Reserved life interest and limited management powers under a settlement determine estate duty inclusion under the Estate Duty Act.

A discretionary beneficial entitlement under a settlement, combined with controlling powers as managing trustee and a clause enabling payments for the settlor's own benefit from income or corpus, was treated as a reserved life interest and attracted inclusion under section 12(1) of the Estate Duty Act, 1953. By contrast, property settled by Bai Jasud was not caught by section 12 because that provision applies only to settlements made by the deceased, and it was not includible under section 6 because the deceased had only limited management and conditional payment powers, not a general power of disposition or competence to dispose of the property at death.

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Issues: (i) Whether the properties settled by the deceased were liable to inclusion in the principal value of the estate under section 12(1) of the Estate Duty Act, 1953. (ii) Whether the properties settled by Bai Jasud were liable to inclusion in the principal value of the estate under section 6 or section 12 of the Estate Duty Act, 1953.

Issue (i): Whether the properties settled by the deceased were liable to inclusion in the principal value of the estate under section 12(1) of the Estate Duty Act, 1953.

Analysis: Section 12(1) applies where, under a settlement made by the deceased, an interest in the settled property for life or a period determinable by death is reserved expressly or by implication. The settlement gave the deceased a beneficial entitlement under a discretionary trust, and also vested in him controlling powers as managing trustee with authority over administration and distribution. Clause 8 further enabled him, subject to the stated contingencies, to require payments for his own benefit from income or corpus. These features amounted to a reserved interest in the settled properties for life.

Conclusion: The properties settled by the deceased were liable to inclusion under section 12(1) of the Estate Duty Act, 1953.

Issue (ii): Whether the properties settled by Bai Jasud were liable to inclusion in the principal value of the estate under section 6 or section 12 of the Estate Duty Act, 1953.

Analysis: Section 12(1) is confined to property passing under a settlement made by the deceased and therefore could not apply to property settled by Bai Jasud. Section 6 applies only where the deceased was competent to dispose of the property at death. The powers in clauses 8 and 10 were limited powers of management or conditional payment for specified purposes and did not confer an estate or general power enabling the deceased to dispose of the settled properties as he pleased. The deceased was therefore not competent to dispose of that property within section 6.

Conclusion: The properties settled by Bai Jasud were not liable to inclusion under section 6 or section 12 of the Estate Duty Act, 1953.

Final Conclusion: The reference was answered by holding that the property settled by the deceased was includible in the estate, while the property settled by Bai Jasud was not includible under either of the cited provisions.

Ratio Decidendi: A discretionary beneficial entitlement coupled with controlling powers under a settlement can amount to a reserved life interest attracting section 12(1), but conditional powers of management or limited payment do not by themselves make the settlor competent to dispose of the property within section 6.

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