Reserved life interest in wakf settlement brought whole settled property within estate duty, despite partial ordinary passing on death.

A wakf settlement reserving a life interest to the settlor fell within section 12 of the Estate Duty Act, 1953, because the reservation covered every item of the settled property during her lifetime. The court rejected the argument that section 12 was excluded where part of the property also answered the ordinary meaning of property passing on death, holding that the deeming fiction in section 12 must operate on the whole settled property. It also held that the instrument was not a gift attracting section 10. Accordingly, the entire wakf property, including the sum of Rs. 1 lakh, was chargeable to estate duty.

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Issues: Whether, on the settlor's death, the entire wakf property including the sum of Rs. 1 lakh was chargeable to estate duty under section 12 of the Estate Duty Act, 1953, or only 621/2% of the corpus corresponding to the reserved life interest.

Analysis: Section 5 is the charging provision, and by section 3(3) the expression "property passing on the death" includes property deemed to pass. Section 12 specifically governs settlements where the settlor reserves an interest for life or a period determinable by reference to death, and the Explanation treats maintenance reservations for relatives as a reservation for the settlor himself. The wakf deed reserved to the settlor an interest in every item of the settled property during her lifetime. The Court rejected the contention that actual passing under section 5 excluded the operation of section 12, and held that the English authorities on the supposed mutual exclusivity of charging and deeming provisions did not justify cutting down the clear language of section 12. The Court further held that the instrument was not a gift attracting section 10, but a settlement with reservation squarely falling under section 12.

Conclusion: The entire wakf property, including the sum of Rs. 1 lakh, was chargeable to estate duty and not merely 621/2% of the corpus.

Ratio Decidendi: Where a settlement reserves an interest in the settled property for life, section 12 applies to the whole settled property and its deeming fiction must be given full effect notwithstanding that some portion may also answer the ordinary meaning of property passing on death.

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