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Issues: Whether the trust property settled under the deed was includible in the principal value of the estate of the deceased under section 12(1) of the Estate Duty Act, 1953, including the effect of the Explanation to that provision.
Analysis: Section 12(1) applies only where the settlor has reserved an interest in the settled property, either expressly or by implication, or has reserved a power to restore to himself or reclaim the absolute interest in the property. On the facts, neither the temporary nor the permanent objects of the trust reserved any interest in the property to the settlor. The power to amend or cancel the temporary objects did not confer any right on the settlor to divert the property back to himself; any savings were required to be applied only to the permanent objects. The Explanation could not be expanded by reading the word "and" as "or". It was intended to cover a reservation of interest for the settlor and his relatives, and not a case where the reservation was only for relatives.
Conclusion: The trust property was not includible under section 12(1) of the Estate Duty Act, 1953, and the question was answered in the negative in favour of the accountable person.
Ratio Decidendi: A trust property is not deemed to pass on the settlor's death under section 12(1) unless the settlor has reserved an interest in the property or a power to reclaim it; the Explanation cannot be stretched by substituting "or" for "and".
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