TMI Blog1973 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... department and partly at the instance of the accountable person, three questions of law said to arise from its order, for the decision of the High Court. The accountable person at whose instance the last question was referred informed the High Court that he does not desire to have any answer to that question ; consequently, the High Court did not answer that question. The High Court answered the first question in favour of the accountable person. In view of that answer, it thought it unnecessary to answer the second question. The only question calling for decision is question No. 1, which reads : "Whether, on the facts and in the circumstances of the case, the whole of the trust estate was to be included in the assessment or only a portion thereof and, if so, what portion?" Herein, we are concerned with the estate of Bai Safiabai (the widow of Eusufalli Badri), who died on October 6, 1955. The High Court opined that only one-third of the trust estate of which the deceased was one of the trustees "passed" on her death. The correctness of that conclusion is challenged by the department. According to the department, the entire trust estate "passed" on the death of the deceased. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Controller. But, later on, the accountable person sought to withdraw the appeal. The Appellate Controller refused to give him permission to withdraw the appeal. Further, he gave him notice requiring him to show cause why the entire value of the trust estate should not be included in the computation of the value of the estate that "passed" on the death of Safiabai. The accountable person contended that the trust property did not belong to the deceased and, as such, the same cannot be said to have "passed" on her death. That contention was rejected and the entire trust property was considered as the property that "passed" on the death of the deceased. Consequently, the valuation made by the Assistant Controller was enhanced by Rs. 5,73,000. Against the order of the Appellate Controller, the accountable person went up in appeal to the Appellate Tribunal. The Tribunal set aside the order of the Appellate Controller and restored that of the Assistant Controller. It held that only one-third of the trust estate "passed" on the death of the deceased. Thereafter, at the instance of the department, the question set out earlier was submitted to the High Court seeking its opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being representing the proceeds of sale and also includes any property converted from one species into another by any method." (The Explanations to this section are not relevant). Section 2(16) defines the expression "property passing on the death". That provision runs thus : " '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". This definition is only an inclusive definition. It does not bring out the meaning of the expression "property passing on the death". The expression "property passing on death" is not a technical expression. In other words, it is not a term of law. The word "passes" means "changes hands". To ascertain whether property has passsed, 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 see the observations of Lord Russell of Killowen in Scott and Coutts and Co. v. Inland Revenue, Commissioners. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to trustees for sale and investment, and for payment out of the annual income thereof of an annuity to his wife, and, subject to the annuity, to his eight children equally, and after the death of his wife to divide the trust fund among the children in equal shares ; but if the fund exceeded a certain specified sum, then to divide eight-ninths of such excess among the children, and to pay the remaining ninth to certain other persons. The wife died after the Finance Act, 1894, had come into operation. The court held that the estate duty was only payable on the one-ninth share of the excess of the trust fund over the specified sum and on the benefit which accrued to the children by the cesser of the annuity, since that was the only property passing on the death of the wife. Dealing with the question of law arising for decision, Kennedy J. observed : "There is no question that, looking to the substance of the disposition which is in question, as to pound 9,600, the children took an interest on the death of the testator which was qua that sum a definite ascertained profit which vested in them, and as to which each of the eight children got his eighth share. Of course the whole est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or any other investment in lieu thereof to him absolutely. If any of the beneficiaries should die before completing the age of 25 years, the shares settled on him (but not the accumulated surplus income) were to devolve on certain persons. The beneficiaries had no right to mortgage or create any incumbrance or sell it until each of them completed the age of 25 years. Manubhai died on June 7, 1954, a minor and unmarried, and the principal value of his interest in the settled property was brought to estate duty in the hands of his brother. The accountable person challenged the validity of the levy. He contended that no property passed on the death of his brother, Manubhai. This contention was rejected both by the High Court and this court. This court held that though the shares were not to be delivered to Manubhai until he attained the age of 25 years, the shares belonged to him since the execution of the trust deed and he was also beneficially entitled to the income from those shares. In the course of his judgment, Shah J. (as he then was), speaking for the court, observed at page 649 : "The interest of Manubhai in the shares and in the accumulated income was 'property' withi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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