Reservation of income under a wakf deed amounted to retained interest, triggering estate duty on the settlor's death.

A reservation of a defined monthly share in the surplus income of settled properties under a wakf deed was treated as a reservation of interest in the property, not a mere independent charge. Section 12(1) of the Estate Duty Act applies where a settlement reserves an interest expressly or by implication for life or for a period linked to death, and the Explanation extends this to maintenance reservations for the settlor and relatives. On that construction, clause 13 secured the settlor a share in the income of the settled properties, so the properties were deemed to pass on his death and were liable to estate duty.

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Issues: Whether the reservation of a monthly share in the surplus income of the settled properties under the wakf deed amounted to a reservation of interest in the property so as to attract section 12(1) of the Estate Duty Act, 1953 and render the settled properties liable to estate duty on the settlor's death.

Analysis: Section 12(1) deems property to pass on the settlor's death where, under a settlement not taking effect as a will, an interest in the property is reserved expressly or by implication for life or for a period determinable by reference to death. The Explanation treats a reservation for the maintenance of the settlor and his relatives as a reservation of interest in the settlor himself. Clause 13 of the wakf deed required the surplus income, after specified deductions, to be divided among the family, including the settlor, and therefore secured to him a defined share out of the income of the settled properties. Such a direction was held to be a reservation of interest in the property itself, and not a mere charge unconnected with the settlement. The cited authorities supporting this construction were preferred to the case relied upon by the accountable person, which was distinguished on its facts.

Conclusion: The reservation under clause 13 attracted section 12(1); the settled properties were deemed to pass on the settlor's death, and the inclusion of the value for estate duty was valid. The answer was in the affirmative, in favour of the Revenue and against the accountable person.

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