (E.D.) 67, 76 he further observes as under: "I do not see that our decision can be said in any way to conflict with those earlier cases. The most that can be said in that connection is that it will leave unexplained what exactly Lord Macnaghten meant in Cowley [1899] A.C. 198, 212 when he said of sections 1 and 2 'the two sections are mutually exclusive' or what Lord Haldane meant in Milne[1914] A.C. 765. 769 by the words 'section 2 is thus not a definition section, but an independent section operating outside the filed of section 1. 'But as Lord Macnaghten's words have been a matter of inquiry since the year 1900 (See Attorney-General v. Dobree [1900] 1 Q.B. 442, 450 per Channell J.), and since Lord Haldane himself gave a substantially different explanation of the relation of the two sections in Nevill v. Inland Revenue Commissioners [1924] A.C. 385, 389 when he said: 'The principle is contained in section 1. Section 2 combines definitions of such property with the extension of the application of the principle laid down in section 1 to certain cases which are not in reality cases of changing hands on death at all...', I think we m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord Radcliffe (see especially Sanderson v. Inland Revenue Commissioners). I add further that Lord Radcliffe notices language used by a very learned judge, Channell J. in Attorney-General v. Dobree [1900] 1 Q.B. 442, 450 and also the differing views expressed by the House in a later case, that of Attorney-General v. Milne. But notwithstanding the weight of those arguments, I feel myself compelled to the view that in those court, as before Danckwerts J., we cannot do other than treat Lord Macnaghten's dictum as still applicable." In dealing with the case of Sanderson v. Inland Revenue Commissioners [1956] 1 All E.R. 14; 30 I.T.R. (E.D.) 67, he observes as follows: "It may well be that this case has disclosed, perhaps for the first time, an anomaly which a strict application of the dichotomy has hitherto concealed, and there may be other anomalies--one being in relation to a corporation sole--which, if the views of the Crown, which have been indicated in argument, are right, may add some emphasis to the view that the matter is one which ought property to be considered by, and resolved only by, the House of Lords itself." In this connection, reference may be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is provided that property passing under any settlement made by the deceased by deed or any other instrument not taking effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor shall be deemed to pass on the settlor's death. Now, the words "property passing under any settlement" in section 12 refer not top property passing on the death, but to property comprised in the settlement. It has been stated in Green's Death? Duties, 4th Edition, page 127, that property "passing" under a settlement or trust in the context of the corresponding provisions in the English statute does not connote a passing on death, in the sense of section 1 of the Finance Act of 1894. Broadly speaking, it means merely property comprised in the settlement or subject to the trust. To a similar effect are the observations in Dymond's Death Duties, 12th Edition, at page 183. It is the property which is comprised in the settlement which is deemed to pass on the settlor's death on the conditions mentioned in section 12 being fulfilled. The property comprised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corpus it would pass under section 5(1) of the Estate Duty Act, 1953, without the aid of any deeming provisions and the application of section 12 would be excluded. There is no reason to exclude the operation of section 12 in such cases. The Legislature has not laid down that where any interest in any property, however small, passes on the death of a person within the ordinary meaning of those words under section 5(1), the deeming provisions contained in sections 6 to 16 of the Act cannot be invoked. There is no reason to add words to that effect. Where there is a deeming provision, it does not necessarily imply that what is sought to be included thereby must be necessity have otherwise been wholly excluded. In this connection, reference may be made to the following observations of Lord Radcliffe in the case of St. Aubyn v. Attorney-General [1952] A.C. 15, 53: "The word 'deemed' is used a great deal in modern legislation. Sometimes it is used to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 62?% of the net income for her life. Then he says that as regards the balance of 37?%, it cannot be said that the settlor had reserved any interest therein and that as she had not reserved any interest therein, it does not all within the ambit of section 12. There is a fallacy in this argument. What is reserved by the settlor is not the income of 62?% of the corpus of the trust properties. She has reserved for herself 62?% of the net income of every one of the properties settled upon trust. She has reserved an interest in every property. It is not possible to say that she has an interest reserved only in some properties and not in others. As the settlor has reserved an interest in each one of the properties settled upon trust, even though that interest may not extend to the whole of the net income thereof, it is sufficient for the purpose of attracting the provisions of section 12 so that all the properties settled under trust would pass on her death. On the basis of the alternative argument of Mr. Palkhivala all the properties settled upon trust are liable to pass on the death of Aishabai. Mr. Palkhivala has lastly urged that even if section 12 applies in its entirety, effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income or corpus as the trustees should think fit for the maintenance, advancement or benefit of the son, and on his attaining the age of twenty-one years to transfer to him as his absolute property all the assets and property whatsoever, including accumulations of income. At page 439 of the report the following observations have been made by the Privy Council: "In their opinion the property comprised in the gift was the equitable interest in the eight hundred and fifty shares, which was given by the settlor to his son. The disposition of that interest was effected by the creation of a trust, i.e., by transferring the legal ownership of the shares to trustees, and declaring such trusts in favour of the son as were co-extensive with the gift which the settlor desired to give. The donee was the recipient of the gift; whether the son alone was the donee or whether the son and the body of trustees together constituted the donee seems immaterial. The trustees alone were not the donee. They were in no sense the object of the settlor's bounty. Did the donee assume bona fide possession and enjoyment immediately upon the gift? The linking of possession with enjoyment as a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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