TMI Blog1988 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... might be possible to predicate that all properties comprised in such settlement, which must be held to be composite deed dealing with several items, do not attract section 12(1) but only the parcel out of which an interest is carved out and reserved for the settlor's benefit. - - - - - Dated:- 9-5-1988 - Judge(s) : M. N. VENKATACHALAIAH., R. S. PATHAK JUDGMENT The judgment of the court was delivered by VENKATACHALIAH J.-These appeals, by certificate, under section 65 of the Estate Duty Act, 1953 (" Act " for short)-one by the accountable person and the other by the Deputy Controller of Estate Duty arise out of and are directed against the judgment dated October 11,1974, of the High Court of Calcutta, answering, in a reference under section 64(1) of the Act, the question of law referred for its opinion. The matter pertained to the determination of the principal value of the estate passing on the death, which occurred on March 24, 1960, of certain Satya Charan Srimani. Dipti Narayan Srimani, appellant in C. A. No. 946 of 1975, is the son of the deceased and is the accountable person. The said Satya Charan Srimani during his lifetime had executed three trust deeds dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charitable purposes mentioned in the deed and the balance of 1/2 for the development, additions and alterations of two of the trust properties, viz., No. 41 42, Macleod Street, Calcutta. After, completion of the developments and alterations, the said 1/2 share was stipulated to go for the benefit of the settlor during his lifetime and thereafter to his heirs. Under both the dispensations, the settlor constituted himself the shebait. In the proceedings of assessment to estate duty, the question arose whether the trust deeds attracted and fell within section 12(1) of the Act. The accountable person contended that the four trust properties under the deed dated September 21, 1953, could not be said to be " settled property " within the definition in section 2(19) and that at all events what must be held to pass would only be a 1/4th share, corresponding to the benefit reserved for the settlor and his heirs. Similarly, in respect of the six trust properties covered by the deed dated October 4, 1959, it was urged that the properties were not " settled properties " and that, at all events, only 1/2 of the property so passed. The Deputy Controller of Estate Duty, the Appellate Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that they were not hit by section 12(1). The High Court said: "...As in our opinion the properties covered by the deed dated 4-10-1959 are not settled properties, section 12(1) cannot apply to the said properties..." Concluding, the High Court held: " ...We must, therefore, hold that section 12(1) of the Act applies to the trust deed dated 21-9-1953 and the said section has no application to the trust deed dated 4-10-1959. Accordingly, we answer the question by saying that the properties comprised in the trust deed dated 21-9-1953 are dutiable under section 12(1) of the Estate Duty Act and the properties comprised in the trust deed dated 4-10-1959 are not dutiable under section 12(1) of the Estate Duty Act..." The Division Bench, however, left open the question, whether the properties constituting the subject-matter of the trust deed dated October 4, 1959, would attract any other provision of the Act to be decided by the appropriate authority. From this opinion expressed by the High Court, both the accountable person and the Deputy Controller of Estate Duty have come up in appeal, the former aggrieved by the inclusion of the whole of the properties comprised in the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests intended for the benefit of the deities and the charities; and that the interest in the property corresponding to the benefit retained by the settlor was not the subject-matter of the dispositions at all; (b) Secondly, that, even if both the documents might admit of being called " settlements " in a wider sense the properties dealt with thereunder were not " settled property " within the meaning of section 2(19) as there was no intervening limited interest before a final vestiture of ownership ; and (c) Thirdly, that, at all events, what must be held to attract and fall within the mischief of section 12(1) and be deemed to pass on the death would only be the value of such share as corresponds or is referable to the quantum of interest so reserved by the settlor, namely, 5/16ths share in the properties covered by the first document and 1/2 share in the properties comprised in the second document, and not the entire value of all the properties. Shri C. M. Lodha, learned senior counsel for the Revenue, submitted that this case was a frank case of what, by definition, attracted the wider net of section 12(1) and that resort to the implications of " settled prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ath for the purpose of section 10 of the Act. It is these aspects which mark the distinction between the two leading cases, namely, Chick's case [1959] 37 ITR (ED) 89 (PC) and Munro's case [1934] AC 61. As we shall indicate presently, Chick's case falls within the first category while Munro's case falls within the other category." Again, in CED v. R. V. Viswanathan [1976] 105 ITR 653 (SC), it was observed (pp. 660, 662 of 105 ITR): "The question as to whether gifted property should be held to be part of the estate of the deceased-donor passing on his death for the purpose of section 10 of the Act is not always free from difficulty. It would depend upon the fact as to what precisely was the subject-matter of the gift and whether the gift was of an absolute nature or whether it was subject to certain rights. There is a fine but real distinction between the two types of cases... ... To put it in other words, if the deceased owner delimits the interest he is parting with and possesses and enjoys some benefit in the property not on account of the interest parted with but because of the interest still retained by him, the interest parted with shall not be deemed to be part of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing under a " settlement " in which the settlor had reserved to himself an interest in such property either expressly or by implication. Apparently, on its language, the section does not draw upon the incidents and implications of " settled property " for the satisfaction of its requirements. The passing of property under a " settlement ", which means It any disposition including a dedication or endowment whereby property is settled " coupled with a reservation of an interest in the property, would suffice. The further incident that the properties covered by the settlement must in addition partake of the character of " settled property " and accordingly, should stand " limited in trust for any person, natural or juridical, by way of succession ", etc., are not to be held as part of the requirements of section 12(1). Those incidents of " settled property " need not be imported into the ingredients of section 12(1) which would be satisfied if there is a " settlement " as defined under the second part of section 2(19) and if there is reservation of an interest by the settlor in addition. The two deeds clearly answer the description of " settlement " as defined under section 2(19), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element in the shebait right which has the legal characteristics of property: but shebaitship is property of a peculiar and anomalous character, and it is difficult to say that it comes under the category of immovable property as it is known in law... " It is true that the reservation of " interest ", so as to attract section 12(1), must be in the property as such and that mere collateral benefits reserved by the settlor emanating from some other property or some other source, independent of the property so settled, will not attract the section. In CED v. R. Kanakasabai [1973] 89 ITR 251 (SC) at p. 257, this court, in the context of section 10, observed : " The provisions for annual payments and maintenance made in the deeds as seen earlier are not charged on the properties settled. Hence the deceased cannot be said to have retained any interest in the properties settled. Therefore, it cannot be said that he retained any benefit either in the properties settled or in respect of their possession. " But in the present case, the benefits reserved emanate from the very properties constituting the subject-matter of the settlements and cannot be said to be collateral in their natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y must be considered to be ' settled property ' and the wakf, being a dedication or endowment, must be considered to be a settlement within the meaning of section 2(19). Inasmuch as the property comprised in the Wakf passes under a settlement, it is property which falls within the scope of section 12. " The terms of the two documents in our opinion satisfy even this extended requirement of the case. What remains to be considered is the third contention of Dr. Ghosh. Learned counsel says that, at all events, all the properties covered by the two settlements cannot be held to pass under section 12(1) but only the value of the share of the properties corresponding to the benefit reserved must be held to pass. These are again certain fallacies in some of the assumptions basic to this contention. The quantum of the interest reserved does not determine the extent of the property passing under section 12(1). This is not a case where several distinct properties or parcels (of properties) are settled and a beneficial interest is reserved out of one alone when it might be possible to predicate that all properties comprised in such settlement, which must be held to be composite deed deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised in his favour, either partly or entirely, and that in my judgment is exactly the position that Major Alfred Stourton was in this case. He had no legal right to force the trustees to give him anything; at the same time he had in a colloquial sense an interest in the estate, because it was an estate out of which something might be allotted to him in the discretion of the trustees. Whether that is an interest within the meaning of the Act of 1881 has, think, been determined by Attorney-General v. Heywood [1887] 19 QBD 326 and the decision has stood since the year 1887, a period of forty-three years. " There is thus no substance in the third contention either. In the result, for the foregoing reasons, Civil Appeal No. 1251 of 1975, of the Deputy Controller of the Estate Duty is allowed and the question referred for our opinion is answered in the affirmative and against the assessee. We hold that while the High Court was right in its view that the properties covered by the deed dated September 21, 1953, were required to be brought to charge under section 12(1), we are unable to agree with the reasoning of, and the conclusion reached by, the High Court in regard to the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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