Reserved usufruct under a Muslim settlement deed was valid, and the wife's income right formed an estate duty interest.

A Muslim settlement deed was construed as an absolute gift of the corpus with a valid reservation of usufruct first for the settlor and then for his wife. The reservation of income was held not to offend Muslim law or Section 11 of the Transfer of Property Act, 1882, because the absolute transfer related only to the corpus and the reserved right to future income was a permissible beneficial arrangement. The wife's right to receive income was also treated as an enforceable interest in the property. On her death, that interest ceased and the value of the property was includible in her estate under the Estate Duty Act, 1953.

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Issues: (i) Whether, on a proper construction of the settlement deed, the reservation of income in favour of the settlor and thereafter in favour of his wife was invalid under Muslim law or Section 11 of the Transfer of Property Act, 1882. (ii) Whether the wife's right to receive the income constituted an interest in the property so that, on her death, the property became includible in her estate under the Estate Duty Act, 1953.

Issue (i): Whether, on a proper construction of the settlement deed, the reservation of income in favour of the settlor and thereafter in favour of his wife was invalid under Muslim law or Section 11 of the Transfer of Property Act, 1882.

Analysis: The settlement deed was read as making an absolute gift of the corpus to the donee while reserving the usufruct for the settlor during his lifetime and, after his death, for his wife during her lifetime. Under Muslim law, a distinction is recognised between corpus and usufruct, and a valid reservation may be made as to the income without offending the rule against conditions repugnant to an absolute gift of corpus. The reservation in favour of the wife was treated as a present grant of the right to future income, not as an impermissible future gift. Section 11 of the Transfer of Property Act, 1882 did not apply because the absolute transfer was only of the corpus and the obligation to pay income was not destructive of that transfer.

Conclusion: The reservation of income was valid and the donee did not obtain an unrestricted right to the usufruct during the reserved periods.

Issue (ii): Whether the wife's right to receive the income constituted an interest in the property so that, on her death, the property became includible in her estate under the Estate Duty Act, 1953.

Analysis: The right to receive income from a specified property was treated as an enforceable beneficial interest attaching to the property, not as a mere personal promise. The fact that the right was not actually enforced or enjoyed during the wife's lifetime did not extinguish it. On her death, that interest ceased and the donee correspondingly became benefited by the cessation. The obligation was therefore capable of being valued and brought within the charging provision governing property passing on death.

Conclusion: The wife had an interest in the property which ceased on her death, and the value of the property was includible in the estate.

Final Conclusion: The reference was answered against the accountable person and in favour of the Revenue, with the property held includible in the estate of the deceased.

Ratio Decidendi: A Muslim donor may validly make an absolute gift of the corpus while reserving the usufruct for himself or another for a limited period, and a reserved right to receive income from specified property constitutes an enforceable interest in that property for estate duty purposes when it ceases on death.

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