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TMI Blog1975 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties thereafter. On September 29, 1956, having realised that she being 73 years of age was sufficiently old, executed a trust deed settling all the properties in favour of the school. This trust deed was executed by her to ensure the continuity and efficient management of the school so that it could render service to the Indian nation. She constituted a board of trustees consisting of herself and six others. The properties, which were assigned and transferred to the trustees, were mentioned in schedule ' A' of the trust deed. The value of these properties was estimated at Rs. 2,62,503-15-9 in the trust deed. The immovable properties included buildings at Nos. 7, 7-A and 11-B, Circular Road, Dehra Dun. Apart from these buildings, there were two vacant plots of land at Nos 5 and 9, Circular Road, Dehra Dun. All these properties were adjacent to each other. Movable properties included furniture and fittings, electric installations, refrigerator and security deposit. The relevant clauses of the trust deed which deserve to be mentioned for the purposes of deciding this reference are the following: "Clause 2: That I shall continue to manage and run the school as trustee till suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble person and referred the question mentioned above. We may now refer to some of the provisions of the Act which would need consideration for deciding the question referred for the opinion of the High Court. Section 2(16) defines " property passing on the death ", which includes property passing either immediately on the death or after any interval, either certainly or contingently. Section 5 is a charging provision. It provides : " (1) In the case of every person dying after the commencement of this Act, there shall, save as hereinafter expressly provided, be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled, including agricultural land situate in the territories which immediately before the 1st November, 1956, were comprised in the States specified in the First Schedule to this Act, and in the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with section 35. (2) The Central Government may, by notification in the Official Gazette, add the names of any other States to the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary at least two years before the death of the trustee. (2) after obtaining possession of the trust property the same is retained and enjoyed by the beneficiary to the entire exclusion of the deceased trustee. In the event of either of these two conditions missing, the property shall be deemed to have passed on the death of the settlor and thus will be liable to estate duty. Adverting to the facts of the present case the question is whether Miss Oliphant reserved benefit or interest in her favour under the trust deed executed by her which could make her properties dutiable under the Act. We have already mentioned the findings arrived at against the accountable person. The counsel for the accountable person, however, submitted that Miss Oliphant did not reserve anything for herself in the trust deed which could create any charge in her favour. The trust deed only stipulated monthly payment of Rs. 1,000 towards her services which she was required to render as principal. Place for her residence was also reserved by her in the capacity of a principal or a managing trustee for rendering certain service and not in her capacity as a settlor. We have considered the above submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain possession and enjoyment of the property and thenceforward retain it, it is only the right to possession or enjoyment that posses on the death of the settlor. From the mere fact that Miss Oliphant had a right to live in the cottage during her lifetime alone and that the same had to revert to the trust on her death, it cannot be said that : "...possession and enjoyment was bona fide assumed by the beneficiary at least two years before the death and thenceforward retained by him to the entire exclusion of the deceased..." Dealing with a similar controversy arising out of a case under s. 102 of the New South Wales Stamp Duties Act, 1920, the Judicial Committee observed in Clifford John Chick v. Commissioner of Stamp Duties [1958] AC 435; [1959] 37 ITR (ED) 89, 100; 3 EDC 915, 929 PC, as under : "Where the question is whether the donor has been entirely excluded from the subject-matter of the gift, that is the single fact to be determined. If he has not been so excluded, the eye need look no further to see whether this non-exclusion has been advantageous or otherwise to the donee." The provision of s. 22 of the Act having been enacted with the same object and purpose, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the respondent must be accepted as correct. As a matter of construction we hold that the words 'by contract or otherwise' in the second limb of the section will not control the words 'to the entire exclusion of the donor' in the first limb. In other words, in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was ' entirely excluded from possession and enjoyment' within the meaning of the first limb of the section, and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty. " This decision has been recently followed by the Supreme Court in CED v. Smt. Parvati Ammal [1974] 97 ITR 621. This appeal arose out of the estate duty case of one R. Venkateswara Iyer. He executed a document describing it as a partition deed on March 11, 1955. Under this document, he gave one of the houses, which was known as " Mayavaram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to s. 22 of the Act. It provides that the property whose possession and enjoyment was not assumed within two years of the death of the settlor, that alone shall be deemed to pass on his death. But where there are a number of properties settled under a trust deed, all of them cannot be deemed to pass on the death of the settlor merely because possession and enjoyment of one of the properties passed on the death of the settlor. For applying s. 22 of the Act, all the properties settled under a trust will have to be taken separately. We, therefore, find that the value of the school at 7, Circular Road, Dehra Dun, alone shall be liable to estate duty under s. 22 of the Act on this ground. The next question for determination is regarding the effect of reservation of maintenance made by Miss Oliphant in her favour on properties settled under the trust deed other than the residential cottage. The relevant part of this reservation mentioned in cl. 3 was: " That I shall receive a sum of Rs. 1,000 per month out of the funds of the School ". This reservation made by her does not specify the property from the income of which this amount had to be received by her. The right to receive money spr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the deed in favour of the school was not charged on the properties settled, the settlor could not be said to have retained any benefit or interest in the properties settled and, accordingly, his estate could not be said to pass on his death. In the case noted above, the material words used in the gift deed executed by the donor in favour of his sons and grandsons were: " You have to pay me during my lifetime a sum of Rs. 1,000 per year for my domestic expenses." Dealing with the facts of the above case and considering the scope of s. 10 of the Act, the Supreme Court held that the benefit received by the settlor should be referable to the property gifted and as the provisions for annual payments and maintenance made in the deeds were not charged on the properties settled under the gift deed, therefore, the deceased donor could not be said to have retained anything for his benefit either in the properties settled or in respect of their possession. For the purpose of applying the principle laid down in the above case by the Supreme Court, it has to be observed that the creation of a charge does not require the use of any particular form or some technical words. All that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the school by charging tuition fees, hostel fees and games fees, etc., could not be treated as income from the trust properties as education is not imparted by this institution for making income. Therefore, the reservation for maintenance from school funds by Miss Oliphant could not be considered as a charge created on the income of the trust properties. According to his submission, this circumstance excluded the operation of s. 22 of the Act, relied upon by the revenue. A reading of the trust deed shows that it was a charitable trust created for expansion of education. It is not a necessary element of a trust being charitable that it should deal in charity without charging anything from the persons who are benefited by it. Poverty is also not a necessary element in a charitable trust and, therefore, it need not be meant for the benefit of the poor alone. Dealing with a similar argument, it was observed in Verge v. Somerville [1924] AC 496 (PC) at : " ....... a valid charitable trust may exist notwithstanding the fact that in its administration the benefit is not confined by the donor to the poor to the exclusion of the rich." It is thus clear that a trust created for ad ..... 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