Estate duty treatment of retained interest and reserved residential use: only the deceased's limited interest was includible, with house share exempted.

Section 10 of the Estate Duty Act does not bring the whole gifted property into the estate where the deceased transferred the property but retained only a limited reversionary interest; in that situation, only the value of the retained interest is includible under section 12. A share in an ancestral house may also qualify for exemption under section 33(1)(n) if it was kept reserved for the deceased's residential use, even though the deceased was not actually residing there at death. The estate duty computation was therefore confined to the retained interest in the gifted property and excluded the exempt house share.

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Issues: (i) Whether section 10 of the Estate Duty Act, 1953 applied to the gifted property so as to include the value of the entire property in the deceased's estate, or whether only the value of the deceased's retained interest was includible under section 12. (ii) Whether the deceased's share in the ancestral house was exempt under section 33(1)(n) on the ground that it was kept for use by the deceased for residence.

Issue (i): Whether section 10 of the Estate Duty Act, 1953 applied to the gifted property so as to include the value of the entire property in the deceased's estate, or whether only the value of the deceased's retained interest was includible under section 12.

Analysis: The gift deed transferred the property to the school, but the donor retained a limited reversionary interest for the event of the school's non-existence. On the facts, the Tribunal treated the donor's surviving interest as one falling outside section 10 and as an interest whose value alone could be brought in under section 12. The valuation fixed for that retained interest was found reasonable.

Conclusion: Section 10 did not apply, and only the value of the deceased's retained interest was includible in the estate.

Issue (ii): Whether the deceased's share in the ancestral house was exempt under section 33(1)(n) on the ground that it was kept for use by the deceased for residence.

Analysis: The Tribunal accepted that the house had been kept reserved for the deceased's residential use, and that the expression "use" in section 33(1)(n) was wide enough to cover such reserved residential availability, notwithstanding the deceased's non-residence at the time of death. The factual appreciation supported exemption of the share in the house.

Conclusion: The share in the ancestral house was exempt under section 33(1)(n).

Final Conclusion: Both referred questions were answered in favour of the accountable person, with the estate duty assessment reduced by excluding the exempt residential house share and limiting inclusion to the deceased's retained interest in the gifted property.

Ratio Decidendi: Where a transfer is accompanied only by a limited reversionary interest, section 10 does not apply if the deceased did not retain possession or enjoyment in the manner contemplated by the provision, and a house kept reserved for residential use may qualify for exemption even if the deceased was not actually residing there at death.

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