TaxTMI 
TaxTMI 
1988 (5) TMI 36
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....ely. In the proceedings, the nature and effect of the dispositions made under the deeds of the trust dated September 21, 1953, and October 4, 1959, fell for consideration. Under the deed dated September 21, 1953, Satya Charan Srimani, as settlor, transferred upon trust to himself as a trustee 4 items of immovable property, viz., 130 and 133, Upper Circular Board ; and 32/5 and 32/6, Beadon Street, Calcutta. The objects and purposes of the trust, broadly stated, were : (i) the conduct of the daily worship and sevas of the deity, Sree Sridhar Jiu ; (ii) the carrying out of certain charitable acts, deeds and things mentioned in schedule B of the deed; (iii) the making of provision for the maintenance of himself and the persons mentioned in the said deed. The trustee was required, after defraying taxes and other outgoings, to accumulate 1/4th of the net income to be set apart for the purposes of effecting certain additions and alterations to the properties ; to make over another 1/4th of the net income to the shebait for the conduct of the daily and periodical pujas, worship and rituals of the said deity ; another 1/4th for the charities mentioned in the deed and the remaining 1/4....
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....al, Calcutta, in the second appeal, held that the entire subject-matter of the two deeds must be held, or deemed, to pass on the death. The value of the properties constituting the subject-matter of the deed dated September 21, 1953, estimated at Rs. 4,69,287 and those constituting the subject-matter of the deed dated October 4, 1959, at Rs. 1,27,400 were accordingly included in the principal value of the estate passing on death. On February 20, 1971, the Tribunal, at the instance of the accountable person, stated a case and referred under section 64 of the Act the following question of law for the opinion of the High Court: " Whether, on the facts and in the circumstances of the case and on a proper interpretation of the trust deeds dated September 21, 1953, and October 4, 1959, the properties comprised therein are dutiable under section 12(1) of the Act ?" A Division Bench of the High Court, by its judgment dated October 11, 1974, held that so far as the four properties comprised in the deed dated September 21, 1953, were concerned, they were " settled property " within the meaning of section 2(19) and that section 12(1) was attracted. The High Court observed: "........ So fa....
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.... by the exclusion of the properties constituting the subject-matter of the trust deed dated October 4, 1959, from the principal value of the estate. We have heard Dr. S. Ghosh, learned Senior Advocate, for the accountable person, and Shri C. M. Lodha, learned Senior Advocate, for the Revenue. Having regard to the career of this litigation and the varying shades of legal thought attracted by it both in the statutory appeals and before the High Court, one is tempted to recall the reflections of Diplock L.J. in In re Kilpatrick's case [1966] 2 WLR 1346, 1370 (CA) : " As in nearly all appeals about estate duty, I reach my decision without confidence. Were I a betting man, I should lay the odds on its being right at 6 to 4 (i.e., 3 to 2) on or against. If ever a branch of law called for reform in 1966, it is the law relating to estate duty. It ought to be certain : it ought to be sensible-it is neither..," In In re Weir's Settlement [1968] 2 All ER 1241, 1244 (Ch D), Cross J. had said : " The facts are simple enough, but it will not surprise anyone acquainted with this branch of the law to learn that the argument lasted for over four days during which counsel at all events wasted n....
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.... meaning of section 12(1) coupled with the reservation of an interest however small. Learned counsel submitted that the distinction made by the High Court between the properties covered by the deed dated September 21, 1953, on the one hand and those covered under the deed dated October 4, 1959, on the other, is, in the ultimate analysis, a distinction without a difference. The first contention of Dr. Ghosh pertaining to what, according to him, should be held to be the subject-matter of the trust deeds, is essentially a matter of construction of the deeds. There is, no doubt, discernible difference between a case of settlement of property with reservation of a benefit to the settlor on the one hand and the case where what is settled is only a share or interest or part of the property excluding the part or the share corresponding to the benefit that the settlor has chosen to retain. There is, indeed, no transfer at all in the latter case. Dr. Ghosh says that there is really no transfer of the share corresponding to the benefit reserved in both the cases. This is the construction learned counsel wants the court to place on the two deeds. In St. Aubyn v. Attorney-General [1951] 2 All....
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....that by retaining something which he has never given, a donor does not bring himself within the mischief of that section, nor would the provisions of the section be attracted because of some benefit accruing to the donor on account of what was retained by him..." In the present case, any possibilities of such an argument are ruled out by the explicit terms of the deeds. The subject-matter of the deeds are not, respectively, 11/16ths share and 1/2 share in the properties. The whole of the properties are conveyed upon trust. There is, therefore, no scope for this submission. The first contention of Dr. Ghosh, therefore, fails. The second contention of Dr. Ghosh is that the provisions of section 12(1) are not attracted as the properties do not fill the bill as " settled properties " within the meaning of section 2(19) of the Act. Section 2(19) which defines " settled properties " and " settlement respectively, provides: "' settled property ' means property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession, whether the settlement took effect before or after the commencement of this Act ; and 'settlement' means any disposition, includi....
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...., reservations of the benefit of the income from the trust properties were made in favour of the settlor. These reservations by themselves, in our opinion, bring the properties within the net of section 12(1). This should dispose of the second contention of Dr. Ghosh. In addition, the settlor in this case constituted himself during his lifetime and thereafter constituted his heirs as the shebaits of the two deities. Indeed, where, while endowing properties to a deity, the settlor stipulates that he shall during his lifetime and thereafter his heirs be the shebaits of the deity, the settlor can possibly be said to provide not only for certain duties to be vested in connection with the endowment but also secures a beneficial interest in the property. The following observations of Mukherjea J. in Angurbala Mullick v. Debabrata Mullick, AIR 1951 SC 293, 296, as to the nature of the office of a shebait may be recalled: "The exact legal position of a shebait may not be capable of precise definition but its implications are fairly well established. It is settled by the pronouncement of the judicial Committee in Vidya Varuti v. Baluswami [1922] AIR 1922 PC 123; 481A 302, that the relati....
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....tion " would require to be kept clearly distinguished. Having regard to the special nature of the office of a shebait and the rights and interests that go with it, it is possible to contend that when a settlor endows property to an idol and reserves the right of shebaitship to himself, he would be reserving an interest in the property. It is, no doubt, true that while dealing with a case of cesser of interest, under section 7 of the Act, of an elected Mahant in Math properties, it was held by this court that no interest passes on the death of a Mahant duly elected, and that the provisions of the Act are not attracted (see CED v. Mahant Umesh Narain Puri [1982] 135 ITR 139 (SC). But the case of a settlor who himself endows property to an idol and constitutes himself a shebait is obviously different. But we need not, in this case, finally pronounce on the effect of reservation of shebaitship by a settlor in the context of section 12(1). But even to the extent the argument that for the purposes of section 12(1), the property must answer the description of " settled property goes the expression " by way of succession " import of the words were stated in Attorney-General v. Owen [1899....
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....ttlor's benefit. Under section 12(1), if the deceased makes settlement and reserves for himself an interest therein for life or for any period determinable with reference to death, the whole of the property so settled would be deemed to pass. The interest reserved might be very small indeed; but, however small the interest, when by virtue of such a reservation a settlement falls within the purview of section 12, the whole property would be deemed to pass. This is what was clarified in Attorney-General v. Earl Grey [1898] 1 QB 318 at p. 325: " But it is to be observed that the words are 'an interest in such property'. Any interest however small will do, provided it issues out of such property that is, out of the property sought to be taxed. agree that if several parcels of land be given by one and the same deed of gift, and an interest be reserved to the donor out of one of those parcels only, estate duty would not be payable upon the whole subject matter of the gift, but only out of that specific portion in which the interest is expressed to be reserved. But that is not the case here " The expression " interest " in section 12(1) is also not used in restrictive sense. Wills J. in....