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TMI Blog1966 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... t 26, 1959, brought the interest of Manubhai in the settlement to tax in the hands of his brother, Mahendra, on the footing that it was vested in possession in Manubhai and was chargeable to estate duty under section 5 of the Estate Duty Act, 1953 (34 of 1953). The order of the Deputy Controller was confirmed in appeal to the Central Board of Revenue. The Central Board of Revenue referred the following question to the High Court of Gujarat under section 64 of the Estate Duty Act, 1953 (34 of 1953) : "Whether, on the facts and in the circumstances of the case, the inclusion, in the estate of the deceased, of the amount of Rs. 10,43,050 being the trust fund, was justified in law ?" The High Court recorded an affirmative answer to that ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all transfer to the names of the trustees the said 160 fully paid up shares to hold in trust for the benefit and advantage of the said beneficiaries in equal shares. 2. The trustees shall stand possessed of the said shares until each of the said beneficiaries shall complete the age of 25 years and until the said time, out of the profits arising therefrom to apply either the whole or part thereof as the said trustees may deem fit and proper in the maintenance and advancement of the said beneficiaries. The trustees are hereby authorized to invest such unused or accumulated funds from the profits in any security or concern as they may deem fit and proper. 3. The trustees are further authorised to sell the said shares and invest the same in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in any manner whatsoever." Under the terms of the deed of trust, each beneficiary was entitled to 80 shares of the Central Trading Company. The trustees were to hold 80 shares for each beneficiary till he attained the age of twenty-five years, and the trustees were to apply either the whole or part of the profits arising from the shares, as the trustees deemed " fit and proper " for the maintenance and advancement of the beneficiaries, and to invest the surplus in securities or concerns as they deemed proper. In the event of the death of either beneficiary before he attained the age of twenty-five, the shares settled on him: but not the accumulated surplus income, were to devolve on the persons mentioned in clauses 6 and 7. Till each be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the income thereof arose from the date on which the deed of trust became operative and it was not deferred till the beneficiary attained the age of twenty-five years. We may now consider whether estate duty in respect of the shares and the accumulated income thereof became payable when Manubhai died on June 7, 1954. Section 5 of the Act, sub-section (1), provides : " 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, . . which passes on the death of such person, a duty called ' estate duty ' at the rates fixed in accordance with section 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of his death before it becomes an interest in possession, and one or more subsequent limitations under the settlement continue to subsist, the property shall not be deemed to pass on his death by reason only of the failure or determination of that interest. " That the 80 shares under the deed of trust were settled property is not disputed ; and Manubhai had an interest in those 80 shares. But the interest of Manubhai in the shares did not, for reasons already set out, fail or determine before it became an interest in possession. Section 23 therefore has no application to the present case. Counsel for the appellant relied upon an Irish case reported in AttorneyGeneral v. Power. In that case, under a settlement, one H took a vested leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, coupled with a direction to accumulate the income in the meantime so far as it is not required for maintenance so as to make the accumulated income an accretion to the capital is in substance a contingent interest, and the property may be exempt from estate duty, if the beneficiary dies before he attains the age specified. But where, as in the present case, the income of the property absolutely belongs to the beneficiary and such part of the interest as is not applied for the benefit of the beneficiary, is liable to be accumulated for his benefit, and in the event of his death before he attains the age specified in the deed of trust, it is to devolve upon his heirs, creates in the beneficiary an interest in possession and not an interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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