TaxTMI 
TaxTMI 
1998 (7) TMI 89
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....er costs, charges, expenses and outgoings of and incidental to the trusts of these presents and the administration thereof; (c) during the lifetime of the settlor to defray the expenses of Haj of the settlor and of such of the members of his family as he may take with him and of their visit and pilgrimage to various Mohammedan Shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending moneys for charitable purposes at such places and for such other religious or charitable purposes as the settlor in his absolute discretion may, from time to time, think fit and require out of the income as well as the corpus of the trust fund in such manner and to such extent as the settlor may from time to time direct and for all or any of such purposes as aforesaid to pay such moneys out of the income of the corpus of the trust fund as the settlor may from time to time require." The settlor appointed himself as one of the trustees along with other trustees. The settlor died on February 24, 1967. The Assistant Controller of Estate Duty held that the settlor was not completely excluded from enjoying the benefit of the corpus of the trust and hence under section 10 o....
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....t, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death : Provided further........." This section, as its marginal note suggests, deals with gifts whenever made where the donor is not entirely excluded. Under the main part of the section, any property taken under any gift, if bona fide possession and enjoyment is not immediately assumed by the donee and retained by him to the exclusion of the donor, would be property deemed to pass on the donor's death to the extent of such retention of benefit. This section also provides that if any benefit in the property given as a gift is retained by the donor by contract or otherwise, that benefit shall be deemed to pass on the donor's death. The proviso lays down that if after the date of the gift, either by means of an express surrender of the retained benefit by the donor or otherwise, the property is enjoyed to the exclusion of the donor for at least two years before his death, such property shall not be deemed to pass on the death ....
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....ion 12 expressly provides that where a settlor reserves an interest in the settled property for the maintenance of himself or any of his relatives, he shall be deemed to reserve an interest in the settled property for himself within the meaning of section 12(1). In the present case, however, the settlor has not reserved any right to receive maintenance either for himself or for any of his relatives. Hence, the Explanation is not relevant here. However, the settlor is entitled to have Haj expenses of himself and any accompanying family members paid out of the trust fund. The settlor has also reserved the right to direct the religious and charitable purposes on which the trust fund may be spent. These are not benefits which accrue directly to the settlor himself, as in the case of his own maintenance. The pilgrimage expenses, however, of the deceased and any accompanying family members are to be defrayed out of the trust fund if and when the settlor goes on such a pilgrimage. As a matter of fact the deceased never went on any pilgrimage as specified in clause 3(c) and did not receive any benefit directly or indirectly under the said trust. In our view, the direction in the trust deed....
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....f. As we have set out already, section 10 in any case, will not be attracted in the present case. The application of section 12 was considered by this court in the case of Dipti Narayan Srimani v. CED [1988] 172 ITR 476. In this case, the settlor executed two deeds of trust. In the first deed, the settlor transferred to himself four items of property to be held on trust; (1) to set apart 1/4th of the net income for effecting certain additions and alterations to the property; (2) to make over another 1/4th of the net income to the shebait of a deity; (3) to apply 1/4th of the net income to certain charities; and (4) to apply the remaining 1/4th for the personal benefit of the settlor during his lifetime and to his heirs thereafter. In the second deed, the settlor transferred six other items of property to himself and his son as trustees : (1) to pay 1/4th of the net income to the shebait of another deity, (2) to spend 1/4th on charities, and (3) to utilise the balance of one-half for the development of two of the properties and after completion of development, for the benefit of the settlor during his lifetime and his heirs thereafter. The settlor provided one room in one of the pr....
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....ttlor for himself. In the case of Ravindra Gunvantlal v. CED [1969] 74 ITR 498, the Gujarat High Court (P. N. Bhagwati C. J., as he then was, and Divan J.) considered a case where there was a joint settlement by the deceased and his wife in respect of certain properties belonging separately to each of them. The deceased and his wife were appointed as trustees and the settlement deed provided that until the death of the last survivor of the deceased and his three sons, the trustees shall apply the net income for and towards maintenance and personal support of all or such one or more exclusively of the other or others of the deceased, his wife, his children and the widow and issues, if any, of any of his sons. The application was to be in such shares and proportions as the trustees may from time to time think proper. The trustees also had the absolute discretion to pay the whole of the net income of the settled property to any one or more of these persons to the exclusion of the others. The Gujarat High Court held that where a settlor is one of the objects of a discretionary trust and the trustees are given an absolute discretion to pay the income of the settled properties to one or....