Estate duty on trust life interest upheld where a limited interest determined by operation of law and section 24 exemption failed.

A limited interest in trust property that determines by operation of law, even without any voluntary act by the life tenant, can fall within section 11 of the Estate Duty Act, 1953 when the statutory conditions are met; the trust corpus attributable to the deceased's life interest was therefore chargeable to estate duty. The exemption in section 24(1) was unavailable because it applies only where property reverts to the disponer who created the disposition during that disponer's lifetime, which was not the position here. Section 7 did not apply, as post-cesser payments were merely gratuitous and did not create a taxable interest.

---

---

Issues: (i) whether the value of the trust corpus attributable to the deceased's life interest was chargeable to estate duty under section 11 of the Estate Duty Act, 1953; (ii) whether the exemption for property reverting to the disponer under section 24(1) applied; (iii) whether any part of the property was includible under section 7 of the Estate Duty Act, 1953.

Issue (i): whether the value of the trust corpus attributable to the deceased's life interest was chargeable to estate duty under section 11 of the Estate Duty Act, 1953.

Analysis: The deceased's right to receive income from the trust ceased under the Bombay repealing legislation, and section 11 applied to a limited interest that had been disposed of or determined after becoming an interest in possession. The words used in the section were held wide enough to cover determination otherwise than by the voluntary act of the life tenant. The section was not confined to a life interest terminable only on death, and its operation did not depend on the continued subsistence of the trust after cesser of the interest.

Conclusion: The charge to estate duty under section 11 was attracted and the value of the 1/3rd share was rightly brought to duty, against the official trustee and in favour of the revenue.

Issue (ii): whether the exemption for property reverting to the disponer under section 24(1) applied.

Analysis: Section 24(1) applies only where the reverter is to the disponer who created the disposition and where the reverter occurs during the disponer's lifetime. The reversion contended for was not to the settlor and, in any event, the settlor had died long before the relevant event.

Conclusion: Section 24(1) was not applicable, against the official trustee and in favour of the revenue.

Issue (iii): whether any part of the property was includible under section 7 of the Estate Duty Act, 1953.

Analysis: After the statutory cesser of the deceased's interest, she had no legal entitlement to income or corpus, and any payments made thereafter were merely gratuitous. The mere fact of actual receipt after the effective date did not create a taxable interest under section 7.

Conclusion: Section 7 did not apply, in favour of the official trustee on this limited point but without affecting the final result.

Final Conclusion: The reference was answered in the affirmative, sustaining the estate duty charge under section 11 and rejecting the claimed exemption under section 24(1), while section 7 was held inapplicable on the facts.

Ratio Decidendi: A limited interest that has determined by operation of law, even without any voluntary act by the life tenant, falls within section 11 of the Estate Duty Act, 1953 if the statutory conditions are satisfied; section 24(1) applies only to a reverter to the disponer during the disponer's lifetime.

---