Reserved power of revocation must remain exercisable for estate duty to apply to settled trust property.

Section 12 of the Estate Duty Act, 1953 applies only where the settlor has an effective reserved power to restore or reclaim the settled property. A trust deed is not governed by the rules applicable to gifts, and a revocation clause does not invalidate the trust or the three certainties; it remains dormant until exercised. On the facts, the charitable trusts were amalgamated into one arrangement, so the settlor could no longer revoke his own trusts without affecting interlinked trusts created by others. The later deeds, being contingent on revocation of the earlier trusts, also became inoperative. Section 12 was therefore not attracted to the trust properties.

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Issues: Whether the value of the trust properties settled by the deceased was includible in his dutiable estate under section 12 of the Estate Duty Act, 1953, having regard to the revocation clauses in the trust deeds and the later amalgamation of the trusts.

Analysis: Section 12 of the Estate Duty Act, 1953 deems property to pass on death where the settlor has reserved a right by which he can restore to himself or reclaim the absolute interest in the settled property. A trust deed, however, is not a gift within the meaning of sections 122 and 126 of the Transfer of Property Act, 1882, and the provisions governing gifts do not govern the creation or validity of a trust. The reservation of a power of revocation does not affect the existence of the trust itself or the three certainties required for a valid trust, since the power remains dormant until exercised. The charitable trusts created by deed were not governed in form by Hindu law merely because the settlor was a Hindu; they were governed by the ordinary law of trusts. On the facts, the earlier trusts were blended and amalgamated into one trust, and from that date the settlor could not revoke his own trusts without also affecting the trusts created by others. The later deeds of trust, being expressly contingent upon revocation of the earlier trusts, also became inoperative once the earlier revocation power ceased to be exercisable. The contention based on public policy and perpetuity was not necessary for decision in view of this result.

Conclusion: The revocation power had become inoperative and ineffectual, so section 12 of the Estate Duty Act, 1953 was not attracted to the trust properties.

Final Conclusion: The trust properties were not includible in the deceased settlor's dutiable estate, and the question referred was answered against the Department.

Ratio Decidendi: Where a reserved power of revocation has ceased to be exercisable because the trusts have been amalgamated and the settlor can no longer revoke his own trusts without defeating other interlinked trusts, section 12 of the Estate Duty Act, 1953 is not attracted to the settled property.

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