Estate duty inclusion of trust property where donor retained benefit and enjoyed trust income in substance.

Section 10 of the Estate Duty Act applied because the gifted trust properties were not taken in bona fide possession and enjoyment to the entire exclusion of the donor. Continuance as trustee, by itself, did not defeat exclusion, but the decisive facts were that the donor retained a right to annual sums and had in fact drawn substantial amounts from trust funds for his own purposes over time. Those drawings were treated as enjoyment of the trust income, even if described as loans or as transactions in breach of trust. A reserved right to remuneration also showed that benefit remained available under the trust deed. The trust properties were therefore includible in the estate duty assessment.

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Issues: Whether the properties dedicated to the trust were liable to be included in the estate duty assessment under section 10 of the Estate Duty Act, 1953, on the ground that the donor was not entirely excluded from possession and enjoyment of the gifted property or from benefit therefrom.

Analysis: Section 10 applies where gifted property is not immediately taken in bona fide possession and enjoyment by the donee and retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise. A donor's continuance as trustee does not, by itself, prevent exclusion, but the factual inquiry remains whether the donor was in substance excluded from enjoyment. Here, the deceased had retained a right to take annual sums from the trust and, more importantly, had in fact drawn substantial amounts from the trust funds for his own purposes over the years. Those drawings were held to constitute enjoyment of the income of the trust property, notwithstanding that they were characterised as loans and even if the transactions were objectionable or in breach of trust. The existence of a reserved right to remuneration also showed that a benefit to the donor remained available under the trust deed. The provision in section 10 is attracted if the donor was not in fact entirely excluded, and the liability is not confined pro tanto where the donor enjoyed income from the trust as a whole in a manner not referable to any separable part of the property.

Conclusion: Section 10 applied and the trust properties were includible in the estate duty assessment; the question was answered against the accountable person and in favour of the Revenue.

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