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TMI Blog1979 (8) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... profits before deductions of income (tax) and other taxes or after deduction of such taxes ? " Jamnabai, whose death has ultimately resulted in this case being stated to us by the Tribunal, was married to one Govindji Madhavji. In the year 1914 Govindji predeceased Jamnabai, leaving behind him a will executed on October 19, 1913, in respect of his self-acquired property. Under this will, certain dispositions were made by Govindji in favour of Jamnabai, his mother, Javerbai, and his brother's son, Damodardas. By cl. 4 of the will, Govindji gave an authority to Jamnabai to adopt Damodardas as his son in case at the time of his death he had no son. In pursuance of this authority to adopt given to her, Jamnabai adopted Damodardas on July 19, 1915. This adoption was recorded in a memorandum executed on the same day. Further, on the same day an agreement was also executed between Damodardas, Gangabai, the widowed mother of Damodardas, and Jamnabai under which Damodardas agreed and confirmed that the properties in respect of which Govindji had made his will were Govindji's own self-acquired properties and agreed that he would not at any time make any claim to any share or interest in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions made thereby by reason of the execution of the said agreement dated July 19, 1915. By the said will Govindji appointed Jamnabai, Damodardas and one Bhai Prabhuram Dewkrishna as the executrix and executors of the said will. In cl. 2 he set out the movable and immovable properties which he possessed. By cl. 3 he declared that the ornaments, jewellery, etc., which his wife, Jamnabai, possessed were her stridhan property and she had full right of ownership over it. Clause 4, as mentioned earlier, conferred authority upon Jamnabai to adopt Damodardas as a son to Govindji. Clauses 5, 11, 12 and 13 of the said will provided as follows: " 5. It is my chief desire that after my death my venerable mother, my wife and the long lived Damodar should live with one another in peace and harmony and should carry on the expenses of the house peacefully as is done now. But, if destiny decrees otherwise, then as many as can manage to live together shall do so, and I recommend my executrix and executors to give the party who goes to live separate a monthly allowance as mentioned below. Should, however, the income of my property be not sufficient to meet payment of the monthly allowance, then I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al had not been specified, but the income had to be spent only on meeting the expenses of the household. In his submission the trust that was created is to be found in cl. 5 of the will, a trust whereby no part of the income is given to any individual beneficiary but the income is to be utilised merely in meeting the expenses of Javerbai, Jamnabai and Damodardas, and, therefore, these three beneficiaries constituted a group, being members of the same family. In the alternative, Mr. Joshi submitted that even assuming that any interest in the nature of a life estate was created in favour of Javerbai, Jamnabai and Damodardas, they did not take the income in any specific or ascertained share but they took the income together jointly or, in other words, as joint tenants and not as tenants-in-common. For this purpose Mr. Joshi laid emphasis upon the sentence in cl. 12 of the will, namely, " If she (that is, Jamnabai) be living with my other heirs, then she has the right together with my other heirs, namely, my mother and the long lived Damodar, to enjoy the income of my other property ". The words in the sentence emphasised by Mr. Joshi in connection with this submission were the words" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he will. Both these clauses specifically mention that Javerbai and Jamnabai will have the right to enjoy the income of the residuary estate along with the other heirs, and both Javerbai and Jamnabai are specifically prohibited from alienating or giving away by will or gift or otherwise any property. Thus, by cl. 12 of the will what is created is a life interest in favour of Jamnabai subject to a condition of defeasance, namely, that if she stops living together with the others she will lose her right to enjoy the income of the property. A similar interest has been created in favour of Javerbai by cl. 13 of the will. The question which then remains is, what is the true construction and effect of cl. 5 of the will ? If one carefully reads the whole of cl. 5 and compares it with the other clauses in the will, to which reference will presently be made, it would be clear that this clause is couched in precatory words and does not cast or create any obligation. It is merely an expression of a pious wish or hope on the part of Govindji that after his death his nearest and dearest ones, namely, his widow, mother and his brother's son, whom he obviously looked upon as his own son, should li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned, cl. 6 states : " After her (my mother's) death, the above-mentioned principal sum shall be dealt with in accordance with what is written below. " Clause 7 of the will provides for the marriage expenses of Damodardas's daughter, Shanta. There too, the testator has provided that " an outlay to the extent of Rs. 1,500 (fifteen hundred) shall be made out of my property and Rs. 1,000 (one thousand) either in articles or in cash shall be given to her by way of kanyadan ". Clause 8 of the will has provided for the funeral and obsequial ceremonies of Jamnabai. There too the words used are " an outlay to the extent of Rs. 3,000 (three thousand) shall be made out of my property " for this purpose. Even in respect of his own funeral and obsequial ceremonies and certain other charities to be made after his death, the testator has provided in cl. 10 of the will that these expenses " shall be made in accordance with what is written below ". This amply shows that wherever by this will the testator had intended to create a binding obligation, he had used appropriate words for that purpose. The total absence of any such words in cl. 5 of the will and using in their place instead merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to persons all of whom are either unascertained or some of whom are ascertained and others unascertained and who all fulfil a particular description, such as children of the testator or the settlor or the grandchildren of the testator or the settlor or the sons of any one of the particular issues of the settlor or the testator. Section 121 of the Indian Succession Act, is one of the sections which, deals with legacies to a class. Javerbai, Jamnabai and Damodardas did not constitute a class as understood in the law of trusts or of wills. They were three individuals named in the will to whom specific benefits were given by the will. We now turn to Mr. Joshi's contention that the shares of the life tenants not being specified, they all took the income of the property of Govindji jointly. This amounts to saying that the income of the residuary estate was bequeathed to Javerbai, Jamnabai and Damodardas as joint tenants and not as tenants-in-common. A joint family tenancy connotes unity of title, possession, interest and commonness of title. In tenancy-in-common there may be unity of possession and commonness of title but the other two features would be absent. Further, in a joint te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu testator gave a 4 annas share of his estate to his daughter and son for their maintenance, with the power of making alienation thereof by sale or gift. It was held by the judicial Committee that on a true construction of such gift each took an absolute interest in a two annas share of his estate and the words " for your maintenance " did not reduce the interest of either to one for life only. The observations quoted above by us were made by the judicial Committee while rejecting the argument that the interest created in favour of the widow and son was joint tenancy and not a tenancy-in-common. In Venkatakrishna Rao v. Smt. Sathyavathi, AIR 1968 SC 751, this question came up for consideration of the Supreme Court. The facts of that case were that the testatrix who was childless, herself brought up a boy and a girl from their infancy. In order to provide for them after her death the testatrix executed a will covering all her properties, movable and immovable. The relevant clauses of the will provided that (head note) "the entire property should be in possession of both of them and that both of them should enjoy throughout their lifetime the said property without, powers of gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of settlement or in the will, a question arose in assessment to income-tax whether the shares of the deities were defined in law, and, therefore, the first proviso to s. 41 of the Indian I.T. Act, 1922, was inapplicable. As we have mentioned earlier, the Division Bench, on a review of all the authorities, held that the two deities took as tenants-in-common, that is, in equal shares. If, in these circumstances, when even a God takes only an equal half share, can a mere mortal presume to take more ? Apart from this, there is intrinsic evidence in the will itself to show that the testator intended that each of the three life tenants should take an equal share in the income of the property. In the second part of cl. 5 of the will the testator has recommended to the executrix and executors of the will to give a monthly allowance to a life tenant who goes to live separately. The amount of such monthly allowance in the case of each of the life tenants is the same, namely, a sum of Rs. 50. This clearly shows what the intention of the testator was. We, therefore, hold that as long as Javerbai was alive, Javerbai, Jamnabai and Damodardas shared equally in the income of the property, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred no right upon her but it only imposed duties upon her and that such a right was not "property". The Supreme Court further held that the word " passes " in s. 5 of the E.D. Act means" changes hands " and that what was relevant in determining the scope of the expression " property passing on the death of the deceased " was the change in the beneficial interest and not title and that to ascertain whether property had passed, a comparison must be made between the persons beneficially interested the moment before the death and the persons so interested the moment after the death. While in the case before the Supreme Court, there were three life tenants, two of whom took the remainder on the death of the other life tenant, in our case, there are three life tenants one of whom took the remainder on the death of the other two. This difference in the number of the remaindermen makes no difference. The case is on all fours with the case before us and must govern the decision of this reference. We will now deal with the arguments advanced before us based on the said agreement dated July 19, 1915, executed on the same day as Damodardas was adopted by Jamnabai in pursuance of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was in any way entitled, were Govindji's own absolute properties and that he had power to dispose of the same in the manner in which he had disposed of them by his will and that Damodardas would abide by and carry out the provisions of the will and act conformably to the terms and conditions set out therein. By cl. 1 of the said agreement Damodardas agreed that the properties and assets, which Govindji died possessed of or was entitled to, were Govindji's own absolute property and that he had the power to dispose of the same by his will and that he would " abide by and carry out the provisions contained in the said will ". By cl. 2 of the said agreement Damodardas declared that he would not at any time, either directly or indirectly, claim any share or interest in such property or any part thereof on the ground that the same was not the absolute property of Govindji. Now, one must bear in mind the background which would result in such an agreement being executed. In Krishnamurthi Ayyar v. Krishnamurthi Ayyar, AIR 1927 PC 139, the judicial Committee of the Privy Council, after examining all the authorities, held that a disposition made inter vivos by a Hindu who had full power ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lifetime of Jamnabai and Javerbai, Damodardas will hold the estate of Govindji and the investments representing the same as a trustee " only for the trusts and purposes set out in the will ". The words in the concluding part of cl. 3, namely, " will not beneficially deal with the same or claim any beneficial interest therein ", do not and cannot refer to the beneficial interest he had got under the said will. They would refer only to an interest or a right in himself in his character as an adopted son or de hors the will, otherwise this latter part would be inconsistent with and repugnant to the first part of cl. 3 of the said agreement. Assuming for the sake of argument that this latter part were to suffer from this repugnancy, in such an event on the principle of construction of deeds referred to by us earlier, it is the first part which would prevail and the latter part would be rejected. This brings us to the second question referred to us. The facts so far as they relate to the understanding of this question are that the estate of Govindji, inter alia, comprised of shares of five private limited companies. Mr. Dastur, learned counsel for the respondents, at whose instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that since a provision for taxes had already been deducted in computing the net wealth of the companies, on the basis of which the valuation of shares of those companies was to be determined, to allow it again to be deducted from the net profits in order to arrive at the maintainable profits would amount to deduction of taxes twice. We are unable to agree with this reasoning. In order to arrive at the valuation of shares what the Deputy Controller was doing was first to value the net assets and then to add to it the value of the goodwill. Goodwill was not an asset shown in the balance-sheet of either of these companies. It had, therefore, to be valued separately. The taking into account of the provision for deduction of taxes in order to arrive at the net assets was an entirely different matter. It had no bearing on the question of valuation of goodwill. Goodwill was being valued separately from the net assets, and assuming that for the purpose of valuing goodwill on the super profits method a deduction is to be allowed of provision for taxation, it cannot be said that this would amount to deduction of taxes twice. It must be stated that Mr. Joshi, learned counsel for the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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