Skip to content


Monie Ardeshir Baria and Piloo F. Antia, Executrices of the Estate of Ardeshir D. Baria and ors. Vs. Controller of Estate Duty, Bombay - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberEstate Duty Reference No. 14 of 1965
Judge
Reported in[1977]106ITR203(Bom)
ActsEstate Duty Act - Sections 22, 44 and 64(1); Estate Duty (Amendment) Act, 1958; Trusts Act - Sections 63; Custom and Inland Revenue Act, 1881; Customs and Inland Revenue Act, 1889; New South Wales Act - Sections 100
AppellantMonie Ardeshir Baria and Piloo F. Antia, Executrices of the Estate of Ardeshir D. Baria and ors.
RespondentController of Estate Duty, Bombay
Excerpt:
direct taxation - nature of credit - sections 22, 16 (2) (a), 16 (2) (b), 44, 46 (1) (a) and 64 (1) of estate duty act, estate duty (amendment) duty, 1958 and section 63 of trusts act - trust created by deceased in name of wife and children - whether amount lying to credit of trusts held by deceased and not debts due by deceased - money received by beneficiary from trustee and deposited with trustee in personal account of beneficiary maintained by trusts - moneys credited by trustees to such account with consent of beneficiary concerned who did not desire to receive actual payment not impressed with trust - in event of death of trustee such amount are debts due by trustee within terms of section 44 which would be subject to abatement under sections 46 (1) (a), 16 (2) (a) and 16 (2) (b) -.....desai, j.1. this is a reference made to us by the income-tax appellate tribunal, bombay bench 'b', bombay, under section 64(1) of the estate duty act. by applications made by 9 accountable persons the tribunal was required to refer to the high court certain questions of law which arose out of the tribunal's consolidated order in estate duty appeals nos. 117 to 125 of 1962-63. since in the opinion of the tribunal certain questions of law did arise from the said order, reference was made to the high court by the tribunal and 7 questions have been referred to us for our consideration. in our opinion, these question do not properly bring out the nature of the controversy between the controller of estate duty and the accountable persons and hence we have reframed the said questions. however,.....
Judgment:

Desai, J.

1. This is a reference made to us by the Income-tax Appellate Tribunal, Bombay Bench 'B', Bombay, under section 64(1) of the Estate Duty Act. By applications made by 9 accountable persons the Tribunal was required to refer to the High Court certain questions of law which arose out of the Tribunal's consolidated order in Estate Duty Appeals Nos. 117 to 125 of 1962-63. Since in the opinion of the Tribunal certain questions of law did arise from the said order, reference was made to the High Court by the Tribunal and 7 questions have been referred to us for our consideration. In our opinion, these question do not properly bring out the nature of the controversy between the Controller of Estate Duty and the accountable persons and hence we have reframed the said questions. However, before setting down the questions as originally referred to us and us reframed by us, a few facts may be stated.

2. The reference relates to property which purportedly passed on the death of Ardeshir Dadabhai Baria (hereinafter referred to as the deceased), who died on 13th August, 1958. He left surviving behind him his widow, Mrs. Monie Baria, and two daughter, Mrs. Piloo Antia and Mrs. Khorshed Billimoria. Mrs. Piloo Antia at the time of death of her father, had two children, and son, Minoo, and one daughter, Laila. On 23rd October, 1930, the deceased handed over to certain trustees the sum of Rs. 3,60,000 for the benefit of his wife, Monie, and an indenture of trust in respect of the said amount was executed between the settlor and the said trustees on 7th November, 1931. A copy of this trust deed is to be found annexed to the statement of case as annexure 'A'. Similarly, on 31st December, 1930, the deceased set apart a sum of Rs. 2,00,000 for the benefit of his daughter, Piloo (called Pirozbai in the formal deed of trust) and in respect of the said amount a trust deed was made and executed by and between the settlor and the trustees on 31st January, 1932. A copy of the said trust deed is annexed as annexure 'B' to the statement of case. There was a similar settlement followed by a trust executed on 14th March, 1940, by the deceased for the benefit of his daughter, Khorshed. In this reference we are not concerned with this trust inasmuch as the liability to charge in respect of the amounts due under the said trust was accepted by the accountable person. The only controversy raised with which also we are not concerned was as regards the amount of tax payable by the trustees thereon. The deceased jointly with his wife created a fourth for the benefit of charity in the name of their late son, Rohinton. As regards this trust, in 1934, the deceased had handed over to the trustees the sum of Rs. 50,001 and a similar amount had been handed over to the trustees by his wife, Monie Baria; a further amount of Rs. 12,501 had been contributed by their relatives, making up in all the aggregated sum of Rs. 1,12,503. The formal deed of trust, however, by and between the settlers and the trustees was executed on 12th August, 1937, and a copy of the same is annexed to the statement of case as annexure 'C'.

3. As stated earlier, we are in this reference concerned only with the trusts for the benefit of Mrs. Monie A. Baria and Piloo Antia, and the charitable trust in the name of Rohinton Baria. The recitals in all the three trust deeds clearly indicate that the amounts stated had been handed over to the trustees (who included the deceased himself) on or before the execution of the respective trust deeds. Under the provisions of the deeds of trust the trustees were at liberty to keep the trust funds in the existing state of investment and had the power at such time or times as they considered fit to invest the same by lending the same to or depositing them with the deceased on interest or in the purchase of immovable properties or other investment. It was further provided that the trustees were to stand possessed of such investments and the income thereof upon such trust. The trust deeds, also provided that as long as the deceased continued to be a trustee, he would be the sole managing trustee and the powers given to the trustees including the power to convert and reinvest the trust funds from time to time should be deemed to vest absolutely in him during the time he continued as trustee thereof as if he were the sole trustee appointed by the respective trustees. At some point of time later on to the execution of the respective trust deeds (not specified in the statements of case or in the consolidated order of the Tribunal) The trust funds were deposited by the trustees with the deceased and the deceased was paying interest to the trustees in respect of such deposits. Originally, the rate of interest was 9% but was subsequently reduced to 7 1/2%. At the time of death of the deceased, i.e., on 13th August, 1958, the accounts of the respective trusts in the personal books of the deceased showed the following credit balances, viz. :

Rs.Account Monie A. Baria Trust 4,63,400Account Piloo A. Baria Trust 2,00,000Account Rohinton A. Baria Trust 1,20,117

4. In addition to these three accounts there were further accounts in the books of the trusts with which we are concerned, which may now be specified. According to paragraph 8 of the statement of case, Mrs. Monie A. Baria, who was the beneficiary under the trust created by the deed dated 7th November, 1931, received amounts from the trust from time to time, which amounts she deposited in her account with the deceased. This account may be described as the individual account of Monie A. Baria as distinguished from the trust account which was also in her name. According to the Tribunal, from this account Monie A. Baria had withdrawn from time to time amounts for purchases, jewellery, investment and for advances to others. It has been found by the Tribunal that the total amount received by her from the trust up to the date of death of the deceased was Rs. 9,61,632. It has been further found that out of such amount, an amount of Rs. 1,25,000 was gifted by her in 1955-56 to her grandson, Minoo, and sum of Rs. 1,00,000 to her grand-daughter, Laila; she (Monie) also gifted the amount of Rs. 67,948 to her daughter, Mrs. Khorshed Billimoria. It may be stated that in actual fact the total mount of Rs. 3,92,000 represented the gifts made by Monie A. Baria to her daughter, Khorshed Billimoria; but out of this total gift, according to the Tribunal only Rs. 67,948 could be linked with the amounts which Mrs. Monie A. Baria had received from the trust. The amount lying to the credit of the individual account of Mrs. Monie A. Baria in the books of the deceased at the time of his death was Rs. 81,078. A further amount of Rs. 12,494 would be required to be considered inasmuch as the said figure represents the amounts withdrawn by her within two years of the death of the deceased.

5. Mrs. Piloo Antia, according to the statement of case, received amounts from the trust created for her benefit and the total amount received by her at the date of death of the deceased has been stated to be Rs. 3,29,800. Out of this, according to the Tribunal, an amount of Rs. 1,80,000 was derived by her after 1946. On the date of death the amount the credit of her account with the deceased was Rs. 34,067 and additional amount of Rs. 1,07,001 will also be required to be considered inasmuch as the said figure represents the amounts which had been withdrawn by her from this account within two years of the death of the deceased.

6. As stated earlier, Mrs. Khorshed Billimoria, another daughter, was also a beneficiary under the trust constituted in her favour with which, as indicated earlier, we are not concerned in this reference. From that trust, however, she received income which was credited to her individual account in the books of the deceased and we are concerned in this reference with the amounts credited to the said account and lying to the credit of the said account on the date of death of the deceased. We will have also to consider the amounts withdrawn by her from this account within two years of the date of death of the deceased. According to the Tribunal up to the year 1955, she had received from the trust created for her benefit the aggregate amount of Rs. 2,57,757. It appears to us that the years mentioned, viz., 1946, for Piloo and 1955 for Khorshed represent the years in which they respectively attained their majority, though this fact is not clearly mentioned in the statement of case. During the period from 1955 to 1958 (ending with the date of death of the deceased), Khorshed is stated to have received a further amount of Rs. 32,000 from the trust created in her favour. In 1952 she had received a gift of Rs. 10,000 from her sister, Piloo Antia, and in 1956 she received a gift of Rs. 3,92,000 from her mother, to which I have already referred earlier. It has been already stated that this amount of Rs. 3,92,000 gifted by her mother included the amount of Rs. 67,948 which the mother, Mrs. Monie A. Baria, had given from the amounts which she had received from the trust created for her benefit. At the time of death of the deceased the amount lying to the credit of the account of Mrs. Khorshed Billimoria was Rs. 3,17,473. This amount had remained in the account after withdrawal of amounts totaling to Rs. 4,16,000 during the two years immediately before the death of the deceased.

7. It may be noted at this juncture that as far as the individual account of Monie A. Baria is concerned, there is a clear statement that the amounts in such account were deposited in this account by her out of the amounts received by her from the trust created in her favour. There appears to be no precise statement regarding deposits by the respective parties in the personal accounts of the two daughters, Piloo and Khorshed. This aspect of the matter is mentioned here as it may assume some importance which will be indicated subsequently.

8. Miss Laila Antia had an account in the books of the deceased and there was an amount of Rs. 1,36,333 to her credit at the time of his death. This included an amount of Rs. 1,00,000 received by her as gift from her grand-mother, Monie A. Baria, in 1955-56, and Rs. 25,000 in respect of which, according to the statement of case, there were no particulars available. Here is may be mentioned that in para. 17 of the consolidated order of the Tribunal it has been stated that she (Laila) 'also received Rs. 25,000 from her aunt and her father'. The reference to the father is obviously an error because the person intended to be referred to was the deceased who was Laila's grandfather and not the father. Further, according to the Tribunal, an amount of Rs. 7,235 had been withdrawn by Laila from this account in the course of two years before the death of the deceased. There is a clear finding by the Tribunal that the amount of Rs. 1,00,000 credited to Laila's account which was received from Mrs. Monie A. Baria and credited to Laila's account was from the amount which Mrs. Monie A. Baria had received from the trust created for her benefit.

9. Master Minoo Antia, the grandson of the deceased, had also an account in the books of the deceased and the amount lying to the credit of this account at the time of death of the deceased was Rs. 1,33,030. An amount of Rs. 4,319 had been withdrawn by Master Minoo Antia within two years of the death of the deceased. It has been found that an amount of Rs. 1,25,000 out of this fund was given by way of gift by Mrs. Monie A. Baria from out of the moneys which she had received from the trust created for her benefit. Mrs. Monie A. Baria, the wife of the deceased, who was also one of the executrices of the estate, filed a return on 20th April, 1959, claiming the amounts owed by the deceased to the three trusts mentioned earlier, viz., Monie A. Baria Trust, Piloo A. Baria Trust and Rohinton Baria Trust as deductions under section 44 of the Estate Duty Act, 1953 (Act 34 of 1953) (hereinafter referred to as 'the said Act'). Subsequently a revised return was filed on 22nd September, 1961, claiming that the amounts lying to the credit of these three trusts in the books of the deceased were not debts at all and that they were really trust moneys which had to be excluded from the chargeable estate under section 22 of the said Act. It was also claimed that the amounts lying to the credit of the individual accounts in the individual names of Mrs. Monie A. Baria, Mrs. Piloo Antia, Mrs. Khorshed Billimoria, Laila and Minoo Antia did not represent property derived from the deceased within the definition of section 16(2)(a) of the said Act. It was further contended that the amounts lying to the credit of these accounts were held by the deceased in a fiduciary capacity and were also trust moneys. It was further submitted that the moneys deposited with the deceased by his wife and/or daughters and/or grandchildren of the deceased, which represented moneys gifted by any one of them to the other or others of them several years after the execution of the said deeds of trust were not liable to abatement under section 46 of the said Act.

10. The Deputy Controller of Estate Duty, however, rejected all these contentions which had been put forward on behalf of different accountable persons. He held that the amounts lying to the credit of the three trusts were debts. Similarly, he held that the amounts lying to the credit of Monie A. Baria, Piloo Antia, Khorshed Billimoria, Laila Antia and Minoo Antia were also debts. He further held that all the amounts lying to the credit of these accounts, whether of the three trusts or of the individuals, were liable to abatement either under section 46(1)(a) or 46(1)(b) of the said Act. He also invoked the provisions of section 46(2) of the said Act in respect of the amounts withdrawn by the individuals within two years of the death of the deceased. In the view that he took he rejected the claim for deduction from the estate of the following amounts :

Rs.Mrs. Monie A. Baria Trust 4,63,400Miss Piloo A. Baria Trust 2,00,000Rohinton A. Baria Trust 1,20,117(which was split up into) :amount contributed by thedeceased ... Rs. 64,817amount contributed byMrs. Monie A. Baria Rs. 55,300Mrs. Monie A. Baria individual loan account(under section 46(1)) 81,078Mrs. Monie A. Baria individual loan account(under section 46(2)) 12,494Mrs. Piloo Antia individual loan account(under section 46(1)) 1,21,116Mrs. Piloo Antia individual loan account(under section 46(2)) 1,07,001Mrs. Khorshed Billimoria individual loan account(under section 46(1)) 3,17,473Mrs. Khorshed Billimoria individual loan account(under section 46(2)) 4,16,000Miss Laila Antia individual loan account(under section 46(1)) 1,36,333Miss Laila Antia individual loan account(under section 46(2)) 7,235Master Minoo Antia individual loan account(under section 46(1)) 1,33,030Master Minoo Antia individual loan account(under section 46(2)) 4,319

11. A copy of the consolidated order of the Deputy Controller of Estate Duty in the case of all the accountable persons along with the subsequent rectification order has been annexed to the statement of case as annexure 'D'.

12. The accountable persons therafter applied to the Appellate Controller of Estate Duty and raised before him similar contentions as had been advanced before the Deputy Controller. The Appellate Controller, however, confirmed the orders of the Deputy Controller on substantially the same grounds as had been given by the Deputy Controller. A copy of the consolidated order of the Appellate Controller in the case of all the accountable persons has been annexed to the statement of case as annexure 'E'.

13. The accountable persons therafter appealed to the Tribunal and it was contended on their behalf that the amounts lying to the credit of the accounts of the trusts with the deceased were not debts pure and simple but were trust moneys lying with the deceased in his capacity as a trustee and they were, therefore, not includible in his estate under the provisions of section 22 of the said Act. It was also contended that the amounts lying to the credit of the individual accounts of Mrs. Monie A. Baria, Mrs. Piloo Antia, Mrs. Khorshed Billimoria, Miss Laila Antia and Master Minoo Antia, whether at the time of the death or withdrawn therefrom within two years of the date of did not represent property derived from the deceased within the definition of section 16(2)(a) of the said Act. It was further contended that the amounts lying to the credit of the said parties were held by the deceased in a fiduciary capacity and were, therefore, trust moneys. It was further contended that the moneys deposited with the deceased by his wife and/or the daughters and/or the grand-children of the deceased which represented moneys gifted by any of them to the other or others of them several years after the execution of the said deeds of trust were not liable to abatement under section 46 of the said Act. It was also contended that the income of the trust fund settled by the deceased could not be regarded as property derived from the deceased within the meaning of section 16 of the said Act as it stood prior to its amendment by the Estate Duty (Amendment) Act, 1958. It was further contended that the amounts of interest paid by the deceased to the trustees in respect of the deposits made with him could not be regarded as a disposition made by the deceased otherwise than for full consideration in money or money's worth within the definition of 'property derived from the deceased' as it stood prior to its amendment by the Estate Duty (Amendment) Act, 1958. It was finally contended that even of it was held that the persons in whose names the deposits stood had amongst their resources any property derived from the deceased as defined in the Act as it stood at the relevant time, the parties were entitled to the benefit of the proviso to section 46(1) of the said Act. On behalf of the department it was contended that all the amounts lying to the credit of the trust accounts and the accounts of the individuals were essentially debts, and since the consideration for these debts flowed either from the property derived from the deceased or from the persons whose resources included property derived from the deceased, these debts were liable to abatement under section 46(1)(a) or 46(1)(b) or section 46(2) of the said Act. It was also contended without prejudice to the main argument that even if the amounts lying to the credit of the trusts were trust moneys, they could not be excluded from the estate because it was clear from the facts on record that possession and enjoyment of the property held under the trust was not assumed by the beneficiaries to the entire exclusion of the deceased. On behalf of the accountable persons was pointed of that this aspect was not considered by the authorities below and would give rise to mixed questions of fact and law. The Tribunal disposed of all the appeals by its consolidated order dated 30th April, 1964, as subsequently rectified by its order dated 23rd April, 1965. According to the Tribunal, the first three amounts out of the several amounts enumerated earlier, i.e., the amounts to the credit of the three trusts could not be properly regarded or held to be debts for the purposes of section 44 or section 46 of the said Act and the position of the deceased with respect to these amounts was that of a trustee holding trust property and he could not be considered to be a debtor of the beneficiaries. However, the Tribunal went on to hold that, though the possession and enjoyment of the property was bona fide assumed by the beneficiaries or by the trustees under the three trust deeds on their behalf, such possession and enjoyment had not been retained by the beneficiaries or the trustees on their behalf to the entire exclusion of the deceased and, therefore, the amounts were includible in the chargeable estate under the provisions contained in section 22 of the said Act. The Tribunal was of the opinion that no further facts were necessary for it to infer in the circumstances that the beneficiaries under the trustees had not retained possession and enjoyment of the property to the entire exclusion of the deceased. According to the Tribunal, the amounts lying to the credit of Mrs. Monie A. Baria, Mrs. Piloo Antia, Mrs. Khorshed Billimoria, Laila and Minoo were not held by the decease in a fiduciary capacity and were, therefore, required to be considered as debts. The tribunal examined details of the accounts and took the view that the amounts of Rs. 81,078 and Rs. 12,494 in the account of Mrs. Monie A. Baria came out of the property derived from the deceased. In the case of Mrs. Piloo Antia the Tribunal found that Rs. 34,067 and Rs. 1,07,001 could be properly regarded as property derived the deceased. The accountable persons accordingly got some relief. Similarly, in regard to the account of Mrs. Khorshed Billimoria, the Tribunal held that the aggregate amount of Rs. 3,67,705 only as compared to the aggregate amount of Rs. 7,33,473 found by the authorities below could be properly considered to be coming from the property derived from the deceased or traceable to it. In the case of Minoo Antia and Laila Antia the Tribunal held that the amount of Rs. 1,25,000 each was traceable to the property derived from the deceased and therefore, liable to abatement under section 46 of the said Act. Slight relief thus was afforded to these two persons. In the case of Rohinton A. Baria trust the Tribunal seems to have held that the sum of Rs. 64,817 which, according to the Tribunal, was contributed by the deceased was held on trust, but Rs. 55,300 contributed to the said trust funds by Mrs. Monie A. Baria was a debt liable to abatement under section 46(1)(b) of the said Act.

14. The following seven question have been referred to us by the Tribunal :

'1. Whether the Tribunal was right in considering the liability of the accountable persons to estate duty under section 22 of the Estate Duty Act in respect of the amounts or any portions thereof lying to the credit of the accounts of the trusts created by the deceased by three deeds of trust dated November 7, 1931, January 31, 1932, and August 12, 1937, even though the estate duty authorities had not considered the applicability of the said section

2. If the answer to question No. 1 is in the affirmative, whether the amounts or any portions thereof lying to the credit of the accounts of the trusts created by the said three deeds of trust could be included in the chargeable estate under section 22 on the ground that the possession and enjoyment of the trust properties were not retained by the beneficiaries under the trusts to the entire exclusion of the deceased

3. Whether, in any event, in so far as Bai Monie's trust was concerned, the amount of Rs. 1,03,400 included in the credit balance of Rs. 4,63,400 in favour of the trust in the books of the deceased could be included in the chargeable estate, even though it did not form part of the original corpus settled by the deceased

4. If the answers to questions Nos. 2 and 3 are in the negative, whether, on the facts and in the circumstances of the case, the amounts of Rs. 4,63,400, Rs. 64,817 and Rs. 2,00,000 due from the deceased to Mrs. Monie A. Baria Trust, Rohinton Baria Trust and Mrs. Piloo A. Baria Trust, respectively, were debts liable to abatement under section 46 of the Estate Duty Act

5. Whether, on the facts and in the circumstances of the case, the amount of Rs. 55,300 contributed by Mrs. Monie A. Baria to the Rohinton Baria Trust and which was lying with the deceased could be abated under section 46(1)(b) of the Estate Duty Act

6. Whether, in the facts and in the circumstances of the case, the moneys deposited with the deceased by or on behalf of his wife and/or his daughters or his grandchildren were moneys held by the deceased in a fiduciary capacity and in consequences held by him as a trustee and as such entitled to be considered under section 22 of the estate Duty Act

7. Whether, on the facts and in the circumstances of the case, the amounts of Rs. 81,078 and Rs. 12,494 in the accounts of Mrs. Monie A. Baria, the amounts of Rs. 34,067 and Rs. 1,07,001 in the account of Mrs. Piloo Antia, the amount of Rs. 3,67,705 in the account of Mrs. Khorshed Billimoria and the amount of Rs. 1,25,000 each in the accounts of Miss Laila Antia and Master Minoo Antia could be abated under section 46(1)(a) or section 46(1)(b), or charged under section 46(2) ?'

After the reference had been argued before us for some time and with the benefit of submissions made by the counsel which both exhaustive and illuminating, we found it necessary to reframed the questions as follows :

1. Whether the amounts of Rs. 4,63,400, Rs. 1,20,117 and Rs. 2,00,000 lying to the credit of Mrs. Monie A. Baria Trust, Rohinton Baria Trust and Piloo A. Baria Trust, respectively, were held on trust by the deceased, or whether they were debts due by the deceased

2. In the event of its being held that the said amounts were held on trust, whether it was open to the Tribunal to consider the liability of the accountable persons to estate duty in respect of these amounts or any portions thereof under section 22 of the Estate Duty Act, even though the authorities below had not considered the applicability of the said section to these amounts

3. Whether, on the fact and in the circumstances of the case the amounts or any portions thereof lying to the credit of the accounts of the said three trusts could be included in the chargeable estate under section 22 of the Estate Duty Act

4. Whether it is open to the Controller to rely on section 10 of the Estate Duty Act for the purpose of chargeability to duty of the sums lying to the credit of the said three trusts in view of the fact that the said section was not relied on before the Tribunal or the authorities subordinate thereto

5. If the answer to question No. 4 is in the affirmative, whether section 10 of the Estate Duty Act would apply in the case of a disposition made by way of trust without consideration

6. If section 10 applies to the dispositions made by way of trust without consideration, whether, on the facts and in circumstances of the case, the sums of Rs. 4,63,400, Rs. 1,20,117 and Rs. 2,00,000 lying to the credit of Monie A. Baria Trust, Rohinton Baria Trust and Piloo A. Baria Trust, respectively, or any portions thereof were includible in the estate as properties deemed to pass on death under section 10 of the Estate Duty Act

7. If, on the facts and in the circumstances of the case, the amounts of Rs. 4,63,400, Rs. 1,20,117 and Rs. 2,00,000 due from the deceased to the three trusts respectively are held to be debts, were the same or any portions thereof liable to abatement under section 46(1)(a) and/or 46(1)(b) of the Estate Duty Act

8. Whether, on the facts and in the circumstances of the case, the amounts lying to the credit of the individual accounts of Monie A. Baria, Khorshed A. Baria, Piloo A. Baria, Minoo Antia and Laila Antia in the books of the deceased were moneys held by the deceased on trust, or were these amounts debts due by the deceased to the respective parties

9. If, on the facts and in the circumstances of the case, the amounts referred to in question No. 8 are to be considered as amounts held on trust whether the said amounts or any portions thereof are liable to be included in the estate of the deceased under section 10 of the Estate Duty Act

10. In the event of its being held that the amounts referred to in question No. 8 are debts due by the deceased, whether the amounts of Rs. 81,078 in the account of Monie A. Baria, Rs. 34,067 in the account of Piloo Antia (nee Baria) and Rs. 2,89,257 in the account of Mrs. Khorshed Billimoria (nee Baria) were liable to abatement under section 46(1)(a) of the Estate Duty Act

11. In the event of its being held that the amounts referred to in question No. 8 are debts, the sums of Rs. 77,948, Rs. 1,25,000 and Rs. 1,25,000 being gifts received by Khorshed Baria, Minoo Antia and Laila Antia, respectively, were liable to abatement under section 46(1)(b) of the Estate Duty Act

12. In the event of its being held that the amounts referred to in question No. 8 are debts, whether the sum of Rs. 12,494 and Rs. 1,07,001 withdrawn by Monie A. Baria and Piloo Antia (nee Baria), respectively, from their individual accounts within two years of the death of the deceased were liable to abatement under section 46(2) of the Estate Duty Act

14. The first question then which is required to be considered is whether the amounts of the three trusts, viz., Monie A. Baria Trust, Rohinton Baria Trust and Piloo A. Baria Trust, were held on trust by the deceased or whether they were debts due by the deceased. Before considering the arguments advanced and the authorities cited at the bar, two observations may be made. In the first place, it is quite clear and there is an express finding to that effect which is binding onus that these amounts were not kept by the deceased set apart and separately from the funds utilised by him in his business. On the other hand, they were mixed up with other amounts and then utilised in his business, which, inter alia, was of money-lending. Further, it is not clear why the Tribunal has chosen to split up the aggregate amounts standing to the credit of Rohinton Baria Trust, viz., Rs. 1,20,117, into two amounts, viz., Rs. 64,817, described as having been contributed by the deceased and Rs. 55,300 described as having been contributed by Mrs. Monie A. Baria. For the purpose of considering whether the amounts standing to the credit of the trust account in the books of the deceased would be properly regarded as held by the deceased on trust or properly regarded as debts due by the deceased to the trustees, it is the entire amount and not the two components thereof which will have to be considered. It is true that after the answer is given and if it is held that the amount represents a debt, consideration may be required to be lavished on the source of the consideration. It is at that juncture only, which would not be necessary if the finding is that the amount is held on trust, that the amount would be required to be split up into two components as done by the Tribunal.

15. According to Mr. Joshi, appearing for the Controller, all these amounts were essentially and truly debts and could not be properly regarded as moneys in the possession of the deceased held by him as trustee. He emphasised the findings of fact in paragraphs 6 and 7 of the statement of case in this connection, where it is seen that moneys were in the hands of the trustees and then handed over to the deceased under the power reserved under the deeds of trust which empowered the trustees to lend the same or deposit the same with the settlor. Our attention was also drawn to paragraph 2 of the consolidated order (at page 92 of the paper-book) of the Tribunal, where it is observed that these moneys which represented the trust funds, came to be deposited with the deceased and were therafter utilised by the deceased for the purpose of his business as a money-lender and for making certain investments in shares and in landed property. It was accordingly submitted that the power to invest the moneys in trust, the fact of subsequent deposit by the trustees as found by the Tribunal, the further finding that there was no segregation between these amounts and the personal amounts of the deceased and finally the finding that these amounts were mixed up with the ordinary moneys of the settlor and utilised for money-lending and investment activity would go to show that the amounts were in the hands of the deceased not as a trustee but as a debtor. In this connection we were referred to certain authorities which I may now proceed to consider.

16. In Nagappa Chettiar v. Official Assignee of Madras AIR 1931 Mad 251 it was observed that when trust money is handed over to any person, whether he be the trustee or not, to use it in his business and subject to the payment of interest, a relationship of creditor and debtor is set up. According to Curgenven J. :

'The circumstances that he may use the money as his own, and that he has to pay interest, seem to me to point clearly to the engrafting of a contract upon the trust, where by title to the money is transferred, and the trust no longer can look to that particular sum of money, as its rest or subject-matter, but to a promise to pay an equal sum. '(See page 254 of the report).

17. It was further observed by the same judge on the facts of the case being considered by the Division Bench of which he was a member that :

'Both the trusteeship and the relationship of debtor and creditor were there, though they may have been combined in the same individuals, and we have been referred to no authority for the proposition that, when so combined, the legal effect is different from what it would be when the individuals are separate.' (page 254, col. 2).

18. Observations to the same effect are to be found in the concurrent judgment of Bhashyam Ayyangar J. at pages 258 and 259 of the report. It is important to observe that these observations were made in the context of following trust property where partners of the firm with whom the moneys had been adjudicated insolvent.

19. Nagappa's case AIR 1931 Mad 251, which is a decision of a Bench of the Madras High Court, was followed in point of time by the decision of the Privy Council in Official Assignee of Madras v. T. Krishnaji Bhat and it will become necessary to consider this decision in some detail inasmuch as a view has been expressed that Nagappa's case AIR 1931 Mad 251 had been overruled by the Privy Council decision. The question for determination in the appeal before the Privy Council was whether the plaintiff-respondent was entitled to a preferential payment of a sum of Rs. 10,000 from the assets of defendants Nos. 1 to 8, vested in the appellant, the official assignee of Madras. The defendants had received the sum to be invested in their business in the name of the plaintiff, then a minor, and it was so invested. The defendants were subsequently adjudicated insolvent. The official assignee sold the stock-in-trade and had funds in his hands divisible among the insolvent's creditors. The plaintiff claimed preferential payment in respect of the amount of Rs. 10,000 and the claim of the plaintiff appears to have been upheld. Our attention was drawn to the observations of the Privy Council decision at pages 759 and 760 of the report, where it is suggested that no issue on the question of the trust was raised at the trial, and the Privy Council proceeded upon the admitted position that the sum of Rs. 10,000 was a trust in the hands of the defendant. On this admitted position the right of the cestui que trust to follow the trust property or the proceeds thereof appears to have been accepted. It was submitted that this decision really cannot afford us proper guidance in determining the question which has come up for consideration and the view taken in subsequent decisions that it has overruled Nagappa's case AIR 1931 Mad 251 is not correct.

20. In Veerappa Chetty v. Official Assignee of Madras : AIR1935Mad686 , brief reference is made to Nagappa's case AIR 1931 Mad 251 at page 689 and it is observed that the same was overruled by the Privy Council case, viz., Official Assignee of Madras v. T. Krishnaji Bhat . In Veerappa Chetty's case : AIR1935Mad686 , it was found that the trustees of a trust fund had appointed one of themselves, a firm in Calcutta, to manage the affairs of the fund, the firm acting through its agent in Calcutta. Funds were received by that firm on behalf of the trust and placed to the credit of the trust in the account books and the account was also credited with interest. It was found that the money was clearly utilised by the firm in its own business but that this was done with the approval of the other trustees. On these findings it was held that the relationship between the trust and the firm was not one of creditor and debtor. It was further observed that the right of the beneficiary to follow the trust property did not depend upon the act of the trustee being a wrongful one. It was held that the trust money invested in the business could be traced within the meaning of section 63 of the Trusts Act, and that the doctrine of tracing was not affected by the fact that moneys were invested by the firm (one of the trustees) in their own business with the authority of the other trustees. According to the Division Bench of the Madras High Court, the beneficiary was entitled at all times to a charge upon such assets in the hands of the firm.

21. All the aforesaid three decisions came to be considered by a Division Bench of our High Court in Krishnadas Goverdhandas Madivale v. Ratanbai Gokuldas Laxmandas : AIR1941Bom41 . In that case one Krishnadas held a sum Rs. 11,000 under an oral will of his brother, which amount he was instructed to pay to his widow, Ratanbai. Ratanbai created a trust of Rs. 10,000 out of this amount, of which she was the main beneficiary and of which Krishnadas was appointed one of the trustees. The trust deed provided that the amount of Rs. 10,000 had been handed over by Krishnadas to Ratanbai and that it was given back to Krishnadas by Ratanbai to be kept as a deposit and was to bear interest. It was further provided that the majority of the trustees, of whom Krishna as was one, was empowered to invest the trust moneys either in authorised securities or with reputed merchants. On the day of the execution of the trust deed, Krishnadas passed a receipt to Ratanbai for Rs. 10,000 in which it was stated that he had received the amount by way of deposit for which he was to pay interest, that Ratanbai was to make a trust deed in respect of the amount, that he was to be one of the trustees, that, as stated in the trust deed, the amount was to be dealt with according to the opinion of the majority of the trustees and that he was bound to pay the amount on demand by them. Krishnadas was therafter adjudicated insolvent. In the insolvency proceeding Ratanbai applied that she should be given a first charge over the property of the insolvent in respect of the amount of Rs. 10,000. It was held that the trust and the deposit formed parts of one and the same transaction, that Krishnadas was a trustee when the amount was deposited with him even though it was agreed that he was entitled to invest the trust fund in any security, that he liked and pay interest to the beneficiary, Ratanbai, and that, accordingly, Krishnadas held the amount in the capacity of a trustee and not as a debtor of Ratanbai. It was accordingly decided that Ratanbai was entitled as a beneficiary to claim priority for the amount. The report sets out the decision of Wassoodew J., who, as single judge, heard the second appeal in the first instance and of Divatia J., in the Letters Patent Appeal from the decision of the single judge hearing the second appeal. Wassoodew J., at page 1050 of the report, observed as follows with reference to Nagappa's case AIR 1931 Mad 251 : 'It seems to me difficult to accept the reasoning in Nagappa's case AIR 1931 Mad 251. In a later case, Veerappa Chetty v. Official Assignee of Madras : AIR1935Mad686 , the Madras High Court held that Nagappa's case AIR 1931 Mad 251 was overruled by Official Assignee of Madras v. T. Krishnaji Bhat . With respect I agree with that view.' In the Letters Patent Appeal the observations of Wassoodew J. and of the Madras High Court in Veerappa Chetty's case AIR 1935 Mad 686 were assailed and it was contented that the decision in Nagappa's case AIR 1931 Mad 251 had not been overruled by the Privy Council decision. It was observed repelling this submission that the decision of the Privy Council was entirely inconsistent with the decision in Nagappa's case AIR 1931 Mad 251. In the view of the Division Bench, the Privy Council held that the trusteeship continued even after the deposit and the Privy Council, according to the Division Bench, did not say that the agreement to pay interest on the amount deposited with a trustee had the effect of engrafting a contract upon it (see page 1055 of the report).

22. In connection with this aspect of the matter we were also referred to a decision of the Supreme Court in Rai Bahadur Seth Jessa Ram Fatechand v. Om Narain Tankha : [1967]2SCR429 , where it was observed that the question whether the security deposit in a particular case could be said to be impressed with a trust would have to be decided on the basis of the terms of the agreement between the parties, the facts and circumstances of each case and the subsequent conduct of the parties. If the terms of the agreement, if written, clearly indicate that the deposit was in the nature of a trust, it was held that the court would come to that conclusion in spite of the fact that the payment of interest is provided for in the agreement. The court went on to hold that where there is a clear trust and the trust deed provides that the trustee may use the trust property as he likes, it was further observed that the fact that the trustee can mix the trust property with his own may not make any difference.

23. This would seem to indicate that merely because the amounts handed over to the deceased by the trustees were not kept segregated and were mixed up with his other moneys or utilised by him in his money-lending business or for investment in securities or lands or the fact that he paid the interest and was required to pay interest on these amounts would not be circumstances conclusive of the matter and from these it would not necessarily follow that a relationship of debtor and creditor had been substituted for or engrafted upon the trust. The Tribunal in its consolidated order approached the question thus : Whether the deceased had divested himself as a trustee and had become only a debtor It also considered that, in the event that it became necessary for the beneficiaries to proceed against the deceased, what would be the nature of the action which the beneficiaries would be compelled to take at law The Tribunal came to the conclusion - and rightly so - that the only way they could enforce their rights against the deceased would be under the Trusts Act and not as ordinary creditors. There is yet another aspect of the matter which may be pointed out. Under the three deeds of trusts being considered, the deceased was one of the trustees right from the commencement of the trusts and in substantially similar language each deed provided that the deceased as long as he continued to be trustee was to be the sole managing trustee of the respective trusts and the other trustees were not entitled to interfere with the management of the trustees during the time the deceased acted as a trustee. It was clarified further that all the powers given to the trustees including the power of conversion and reinvestment of the trust funds from time to time were to vest absolutely in the deceased during the time he continued to be a trustee as if he was the sold trustee. With these provisions in the trust deeds, can it be said that the deceased substituted his liabilities as a trustee by a liability admittedly less onerous of a mere debtor for the amounts of the trusts kept on deposit with him It is true that at some point of the time the amounts were handed back to the settlor for keeping on deposit with him after the commencement of the trusts. It is equally true that the amounts were not segregated and were utilised by the deceased in his own business and for which amounts he paid interest. None of these facts, in my opinion, will alter the nature of the relation between the deceased and the beneficiaries and/or convert his obligation from that of a trustee to that of a mere debtor. The decisions referred to earlier would seem to indicate that a beneficiary would be in a position to follow the trust property even in the hands of a third party who derives the title from the trustee. According to Lew in on Trust (16th edition), at page 655, the trust property could be followed in the hands of even a total stranger who takes it from the trustee with knowledge of the trust. A fortiori it would follow all the more that a beneficiary would be entitled to follow the trust property in the hands of a trustee and that trust property would retain the characteristics of trust property in such hands irrespective of the fact that the trustee is empowered to mix the same with his own funds or utilise the same or is required to pay interest for the same. In my opinion, the conclusion of the Tribunal that the amounts of the three trusts cannot be held to be debts for the purpose of section 44 or section 46 of the said Act and that the case of the deceased with respect to these amounts is to be decided on the footing of a trustee holding trust property and not as a debtor of the beneficiaries, appears to be unassailable and will be required to be upheld.

24. In my view, in respect of these amounts the position of the deceased vis-a-vis the beneficiaries remained that of a trustee and the excludability of these amounts and the chargeability to duty will have to be considered from this angle. In this connection it appears to me that the entire amount of Rs. 1,20,117 standing to the credit of Rohinton A. Baria Trust will be deemed to be an amount held on trust by the deceased and there would be no question of splitting it up this view into two components as the Tribunal has done.

25. It will be appropriate now to consider whether it was open to the Tribunal to consider the liability of the accountable persons to estate duty in respect of these amounts or any portions thereof under section 22 of the said Act even though the authorities below had not considered the applicability of the said section. The consideration of this aspect of the matter must proceed upon the footing that all the facts necessary to determine the question arising under section 22 were already on record, and our attention has not been drawn to any relevant or pertinent fact having a bearing on this aspect of the matter which was not on record and which could have been brought on record by the parties concerned had the Tribunal given them the opportunity to do so either by recording evidence itself or by remanding the matter back for recording of such evidence. In my view, once the necessary facts are on record, it will be open to the Tribunal to apply as provision of law, which it thought was applicable, to these facts and to decide the question of chargeability applying this provision. It may be pointed out that in this very reference in considering the amounts standing to the individual credit of Minoo Antia and Laila Antia and the question of abatement of such debts under section 46 of the said Act, reliance was sought to be placed by Mr. Dastur on the second part of the proviso to section 46(1), which aspect of the matter does not appear to have been urged before the Tribunal. This was objected to by Mr. Joshi. I will deal with the objection later on in connection with those amounts; but, in my opinion, if it is held that all the necessary facts are on record, it would be open to the Tribunal or even to the High Court in a reference to apply a statutory provision which it considers appropriate to these facts and to give the proper answers to the questions arising for determination by application of the appropriate statutory provisions irrespective of whether such provision was urged before the authorities below. In the same way the Controller relied upon and would be entitled to rely upon the provisions contained in section 10 of the said Act for the purposes of chargeability of the amounts to the credit of the three trusts, although this section does not appear to have been considered by the Tribunal or the authorities subordinate to the Tribunal. The position would be different if further or fresh facts were required to be elicited. That not being the case, I do not see any merit in the objection taken to the applicability of sections 22 and 10 or the latter part of the proviso to section 46(1). Mr. Dastur points out to page 106, line 21, of the paper-book and suggests that both parts of the proviso to section 46(1) may have been urged before the Tribunal, though the Tribunal only linked the gift with the loan and not the original disposition with the loan.

26. The view taken by the Tribunal that the amounts standing to credit of Monie A. Baria and Piloo Antia (nee Baria) Trusts and the amount of Rs. 64,817 which was found by the Tribunal as a portion of the Rohinton Baria Trust representing the contribution of the deceased, were liable to be included in the estate under section 22 of the said Act, cannot be sustained. It is clear that the question of imposition of estate duty or liability of any property to estate duty will be principally regulated by the sections to be found in Part II of the said Act. The principal charge is under section 5 and sections 6 to 16 mainly deal with the property which will be deemed to pass on death. Section 22 occurs in Part III of the said Act which bears the general heading 'Exceptions from the charge of duty', and it would not appear to be permissible to rely on the provisions of section 22 occurring in this Part as empowering the charge or levy of estate duty on any property. The position is made clear both in England and in India. In Green's Death Duties (sixth edition) at page 34 it is stated that :

'Estate Duty is not payable under section 1 by reason only of a charge of title, where the same person was entitled as of right to the possession or income of the property both before and after the death, without interruption.'

27. This observation is based on the decision in Thomas Townsend's case [1901] 2 KB 331; 1 EDC 336

28. In Controller of Estate Duty v. Hussainbhai Mohamedbhai Badri : [1973]90ITR148(SC) the Supreme Court had occasion to consider the passing of property under section 5 of the said Act and approved of the rule laid down in Thomas Townsend's case (1901) 2 KB 331; 1 EDC 336 (KB). It was observed (page 154) :

'..... what is relevant in determining the scope of the expression property passing on the death of the deceased' is the change in the beneficial interest and not title.' According to the Supreme Court, in determining whether a particular property passed on the death of a deceased, what is to be seen is whether that deceased had any beneficial interest in that property and whether that interest passed to someone on his death.

29. The point also came up directly for consideration before the Madras High Court in Controller of Estate Duty v. H. N. Markandan : [1974]94ITR144(Mad) . It was submitted before the Madras High Court that if the provision of exemption under section 22 could not be invoked, the value of the settled properties would necessarily have to be taken to have been included in the estate of deceased. But this submission was not accepted by the Madras High Court. According to the Madras High Court :

'The non-availability of exemption under section 22 cannot automatically result in the charge being imposed under section 5. The words 'shall not be deemed to include' occurring in section 22 cannot be construed as having a positive content so as to include the properties referred to in that section within the charge, wherever the exemption under that section is not available.' (at page 149).

30. The Madras High Court reiterated what had been earlier observed by the Supreme Court that :

'The only property that passes on the death of the deceased is the beneficial interest which he was entitled to under the settlement deed' (also page 149).

The Madras High Court further observed (at page 151) that section 22 was 'a clarifying rather than an excepting provision and it is no objection to its interpretation that it may refer to property which in any event might be considered not to be 'property passing on the death'.'

31. It is clear, therefore, that merely on the assumption that conditions for exemption under section 22 are not satisfied, it would not be proper to hold that the property was subject to a charge. These decision clearly lay down that the property in which the deceased had a legal title as a trustee would not pass on his death nor can it be deemed to pass on death only by reason of the fact that the conditions imposed by section 22 were not satisfied.

32. It may be mentioned that Mr. Joshi very fairly conceded this position and submitted that the charge is to be referable to the provisions of section 10 of the said Act, and not, as the Tribunal had done, to section 22. It becomes, therefore, necessary in the circumstances to consider the provisions of section 10 of the said Act and in connection with this aspect of the argument I may split up the discussion into three branches, each of which would require separate consideration :

(1) What precisely was the nature of the disposition

(2) Whether section 10 was applicable to dispositions made by way of trust without consideration and

(3) If section 10 were applicable to such dispositions, whether the conditions implicit in section 10 were satisfied and the property which was the subject-matter of the disposition would be deemed to pass on the death of the deceased

33. The third branch of the argument would involve a subsidiary aspect, viz., what precisely was the subject-matter of the disposition In other words, dealing with the last mentioned aspect even if the submission of the Controller as to the applicability of section 10 was to be accepted in its entirety, it will have to be considered whether the deeming will apply to the full amount standing to the credit of the respective trusts or to any specific portion thereof.

34. It was submitted by Mr. Dastur in connection with the first aspect of this question that the property placed on trust or impressed on trust was expressly made subject to the right of the deceased to have the property deposited with himself. In other words, according to him the disposition made subject to this reservation must be properly regarded as a disposition in respect of the amount shorn of or excluding this right or power. It becomes necessary to consider the provisions pertaining to such deposits to be found in each of the trusts as there are slight differences of language. It will be important to note whether such differences have any bearing on the question or are what may be called relevant differences.

35. In Monie A. Baria Trust the following provision as regards to investment or deposit with the settlor is found :

'And it is hereby declared that the Trustees shall be at liberty to keep the Trust Fund in its present state of investment or at such time or times as they may in their absolute discretion think fit to invest the same by lending the same to or depositing it with the settlor at interest or in the purchase of immovable properties in Bombay of the freehold tenure only or in the mortgages of immovable properties in Bombay either of the free-hold or of the lease-hold tenure....'

36. I have already noted the provisions in the said trust conferring on the settlor the right to be the sole managing trustee excluding interference from the others, with full liberty to invest the trust funds, to convert and reinvest the trust funds with specific and absolute power to sell, exchange, transfer, assign any of the properties comprised in the trust funds without the consent of the other trustees. Mr. Dastur emphasised in this connection the words to be found in the trust deeds that the trustees were to 'stand possessed of such investments and the income thereof upon such trusts and with and subject to such powers, provisions and declarations as are hereinbefore declared and contained of and concerning the trust fund hereby granted and transferred and assigned respectively'. In the Piloo Antia (nee Baria) Trust also there is a similar power in the trustees to invest the trust fund by lending the same or depositing it with the settlor on interest, and similar provision regarding the rights of the settlor to be the sole managing trustee having exclusive powers of managing, converting and investing the trust fund as noted for Monie A. Baria Trust. The same words relied upon by Mr. Dastur in Monie A. Baria Trust earlier set out are also to be found in this trust. Turning to the third trust, viz., annexure 'C', similar powers are conferred on the deceased with similar right of lending to or depositing with himself in clause (6) of the deed of trust; the wording, however, is slightly different, but the difference does not appear to be substantial. The same words as were to be found in Monie A. Baria trust which were relied upon by Mr. Dastur are to be found in clause (1) of the Rohinton A. Baria Trust.

37. Mr. Dastur's attempt obviously was to make us accept that the disposition was of a type which would be within the doctrine enunciated in H. R. Munro v. Commissioner of Stamp Duties [1934] AC 61; 2 EDC 462 (PC). As this decision was the basis of Mr. Dastur's argument on this aspect of the matter, it may be dealt with in some detail. In 1909, Munro, the owner of 35,000 acres of land in New South Wales on which he carried on the business of a grazier, verbally agreed with his six children that therafter the business should be carried on by him and them as partners under a partnership at will; the business was to be managed solely by Munro and each partner was to receive a specified share of the profits. In 1913, by six registered transfers in the prescribed forms Munro transferred by way of gift all his right, title and interest in portions of his land to each of his four sons and to trustees for each of his two daughters and their children. The evidence showed that the transfers were taken subject to the partnership agreement and on the understanding that any partner could withdraw and work his land separately. In 1919, Munro and his children entered into a formal partnership agreement, which provided that during the lifetime of Munro no partner should withdraw from the partnership. The question arose, on the death of Munro in 1929, whether the land transferred in 1913 was includible in assessing his estate to death duties under the Stamp Duties Act, 1920 - 1931 (New South Wales) on the ground that they were gifts dutiable under section 102, sub-section (2)(a) of the Act. It was held that the property comprised in the transfers was the land separated from the rights therein belonging to the partnership, and was, therefore, excluded by the terms of section 102, sub-section (2)(a), from being dutiable because the donees had assumed and retained possession thereof, and any benefit remaining in the donor was referable to the earlier partnership agreement of 1909 and not to the gifts made in 1913. The Privy Council deemed it unnecessary to determine the price nature of the right of the partnership at the time of transfers in 1913. It could have been, according to the Privy Council, either a tenancy during the time of the partnership or a licence coupled with a interest. But, on either footing, according to the Privy Council, what was comprised in the gift was, in the case of each of the gifts to the children and the trustees, the property shorn of the right which belonged to the partnership, and on that footing it was plainly observed by the Privy Council, that the donee in each case assumed bona fide possession and enjoyment of the gift immediately upon the gift and thenceforward retained it to the exclusion of the donor. It was observed further that the benefit which the donor had as a member of the partnership in the right to which the gift was subject was not a benefit referable in any way to the gift; the same was referable to the earlier agreement of 1909 and nothing else. It was, inter alia, observed in passing that in the opinion of the Privy Council it was the substance of the transactions which had to be ascertained and if when so ascertained the substance did not fall within the words of the statute, it could not be brought within them merely because the forms employed did not give true effect to the substance.

38. It is pertinent to point out that in Munro's case [1934] AC 61; 2 EDC 462 what according to the Privy Council was not the subject-matter of the gift had been constituted by separate earlier transactions which gave rise to an independent legal relationship, and circumstance which we will have to consider is whether the dispositions made in the case being considered are in any way comparable to the gifts and the dispositions in Munro's case [1934] AC 61; 2 EDC 462.

39. Mr. Dastur had made a number of submissions in support of his argument that the dispositions to be considered by us could be regarded as dispositions subject to restrictions or subject to the limitation almost exactly similar to the dispositions made in Munro's case [1934] AC 61; 2 EDC 462 provided the substance of the transactions was considered and not the form in which the disposition was made. It was urged that the disposition could have been made in any of the four ways and it was submitted that the principle enunciated in Munro's case [1934] AC 61; 2 EDC 462 by the Privy Council must be applied and would be properly applicable to all the four methods of disposition indicated in the argument. In the first place, according to Mr. Dastur, the trust could have been created by debiting the individual account of the deceased in his own books and in such a contingency it could have been considered as a gift made subject to the right of the deceased to use the moneys, or to use the phraseology which four favour with the Privy Council, shorn of the right to us which was reserved in the deceased at the very time when the disposition was made. Alternatively, according to this branch of the argument, the trust could have contained a specific direction in the trust deed making investment or deposit with the settlor obligatory as the only permissible method of investing or keeping the trust fund. A third method, which it was submitted would also be within the principle laid down in Munro's case [1934] AC 61; 2 EDC 462, was to make it obligatory for the trustees under the dispositions to keep the amounts on deposit or invest with the settlor, viz., the deceased if the deceased so directed the trustees to do. Finally and fourthly, it was submitted that a variant of the third illustration given above can be what was found in the dispositions being considered by us, viz., a provision in the trust deed by which the settlor who was one of the original trustees constituted and empowered himself as the manager or sole trustee with absolute powers of investment of trust funds including that of conversion and reinvestment, with the further enabling provision that the trust funds would be lent or invested with the settlor himself. In Mr. Dastur's submission all the four variants of dispositions mentioned above would fall squarely within the principle enunciated by the Privy Council in Munro's case [1934] AC 61; 2 EDC 462 (PC) although there were certain differences, which, according to him, were not basic. According to his submission, the substance of the disposition or gift was that it was made subject to or was under a restriction of user which was reserved in the settlor. Before dealing with this argument and repelling it, since I am of opinion that it deserves not to be accepted, it may be appropriate to note that the Supreme Court accepted the view enunciated by the Privy Council in Munro's case [1934] AC 61; 2 EDC 462 and applied it in Controller of Estate Duty v. C. R. Ramachandra Gounder : [1973]88ITR448(SC) . The Supreme Court in that case was considering two items of property, viz., a house property and sum of Rs. 1 lakh. These came to be the subject-matter of a gift in these circumstances. The deceased was a partner in a firm and he owned a house property which had been let out to the firm as tenant-at-will. In August, 1953, he executed a deed of settlement under which he transferred the property let to the firm to his two sons absolutely and irrevocably and therafter the firm paid the rent to the donees by crediting the amount in their accounts in equal shares. With effect from 1st April 1953, the deceased further directed the firm to transfer from his account a sum of Rs. 20,000 to each of his five sons in the firm's books and he also informed them of this transfer. The sons did not withdraw any amounts from their accounts in the firm and the amounts remained invested with the firm for which interest 7 1/2% was paid to them. The deceased continued to be a partner of the firm till 13th April, 1957, when the firm was dissolved and therafter he died on 5th May 1957. The question was whether the value of the house property and the sum of rupees one lakh could be included in the principal value of the estate of the deceased as property deemed to pass under section 10 of the said Act. As regards both these items, the view of the Supreme Court was that neither can be included in the estate of the deceased. It was observed that on the date when he gifted the house property to the sons, which property was already leased out to the firm, the deceased had two rights therein, viz., of ownership in the property and the right to terminate the tenancy and obtain possession thereof. According to the Supreme Court, the donor had transferred at the time of the gift possession of the property which the nature of that property was capable of on the date of the gift which, in the case being considered by the Supreme Court, was subject to the tenancy. It was held that he had given such possession which the circumstances and the nature of the property would admit and the benefit which he had as a member of the partnership was not a benefit referable in any way to the gift but unconnected therewith. As far as the gift of rupees one lakh was concerned, the Supreme Court approved of the view taken by the Mysore High Court in Controller of Estate Duty v. Aswathanarayana Setty : [1969]72ITR29(KAR) . The aspect which was emphasised was that what was gifted was an amount standing to the credit of the deceased in the books of the firm and what considered as a matter of law, though not so expressly stated by the Supreme Court, was really a transfer of an actionable claim.

40. In my view all the four variants indicated for our acceptance by Mr. Dastur would not necessarily fall within the principle or doctrine enunciated by the Privy Council in Munro's case [1934] AC 61; 2 EDC 462. If the provisions in the three trust deeds already earlier summarised which are relevant for this purpose are considered, the question would arise whether the settlor as the sole trustee was under any obligation or bound to keep the moneys with himself. The answer to this query must be clearly in the negative. He could keep the amounts with himself, lend it to himself or deposit the same with himself or with any third party at his discretion. Further, it is pertinent that such obligation if at all it can be considered to be binding, would ensure only as long as the deceased continued to remain as sole trustee. The subject-matter of the disposition cannot, in the circumstances of the case and in view of the plain language of the trust deeds, be regarded as a disposition of an amount coupled with a certain, i.e., determinate obligation. It is only a disposition coupled with a power of the trustee to keep the amounts with the settlor himself. What is gifted cannot in my view depend on what the settlor or the donor may or may not require the trustees to do or may or may not do himself if he constituted himself as a sole trustee. It would be impermissible in this view of the matter to regard this as a disposition shorn of any right and accept the argument which is consequential that when subsequently the amount was deposited with the settlor the deposit was not referable to the gift inasmuch as the gift was not of the entire right in the moneys but in the entire bundle of rights less the right to keep on deposit. At this juncture a brief reference may be made to Nichols v. Inland Revenue Commissioners [1973] 3 All ER 632. It was held in that case that if a donor conveyed land to a trustee on trust to grant there out a lease back to himself and, subject thereto, to hold the land on trust for a beneficiary absolutely, the gift by the donor to the beneficiary would be a gift of the reversion only. The same result would follow if the beneficiary took the land directly but burdened with an immediate equitable obligation to grant the lease back to the donor. The principle earlier enunciated by the Privy Council in Munro's case [1934] AC 61; 2 EDC 462 was held applicable even though the actual signing of the lease took place three weeks after the gift was made. This was since the obligation was held to be contemporaneous with the actual gift. As stated earlier by the Privy Council, it was the substance of the transaction which had to be viewed and not the form. In any case Nichols case [1973] 3 All ER 632 does not carry the principle further. There has to be, in my opinion, some condition which is previously existing to, or it may at the highest be contemporaneous with, the gift constituting an independent and binding legal relationship, and in such a case alone can a gift be regarded not of the entire bundle of rights but of the property shorn of some rights. It may be a gift of property subject to a lease or subject to a licence coupled with interest or it may be a gift of an actionable claim to recover a certain amount of money. In such a case the benefit which the donor might have retained cannot be considered to be a benefit referable to the gift and, therefore, the consequences of section 10 of the said Act or similar provisions would not be attracted.

41. The next aspect of the matter which we have to investigate is whether the provisions contained in section 10 of the said Act would apply in the case of a disposition without consideration made by way of trust. Before considering the case law which may have a bearing on this aspect of the question, the relevant provisions of the said Act may be set out. Part II of the said Act bears the Chapter heading 'Imposition of Estate Duty' and we find that there are three sub-headings subsequently, viz., 'Extent of charge' (sections 5 and 5A), 'Property which is deemed to pass' (sections 6 to 16) and 'Special provisions relating to transfers to companies' (sections 17 to 20A). Sections 9 and 10 may be fully set out :

'9. Gifts within a certain period before death. - (1) Property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide made two years or more before the death of the deceased shall be deemed to pass on the death :

42. Provided that in the case of gifts made for public charitable purposes the period shall be six months.

(2) The provisions of sub-section (1) shall not apply to -

(a) gifts made in consideration of marriage, subject to a maximum of rupees ten thousand in value;

(b) gifts which are proved to the satisfaction for the Controller to have been part of the normal expenditure of the deceased, subject to a maximum of rupees ten thousand in value.

43.. Gifts whenever made where donor not entirely excluded. - Property taken under and gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise :

Provided that the property shall not be deemed to pass by reason only that it was not, 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;.........'

44. In 1965 a second proviso was added to section 10 by Act 10 of 1965 (with effect from 1st April, 1965) reading as under :

'Provided further that a house or part thereof taken under any gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donor's death by reason only of the residence therein of the donor except where a right of residence therein is reserved or secured directly or indirectly to the donor under the relevant disposition or under any collateral disposition.'

45. It may be mentioned that section 12 specifically deals with settlement made by deed or any other non-testamentary containing certain reservations as indicated in sub-section (1) and it is declared that such property shall be deemed to pass on the settlor's death.

46. Reference may also be made to section 16 where in sub-section (2)(b) an inclusive disposition has been defined for the purposes of that section as including any trust, covenant, agreement or arrangement. This provision also may be fully set out :

'16. Annuity or other interest purchased or provided out of property derived from the deceased. - (1) Section 15 shall have effect in relation to any annuity or other interest that was purchased or provided wholly or in part by any person who was at any time entitled to, or amongst whose resources there was at any time included, any property derived from the deceased, as if that annuity or other interest had been provided by the deceased, or, if it is proved to the satisfaction of the Controller that the application of all the property derived from the deceased would have been insufficient to provide the whole of that annuity or other interest, as if a similar annuity or interest of an amount reduced to an extent proportionate to the insufficiency proved had been provided by the deceased :

47. Provided that for the purpose of determining whether there would have been any such insufficiency as aforesaid, and the extent thereof, there shall be excluded from the property derived from the deceased any part thereof as to which it is proved to the satisfaction of the Controller that the disposition of which it, or the property which it represented, was the subject-matter, was not made with reference to, or with a view to enabling or facilitating, the purchase or provision of the annuity or other interest, or the recumbent in any manner of the cost thereof.

(2) In this section the following expression have the meaning hereby assigned to them respectively, namely :-

(a) 'Property derived from the deceased' means any property which was the subject-matter of a disposition made by the deceased, either by himself alone or in concert or by arrangement with any person (not withstanding that the disposition was made for full consideration) in money or money's worth paid to him for his own use or benefit, or which represented any of the subject-matter of such a disposition, whether directly or indirectly, and whether by virtue of one or more intermediate disposition and whether any such intermediate was or was not for full or partial consideration :

Provided that where the first mentioned disposition was for full consideration in money or money's worth paid to the deceased for his own use or benefit and it is proved to the satisfaction of the Controller that the disposition was not part of associated operations which included -

(a) a disposition by the deceased, either by himself alone or in concert or by arrangement with any other person, otherwise than for full consideration in money or money's worth paid to the deceased for his own use or benefit, or

(b) a disposition by any other person operating to reduce the value of the property of the deceased;

then, in considering whether estate duty should be charged the said first-mentioned disposition shall be left out of account as if this provision did not apply in relation to it;

(b) 'disposition' includes any trust, covenant, agreement or arrangement; and

(c) 'subject-matter' includes, in relation to any disposition, any annual or periodical payment made or payable under or by virtue of the disposition.

(3) For the purposes of section 34 the deceased shall be deemed to have had an interest in any property included by virtue of this section in the property passing on the death of the deceased.'

48. Part III of the said Act bears the chapter heading 'Exceptions from the charge of duty', and we are concerned with section 27 as it stood on the relevant date. Sub-section (1) of section 27 which may be fully set out read as under :

'27. Dispositions in favour of relatives - (1) Any disposition made by the deceased in favour of a relative of his shall be treated for the purpose of (this Act) as a gift unless -

(a) the disposition was made on the part of the deceased for full consideration in money's worth paid to him for his own use or benefit; or

(b) the deceased was concerned in a fiduciary capacity imposed on him otherwise than by a disposition made by him and in such a capacity only;

and reference to a gift in this Act shall be construed accordingly :

Provided that where the disposition was made on the part of the deceased for partial consideration in money or money's worth paid to him for his own use or benefit, the value of the consideration shall be allowed as a deduction from the value of property for the purpose of estate duty.'

48. Section 22 of the said Act has already been earlier referred to and, therefore, is not required to be set out though it will have to be considered as it was Mr. Joshi's submission that that section made abundantly clear that section 10 would be required to be construed as applying to disposition made by way of trust provided they were without consideration.

49. Before dealing with the argument and decisions in which section 10 appears to have been applied to such disposition, it may be pointed out that there is a difference in the phraseology employed in similar enactments in England and New South Wales and in our country.

50. The English statutory provision as would be applicable is to be found as a result of the combined reading of the Custom and Inland Revenue Act, 1881, the Customs and Inland Revenue Act, 1889, and the Finance Act, 1894. Under section 38(2) of the Act of 1881 it was provided as under :

'38. Grant of duties on account of certain property. - (1) Stamp duties at like rates as are by this Act charged on affidavits and inventories shall be charged and paid on accounts delivered of the personal or movable property to be included therein according to the value thereof.

(2) The personal or movable property to be included in an account shall be property of the following descriptions, viz. :

(a) Any property taken as a donation mortis causa made by any person during on or after the first day of June one thousand eight hundred and eighty-one, or taken under a voluntary disposition, made by any person so dying, purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise, which shall not have been bona fide made twelve months before the death of the deceased.

(b) any property which a person dying on or after such day having been absolutely entitled thereto, has voluntarily caused or may voluntarily cause to be transferred to or vested in himself and any other person jointly whether by disposition or otherwise, so that the beneficial interest therein or some part thereof passes or accrues by survivorship on his death to such other person......'

51. By section 11 of the Act of 1889 sub-section (2) of section 38 of the Customs and Inland Revenue Act, 1881, was amended by, inter alia, providing :

'The description of property marked (a) shall be read as if the word 'twelve' were substituted for the word 'three' therein, and the said description of property shall include property taken under any gift, whenever made, of which property bona fide possession and enjoyment shall not have been assumed by the donee immediately upon the gift and thenceforward retained, to the entire exclusion of the donor, or of any benefit to him by contract or otherwise.'

52. Thus, after the amendment of sub-section (2) of section 38 by the Act of 1889, it is perceived that section 38(2)(a) contained which in our enactment are contained in three separate sections, viz, sections 8, 9 and 10. Further - and this appears to be somewhat important - when the amendment of 1889 was made and phraseology similar to that employed by section 10 of the said Act engrafted upon the original provision in section 38(2)(a), amendment provided that the description of property already to be found in section 38(2)(a) was to include property taken under any gift, of which property bona fide possession and enjoyment were not assumed by the donee immediately upon the gift and thenceforward retained to the entire exclusion of the donor, or any benefit to him by contract or otherwise. Now, what was the description of the property already existing in section 38(2)(a) of the Act of 1881 That description clearly brought within its compass disposition purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust or otherwise (underlining supplied). Thus, this part of the description, viz., a gift by means of declaration of trust was obviously applicable to gifts which were sought to be brought within the charge by the amending Act of 1889. It may be noted further that under section 2 of the Finance Act, 1894, property passing on the death of the deceased was declared to be deemed to include various types of properties therein described. Sub section (3) of the said section contained provisions similar to those found in section 22 of our Act.

53. The relevant provisions of the New South Wales Stamp Duties Act, 1920, are to be found quoted in the foot-note at page 429 in the reported decision of Commissioner of Stamp Duties of New South Wales v. Perpetual Trustee Company Ltd. [1943] AC 425; 2 EDC 788. Section 100 of the New South Wales Act, inter alia, provides that in that part, unless the context or subject-matter otherwise indicates or requires, 'disposition of property' means (a)........., (b) the creation of any trust. 'Gift' means any disposition of property made otherwise than by will whether with or without an instrument in writing without full consideration in money or money's worth. Wording similar to section 10 of the said Act is to be found in section 102(2)(d) and it is provided :

'102. For the purpose of assessment and payment of death duty...... the estate of a deceased person shall be deemed to include and consist of the following classes of property :......

(d) Any property comprised in any gift made by the deceased at any time, whether before or after the passing of this Act, of which bona fide possession and enjoyment has not been assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased, or of any benefit to him whatsoever kind or in any way whatsoever'. (Underlining supplied).

54. The underlined words in section 102(2)(d) indicate a provision materially different from the language employed in section 10 of our Act. What is important for our purposes, however, is that by the defining section, viz., section 100, which is applicable to the entire part, it is clear that a gift sought to be made includible by section 102 would clearly include disposition of property without full consideration in moneys or money's worth through the creation of any trust.

55. The question which we have to consider is whether the provision under our enactment as it stood at the relevant time is the same or substantially similar or materially different. Our attention has been drawn in this connection to passages from standard works on the subject in England. But, as indicated earlier, the position in England appears to be abundantly clear as is the position in New South Wales. In India, however, the words 'whether by way of transfer, delivery, declaration of trust, settlement upon person in succession, or otherwise' to be found in section 9 of the said Act significantly absent from section 10. Further, even assuming section 27 may be read as a clarifying section, the clarification was originally restricted prior to 1st July, 1960, to section 9 alone and was not made applicable to section 10 or any other section of the Act besides section 9.

55. In the same vein it is found in sub-section (2) of section 16 earlier set out that the extended definition of 'disposition', though an inclusive definition, is restricted to that section alone and is not made applicable even to entire part, viz., part II.

56. Our attention was drawn by Mr. Joshi on behalf of the Controller to various decisions in which provisions of section 10 were applied dispositions by way of settlement or trust. In Controller of Estate Duty v. R. Kanakasabai : [1973]89ITR251(SC) the attraction of section 10 was considered in a case where the deceased had executed separate deeds settling properties in favour of the respective beneficiaries. However, it is important to note that the deeds of settlement under the trust in favour of the beneficiaries has been described (at page 253 of the report) as settling properties absolutely and with full power alienation. It would appear, therefore, that although the word 'settlement' has been used in the judgment, the transaction was equivalent to an outright gift without any restrictions on the beneficiaries. Further, it is clear that the point which was being canvassed before us was not brought in issue before the Supreme Court and, therefore, the said decision cannot be accepted as an authority for the view that section 10 must necessarily cover dispositions without consideration made by way of trust.

57. Similarly, in Rash Mohan Chatterjee v. Controller of Estate Duty : [1964]52ITR1(Bom) the Calcutta High Court considered the applicability of section 10 of the said Act to a case where the deceased had made a settlement under which certain trustees were to hold the property for the absolute use and benefit of the two sons in equal shares during their respective lives and upon the death of any or both to be held for the use of the wife or wives of such son or sons with remainder to the male children of the two sons in equal shares per stripes. It is clear from a perusal of the judgment which deals exhaustively with section 10 that the point which was canvassed before us by Mr. Dastur that section 10 was not applicable to such dispositions was not canvassed before the Division Bench of the Calcutta High Court. I, therefore, cannot accept this decision as an authority supporting the proposition that section 10 was applicable to such disposition.

58. The point came up for consideration before a Division Bench of the Bombay High Court in Katizabai Mohomed Ibrahim v. Controller of Estate Duty : [1959]37ITR53(Bom) , where the provisions of the said Act were set out and exhaustively dealt with. Separate but concurring judgments have been given by the two judges constituting the said Division Bench. One of the arguments which was a link in a chain of arguments which was urged was that the word 'gift' to be found in section 10 must be construed in the same manner as it is described or defined in section 9 (at page 53 of the report), viz., as including settlements. It was accordingly urged that section 10 must be read as applicable to both gifts and settlements with reservation. S. T. Desai J. found it unnecessary to deal with this argument. On the other hand, it was observed by K. T. Desai J. (at pages 87 and 88 of the report) that 'gifts may be made through the medium of a trust or settlement'. However, if the entire paragraph commencing at pages 87 of the report is perused, it is observed that this sentence is with reference to the position under section 12, which section, as indicated by me earlier, deals with settlement with reservation. The precise argument earlier set out by S. T. Desai J., has not been answered by K.T. Desai J. by these words. Thus, the decision in Khatizabai's case : [1959]37ITR53(Bom) also cannot be accepted as clear authority that section 10 would cover cases of disposition made by way of trust without consideration.

59. In Maxwell on The Interpretation of Statutes (12th edition), at pages 282, it is stated as follows :

'Change of language

From the general presumption that the same expression is presumed to be used in the same sense throughout an Act or a series of cognate Acts, there follows the further presumption that a change of wording denotes a change in meaning......'

60. It was submitted that with the clear position existing in England, the Indian legislature had chosen to have two separate, i.e., sections 9 and 10, with significant differences of languages and also chosen to provide that, as the enactment originally stood, the provision to be found in section 27 was to be restricted to section 9 alone. Thus, by reason of the provision contained in section 27 it was submitted that 'gift' within the meaning of section 9 would have a different connotation from 'gift' within the meaning of section 10. In the former section 9 it would include a gift through the medium of a declaration of a trust in favour of a relative when the disposition was made otherwise than for full consideration in money or money's worth. Inasmuch as the provisions to be found in sub-section (1) of section 9 and sub-section (1) of section 27 could not apply to gifts sought to be covered by section 10, it was submitted that the property under gift which was deemed to pass under section 10 must be restricted to gifts inter vivos and would not cover cases of properties taken under declaration of trust or settlement.

61. Our attention was drawn by Mr. Joshi to Halsbury's Laws of England, volume 18, paragraph 693, at page 365, where it is observed as follows :

'Modes of making gifts. - There are three modes by which a gift inter vivos can be made, namely :- (1) by deed or other instrument in writing; (2) by delivery in cases where the subject of the gift admits of delivery, and (3) by declaration of trust, which is the equivalent of a gift.'

62. With this statement from Halsbury or the observations from the judgment of K. T. Desai J. in Khatizabai's case : [1959]37ITR53(Bom) viewed as general propositions, there can be no quarrel. However, the question which we have to consider is not the manner of mode of making gift in general but as used in section 10 and in that connection the disparity in the language of the two sections, viz., sections 9 and 10, becomes material. Section 9 talks of property taken 'under a disposition made by the deceased' whereas section 10 mentions 'property taken under any gift'. Indeed, the change in the terminology or phraseology employed appears to me to be most vital. To return again to the passage from Maxwell cited by Mr. Joshi, it would be difficult to find fault with the position in general. Words in a similar strain are also to be found in the commentary on section 16 at page 122 of Mulla's Transfer of Property Act (sixth edition). Even the words of K. T. Desai J. earlier indicated in Khatizabai's case : [1959]37ITR53(Bom) (at pages 87 and 88) appear to deal with the general position and, as earlier indicated, were not made with specific reference to gifts under section 10. It is by reason of the significant difference in the language between section 9 and 10 of the said Act that it appears necessary to restrict the application of section 10 only to gifts made either by transfer or delivery and not to gifts made through the medium of a trust or by settlement.

63. Mr. Joshi then sought reliance on the provisions contained in section 22 and submitted that if section 10 was to be construed as not including within its ambit a disposition made by means of a trust without any consideration, then section 22 would have to be regarded as redundant and that, therefore, such interpretation of section 10 had to be avoided. It was urged that the legislature could not be said to enact any provision in vain. According to this submission, it was only if section 10 were understood as including within its ambit a gift or property disposed through the medium of a trust without consideration, then and in that case alone the exclusion or exception provided by section 22 would come into play. It was thus submitted that section 10 should be construed in a manner as would given some meaning to the later statutory provision, i.e., section 22. The argument does appear to be attractive. Normally, it should not be presumed that any statutory provision is redundant and, therefore, attempt should be made to find out the applicability of the exclusion covered by section 22. If section 10 then is the only possible section to which the exception may be applied, then there would be considerable force in this submission.

64. Mr. Dastur, however, pointed out that the vice of redundancy attributable to section 22 will not be removed even if section 10 was construed in the manner suggested by Mr. Joshi. According to Mr. Dastur the exception or exclusion which may be attributable to section 22 will be covered in the proviso to section 10 (originally the only proviso and at present the first proviso to that section). If section 10 was given the construction sought for by Mr. Joshi, then it is the proviso which will carve out the exception or exclusion and section 22 would still remain redundant.

65. It was pointed out by Mr. Joshi that the second proviso to section 10 and the proviso to section 22 had been added to the original provisions of the Estate Duty Act, 1953, by the same amending Act of 1965 (Finance Act of 1965). That might be so; but that fact, in my opinion, can have little bearing on the interpretation of section 10.

66. It was suggested by Mr. Dastur that section 22 perhaps was originally enacted to carve out an exception from the anticipated effect of the charging provision, viz., section 5. The bare words of section 5 (apart from the later judicial interpretation to the contrary) are such that they would seem to apply to a case where on the death of a trustee or a sole trustee, the property would vest in the new trustees or pass to the legal representatives of the sole trustee. In such a case although it was merely the legal title (dehorns the beneficial interest) which had passed, it could have been contended that there was a passing of property on death. It was perhaps to meet such a situation that section 22 was enacted in the Act of 1953. As indicated earlier, in either view of the matter section 22 which cannot be accepted as sustaining a charge to property would remain redundant and, therefore, this argument of Mr. Joshi will have to be rejected. It has been observed by the Supreme Court in Kanakasabai's case : [1973]89ITR251(SC) that 'if a taxing provision is ambiguous and is reasonably capable of more than one interpretation that interpretation which is beneficial to the subject must be adopted.' This was stated to be a well accepted rule of construction.

67. It has been similarly observed by S. T. Desai J. in Khatizabai's case : [1959]37ITR53(Bom) that 'it is well settled that it is incumbent on the revenue to establish that its claim comes within the very words used and the subject cannot be taxed unless there are words clear enough to impose the tax'. Although the question which arises for our consideration is not free from difficulty and as some doubt must remain, the benefit of that doubt must go to the subject and not to the revenue.

68. One further argument becomes apparent. If section 10 was required to be construed to include a gift by way of trust, why should section 27 before its amendment have been restricted only for the purpose of section 9 If disposition by way of trust had been covered by both the sections, viz., section 9 and 10, it would appear that section 27 as originally enacted should have said 'for the purpose of section 9 and 10'.

69. In the view that we have taken viz., that section 10 will not apply to the dispositions without consideration made through the medium of trust, it would not be necessary to consider further whether the dispositions made were hit by any of the provisions prescribed by the said section. It appears to me, however, to be advisable to consider the fulfillment of these conditions on the assumption that section 10 would apply to such dispositions.

70. Section 10 has been interpreted and construed by the Supreme Court in a number of decisions and it would be proper to make a brief reference to these decisions before considering the applicability of the said section to dispositions with which we are concerned. In George Da Costa v. Controller of Estate Duty : [1967]63ITR497(SC) , it was observed (at page 501) that 'the crux of section 10 of the Estate Duty Act, 1953, lies in two parts : (1) the donee must bona fide have assumed possession and enjoyment of the property, which is the subject-matter of the gift, to the exclusion of the donor, immediately upon the gift; and (2) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him, by contract or otherwise. As a matter of construction we are of opinion that both these conditions are cumulative. Unless each of these conditions is satisfied, the property would be liable to estate duty under section 10 of the Act'. Ramaswami J., speaking for the Supreme Court, went on to say (again at page 501) :

'The second part of the section has two limbs : the deceased must be entirely excluded, (i) from the property and (ii) from any benefit by contract or otherwise. It was argued for the appellant that the expression 'by contract or otherwise' should be construed ejusdem generis and reference was made to the decision of Hamilton J. in Attorney-General v. Seccombe [1911] 2 KB 688; 1 EDC 589. On this aspect of the case, we think that the argument of the appellant is justified. In the context of the section, the word 'otherwise' should in our opinion, be construed ejusdem generis and it must be interpreted to mean some kind of legal obligation or some transaction enforceable at law or in equity which, though not in the form of a contract may confer a benefit on the donor'.

71. Further, at page 502 of the report, it was observed :

'The words 'by contract or otherwise' in the second limb of the section will not control the words 'to the entire exclusion of the donor' in the first limb. In other words, in order to attract the section, it is not necessary that the possession of the donor of the gift must be referable to some contractual or other arrangement enforceable in law or in equity.'

72. In Da Costa's case : [1967]63ITR497(SC) , the Supreme Court had occasion to consider a case where the deceased had purchased a house in the joint names of himself and his wife in 1940. They made a gift of the house to their sons in October, 1954. The document recited that the donees had accepted the gift and that they had been put in possession. The deceased died on 30th September, 1959. The Controller included the value of that house in the principal value of the estate that passed on the death of deceased under section 10 of the Estate Duty Act, 1953. The Board found that though the deceased had gifted the house four years before his death, he still continued to stay in the house till his death as the head of the family and was also looking after the affairs of the house. It was further held that the property had been purchased entirely out of the funds of the deceased and that, though the property stood in the joint names of the deceased and his wife, the wife was merely a name-lender and the entire property belonged to the deceased. On these facts it was held that the value of the property was correctly included in the estate of the deceased as property deemed to pass on his death under section 10. It was further held that the whole property and not merely half of it could be deemed to have passed for the purposes of the estate duty assessment. It is pertinent to note whilst dealing with this case that the argument of the learned counsel for the Controller was that the case of the revenue did not rest on the second limb of the section but upon the first limb which required that the donor must have been entirely excluded from possession and enjoyment of the property (see page 501 of the report). It was pointed out that there was no such exclusion in the case as the deceased continued to stay in the house till his death as the head of the family and was looking after the affairs of the household. It was accordingly contended that the first limb of the second part was not satisfied and the property must be held to pass on the death of the deceased. What may be emphasised is that the deceased was living in the gifted house on account of filial affection and, according to the Supreme Court, the first limb of the section may be infringed if the donor occupies or enjoys the property or its income, even though he has no right to do so which he could legally enforce against the donees. The Supreme Court cited with approval in that connection a passage from the leading Privy Council case of Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR 89.

73. Section 10 was again required to be considered and applied by the Supreme Court in Ramachandra Gounder's case : [1973]88ITR448(SC) to which I have already referred earlier in this judgment. In Ramachandra Gounder's case : [1973]88ITR448(SC) Jaganmohan Reddy J. referred to the earlier Supreme Court judgment in Da Costa's case : [1967]63ITR497(SC) and also Chick's case [1959] 37 ITR 89. The observations in this judgment dealing with the proper construction of section 10 are to be found at page 451 of the report. It may be mentioned that in Ramachandra Gounder's case : [1973]88ITR448(SC) on the facts of that case it was held that the gift was a gift shorn of certain rights and, therefore, section 10 was not attracted.

74. A similar question once again arose for determination by the Supreme Court in Controller of Estate Duty v. R. Kanakasabai : [1973]89ITR251(SC) . In June, 1951, the deceased had executed separate deeds in favour of his sons, grandsons, daughter and wife, settling properties thereby severally in favour of the respective beneficiaries absolutely and with full power of alienation. The deeds in favour of the sons and grandsons provided for payment of Rs. 1,000 per month to the settlor, the deed in favour of the daughter provided for maintenance of the settlor and his wife during their lifetime and in the deed in favour of the wife the settlor expressed the hope that she will maintain him during his lifetime. No charge, however, was created in respect of the amounts made payable by the sons and grandsons or in respect of the daughter's liability to maintain the settlor and his wife. The deceased died on 5th February, 1959, and the question was whether the whole or any part of the properties comprised in the deeds passed on the death of the deceased under section 12 or section 10 of the Estate Duty Act, 1953. As far as section 10 is concerned, it is clear that the question as to whether the estate or any portion thereof was includible in the estate of the deceased was being considered on the basis of the second limb of the second part of the said section. Had the deceased retained any benefit in the properties settled After citing and explaining Da Costa's case : [1967]63ITR497(SC) , the contentions advanced on behalf of the assessees were accepted as deriving support from the observations found in Da Costa's case : [1967]63ITR497(SC) . It had been contended on behalf of the assesses that the expression' of any benefit to him by contract or otherwise' in section 10 must be in the property settled and not a benefit arising from the transaction resulting in the gift. To put it differently, the assessee's contention was that the benefit by contract or otherwise must be referable to the property gifted because all the earlier conditions stipulated in the section referred to the property gifted. As the provision for annual payments to the deceased and maintenance of the deceased made in the deeds was not charged on the properties settled, it was held that the deceased could not have retained any interest in the properties settled and, therefore, 'it could not be said that he retained any benefit either in the properties settled or in respect of their possession'. As it is not the contention of Mr. Joshi that the facts of this case would fall within the second limb of the second part, I think it unnecessary to discuss Kanakasabai's case : [1973]89ITR251(SC) in any further detail.

75. The fourth and the last case of the Supreme Court to which our attention was drawn at the bar is Controller of Estate Duty v. Smt. Parvati Ammal : [1974]97ITR621(SC) . This decision approves of the decision of the Calcutta High Court in Rash Mohan Chatterjee v. Controller of Estate Duty : [1964]52ITR1(Cal) , to which reference had been made earlier in this judgment; it also refers to the earlier decisions of the Supreme Court in Kanakasabai's case : [1973]89ITR251(SC) , Ramachandra Gounder's case : [1973]88ITR448(SC) and Da Costa's case : [1967]63ITR497(SC) . In Parvati Ammal's case : [1974]97ITR621(SC) the Supreme Court had occasion to consider the following facts : On 11th March 1955, the deceased executed a deed whereby he gave the property in which he was carrying on the business of boarding and lodging absolutely to his five sons in equal shares. The rafter, on 25th June, 1955,he took the property on lease from the sons and carried on his business as before. Later on, the deceased gave the boarding house on sub-lease to a third party. The deceased died on 6th April, 1957, and the question was whether the entire value of the property was liable to be included in the principal value of the estate of the deceased as property deemed to pass on his death under section 10 of the Estate Duty Act, 1953. It was held by the court that the entire value of the property and not merely the value of the right to possession and enjoyment in the hands of the deceased as a lessee was liable to be included in the principal value of the estate of the deceased as property deemed to pass on his death under section 10. In the above case the Supreme Court also considered the decision of the High Court of Australia in the case of John Lang v. Thomas Prout Webb [1912] 13 CLR 503 (Aus) and also the leading case of Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR 89. According to the Supreme Court : [1974]97ITR621(SC) , the following points emerged from Chick's case :

'(1) The deceased was not in fact excluded from the property, but as a partner enjoyed rights over it.

(2) There was an initial outright gift of the property - not of the property shorn of certain rights.

(3) It was immaterial that the partnership agreement was later than the gift, since the section required that possession and enjoyment should 'thenceforth' be retained to the exclusion of the donor.

(4) It was also immaterial that the partnership was 'an independent commercial transaction' and that the donor gave full consideration for rights. If a donor gives a donee a freehold and the donee give the donor a lease, even at a full rent, the donor is not excluded from the property.

(5) The question whether the partnership agreement was 'related' or 'referable' to the gift did not arise; the question is relevant only to the second limb of the clause.'

76. In this connection, before referring to other authorities it is important to bear in mind that we have examined the subject-matter of the disposition and, in my opinion, it was a disposition of the amounts and not amounts shorn of any right as was contended by Mr. Dastur. It is in the light of this finding and the principle enunciated by the Supreme Court in construing section 10 that the question will have to be further considered.

77. It may be mentioned that according to the Tribunal (see paragraph 13 of the consolidated order), possession and enjoyment of the properties was bona fide assumed by the beneficiaries or by the trustees on their behalf, but possession and enjoyment was not therafter retained by the beneficiaries or the trustees on their behalf to the entire exclusion of the deceased or any benefit to him. As indicated earlier, Mr. Joshi has not rested his case on the second limb of the second part, i.e., the retention of benefit. According to him, however, the facts would be covered both by the first part of the section as well as by the first limb of the second part. On the other hand, according to Mr. Dastur, the deceased was excluded from possession and enjoyment inasmuch as his subsequent possession of the amounts after they were kept with him as deposit was his possession in the capacity of a trustee. According to this submission the deceased never came into beneficial possession or enjoyment of the amounts, nor could he be said to have derived any benefit therefrom. At all times the beneficial interest in the amounts remained with the beneficiaries (or the trustees and the beneficiaries) and, therefore, the conditions imposed by section 10 were fully complied with and none of them was contravened. The principal basis of this submission was the contention that the possession of a trustee is not such possession as in contemplated by section 10, and for this purpose reliance was placed on the observations to be found in Commissioner of Stamp Duties of New South Wales v. Perpetual Trustee Company Ltd. [1943] AC 425; 2 EDC 788. In that case by an indenture of settlement made in 1917 between the settlor and five trustees it was declared that the trustees should hold certain company shares of which the settlor was the owner and registered holder and which were transferred to and registered in the names of the trustees in trust, briefly to apply during the minority of his son the whole or any part of the income or corpus as the trustees should think fit for the maintenance, advancement or benefit of the son, and on his attaining the age of 21 years to transfer the same to him as his absolute property including all accumulations of income. From the date of the settlement the settlor never exercised any voting power in respect of the shares; and with exception of premiums paid in respect of a policy of insurance on the life of the son taken out by the trustees, no part of the dividends and income was paid or applied towards the infant's maintenance, advancement or benefit, any balance which might have been so applied being accumulated and invested. The son attained the age of 21 years in 1931 and, thereupon, the assets comprised in the settlement were transferred to him. The revenue claimed that earlier, on the death of the settlor, the subject of the settlement formed part of the settlor's dutiable estate by virtue of section 102, sub-section (2)(d) of the New South Wales Stamp Duties Act, 1920 (earlier indicated in this judgment). It was held that the settlement, being a disposition of property effected by the creation of a trust without full consideration in money or money's worth, was a 'gift' within the meaning of section 100 of the Stamp Duties Act. It was held further that the property comprised in the gift was the equitable interest in the shares and that bona fide possession and enjoyment of the property comprised in the gift was assumed by the son, the donee, immediately upon the gift and thenceforth retained to the entire exclusion of the deceased or of any benefit to him of whatsoever kind or in any way whatsoever and accordingly the shares did not form part of the settlor's dutiable estate. The following observations which are to be found at page 440 (2 EDC 788, 803 (PC)) of the report were strongly relied upon by Mr. Dastur :

'Did the donee assume bona fide possession and enjoyment immediately upon the gift The linking of possession with enjoyment as a composite object which has to be assumed by the donee indicates that the possession and enjoyment contemplated is beneficial possession and enjoyment by the object of the donor's bounty. This question, therefore, must be answered in the affirmative, because the son was (through the medium of the trustees) immediately put in such bona fide beneficial possession and enjoyment of the property comprised in the gift as the nature of the gift and the circumstances permitted. Did he assume it, and thenceforth retain it to the entire exclusion of the donor The answer, their Lordships think, must be in the affirmative, and for two reasons : namely, (1) the settlor had no enjoyment and possession such as is contemplated by the section : and (2) such possession and enjoyment as he had from the fact that the legal ownership of the shares vested in him and his co-trustees as joint tenants, was had by him solely on behalf of the donee. In his capacity as donor he was entirely excluded from possession and enjoyment of what he had given to his son. Did the donee retain possession and enjoyment to the entire exclusion of any benefit to the settlor of whatsoever kind or in any way whatsoever Clearly, yes.'

77. It was accordingly held that in the interval between the gift and his death the settlor received no benefit of any kind or in any way from the shares, nor did he receive any benefit whatsoever which was in any way attributable to the gift.

78. It may be pointed out in passing that in [1943] AC 425, viz., in the Perpetual Trustee Company's case, above cited as well as in the later cases emanating from New South Wales in Australia, which I propose to deal with, it was held that the settlement, being a disposition of property effected by the creation of a trust without full consideration in money or money's worth, was a gift as specifically provided by section 100 of the Stamp Duties Act to which reference has been earlier made.

79. Mr. Dastur submitted that the Perpetual Trustee Company's case [1943] AC 425; 2 EDC 788, as I will hereinafter refer to the previously mentioned decision, emphasizes that linking of possession with enjoyment was as a composite object which had to be assumed by the donee and further that possession and enjoyment contemplated was beneficial possession (see observations at page 440 of the report). Applying these observations to the facts of the case before us, it was submitted that after the declaration of the trust the beneficial possession and enjoyment of the amounts remained with donees (either the beneficiaries or the trustees and the beneficiaries) and that because subsequently the amounts came to be reinvested with the deceased it could not be said that the deceased was in beneficial enjoyment of the amounts. Now, it appears to me that it is not proper to read the words 'beneficial possession and enjoyment' as equivalent to the words 'possession and enjoyment of a beneficiary or cestui que trust'. It is true that the deceased never obtained possession as a beneficiary in the sense known to the law of trusts. But from this it would not necessarily follow that the deceased did not have beneficial possession and enjoyment of the amounts when they were re-deposited with him, mixed up with his other moneys and utilised by him in his business.

80. One way of looking at the question would be to omit reference to the trusts altogether and to consider what the position in law would be if there had been an outright gift and subsequently the donees had kept the amounts on deposit with the donor, allowed the donor to use the amounts in any way he liked, even permitting the donor to mix up the same with his own moneys and for which use the donor was required to pay interest. The right of the donees as the owners of these amounts would remain unimpaired, but it cannot be said that the donor did not subsequently come in to beneficial possession and enjoyment of the amounts. It appears to me that it is in this sense that the composite expression 'beneficial possession and enjoyment' is used, i.e., to distinguish between the mere possession which may almost be equivalent to custody and possession which confers some advantage on the possessor. It would seem to make no difference when the same factual position is arrived at under a disposition by way of trust. It is because there is a trust that the idea of a legal owner and a beneficial owner comes into the picture. But, merely because of this dichotomy it would not follow that when the Privy Council talks of beneficial possession and enjoyment, it was referring to possession and enjoyment as a beneficiary. In my view in Perpetual Trustee Company's case [1943] AC 425; 2 EDC 788 the Privy Council has used the adjective 'beneficial' before the word 'possession' in order to make it abundantly clear that the possession of the donor must be accompanied by enjoyment. In the resent case the recitals in the trust deeds indicate that the amounts had been earlier handed over to the trustees and there are express findings to this effect and a further finding that subsequently, under the powers reserved to them, the amounts or the proceeds of the investments were subsequently lent to the deceased or kept on deposit with the deceased. In the view that we have taken and applying the principles enunciated by the Privy Council in the Perpetual Trustee Company's case [1943] AC 425; 2 EDC 788 the moment such deposits were made the conclusion must follow that the donees had not retained possession and enjoyment to the entire exclusion of the donor. Thus, the matter would sees to be covered by the first limb of the second part of section 10 (see paragraphs 6 and 7 of the statement of case).

81. The next decision to which our attention was drawn is Norman Clyde Oakes v. Commissioner of Stamp Duties of New South Wales : [1954]26ITR1(SC) , also a case decided by the Privy Council but arising from New South Wales. In that case the testate owned a grazing property in New South Wales. From 1st July, 1924, he held the property upon trust for himself and his four children as tenants-in-common in equal shares. The deed gave him wide powers of management and, in particular, provided that in addition to reimbursing to himself all expenses he was entitled to remuneration for all work done by him in managing the trust property on which he resided with his family in his capacity as trustee and manager in the same manner and as fully in all respects as if he were not a trustee thereof. The testator continued to manage the trust property until his death. On his death in 1947 the question arose whether the value of the whole of the trust property or only one-fifth thereof was to be included in his estate for the purposes of death duty under section 102(2)(d) of the New South Wales Stamp Duties Act, 1920-40. It was held, first, it is not sufficient to bring a case within the scope of the section to take the situation as a whole and to find that the settlor had continued to enjoy substantial advantage which have some relation to the settled property, and that it was necessary to consider the nature and source of each of those advantages and determine whether or not it was a benefit of such a kind as to come within the scope of the section. As far as the settlor remaining in possession of the property was concerned, it was held that the possession of the beneficiaries was for the purpose of the exclusion of the property under the section and it mattered not that the trustee was the donor himself. According to the Privy Council, the donor was entirely excluded if he only held the property in a fiduciary capacity and dealt with it in accordance with his fiduciary duties. The Privy Council considered the advantage to the testator in the application of the children's income from the trust for their maintenance and education before they came of age, and it was observed that this did not impair or diminish the value of the gift to them or their enjoyment; and, accordingly, any such advantage could not be considered to be a benefit to the testator within the meaning of the charging section. It was held, thirdly, that if a donor reserved to himself a beneficial interest in the property and only gave to the donees such beneficial interests as remained after his own reserved interest had been satisfied, such reservation of the beneficial interest did not involve any benefit to the donor within the meaning of the section. However, on the question of the right of the testator to take remuneration for his services in managing the trust property, even though such remuneration could be assumed to be appropriate and reasonable and be such as would be payable to any other manager, it was observed that the same could not be regarded as beneficial interest in the property but he had reserved the power to take benefit out of, or at the expense of, interests which were given, for the remuneration came out of the trust property and diminished the amount available for division amongst the tenants-in-common for their enjoyment. Accordingly, it was held that death duties were payable on the whole of the trust estate. The Privy Council considered this a benefit, i.e., it brought the case within the second limb of the second part of section 10 as it appears in our statute book.

82. Mr. Dastur relied upon the observations to be found at page 15 of the above report, which are in the following words : [1954]26ITR1(SC) :

'If property is held in trust for the donee, then the trustee's possession is the donee's possession for this purpose, and it matters not that the trustee is the donor himself. The donor is entirely excluded if he only holds the property in a fiduciary capacity and deals with it in accordance with his fiduciary duty.'

83. The question is whether in the case before us the deceased can be said to be holding the properties in a fiduciary capacity and dealing with them only in accordance with his fiduciary duty. The moment it is held and there is a clear finding that the deceased had mixed up the amounts with his own fund and utilised the same as he liked for the purpose of his money-lending business and for the purchase of securities and lands as has been found by the Tribunal, it cannot be said that the deceased was in possession thereof and was dealing with them in accordance with his fiduciary duty. It may be pointed out, though in our case the facts have not been such as falling within the second limb of the second part of section 10, that the observations to be found at pages 16 and 17 of the above report that a benefit to the donor can be regarded as one only if it was at the expense of the donee and if it impaired or diminished the value of the gift, have been subsequently doubted in Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR 89.

84. The next case which may be referred to, also arising from New South Wales, is Commissioner of Stamp Duties of New South Wales v. Permanent Trustee Co. of New South Wales : [1957]32ITR33(All) ). In that case a testator who died in 1946 domiciled in New South Wales, had by a deed of settlement in 1924 transferred to a trustee company various shares, property and investments of trust to apply the whole or such part of the income thereof as the company should think fit for the maintenance, education and general support of his daughter until she attained the age of 30 or married. It was provided that on her attaining the prescribed age the balance of the trust fund with all accumulations were to be paid over to her. The testator's daughter married in July, 1938, and attained the age of 30 in February, 1940. In the meanwhile, on 1st December, 1938, pursuant to the testators's instructions, she wrote to the respondent-company authorising them to take instructions from her father in all matters regarding her trust and pay over the income in a new account which he was opening in a bank in her name. Subsequently, the father was authorised to operate on her account in the fullest possible manner, and it was found as a fact that he had authority to withdraw moneys from that account without first obtaining his daughter's approval. It was common ground that the sums thus withdrawn by him from his daughter's account were to be regarded as loans made by her to him without interest. Even on this footing it was held that death duty was payable on the value of the trust property. According to the Privy Council, it was clear that from 1939 onwards the testator was the master of the income as it was paid over by the trustees and he was in a position to ensure that it was so paid over. The dual authority from his daughter which he obtained from her enabled him on the one hand to direct the trustees how her money should be disposed of and, on the other, to deal with it when it reached the bank, and this placed him in a position of unchallengeable control. It was observed (page 45 of : [1957]32ITR33(All) ) :

'In these circumstances the conclusion is irresistible that the daughter, who at material times was the sole beneficiary under the settlement, did not remain bona fide possession and enjoyment of the trust property to the entire exclusion of her father or of any benefit to him'.

85. Their Lordships of the Privy Council found that on the facts of the case before them both limbs of the second part of the section would be attracted though, as far as the second limb was concerned, according to them, any question whether the benefit taken by the donor impairing the possession and enjoyment by the donee of the subject-matter of the gift did not arise, it being held that the daughter's possession and enjoyment stood reduced and impaired precisely by the measure of the testator's use and enjoyment of her income (at page 45 of the report). In my view, this decision would be a complete answer to the submission which Mr. Dastur has been making before us. It was the case of a trust which the Privy Council was considering and the beneficial interest in that trust remained at all times with the daughter and the corpus remained at all times with the trustee-company. By reason of the arrangement, however, which has been indicated earlier, the donor obtained the advantage of using the moneys of the daughter and thereby, according to the Privy Council, reduced her enjoyment of what was her trust income. On these findings the case appears to have been brought within both the limbs of the second part of section 10 (see observations at page 45 of the report above quoted). At the foot of page 45 of the report it has been observed that the transaction must be viewed as a whole, and this may appear to be in some conflict with the observations in Oakes' case : [1954]26ITR1(SC) , where it has been stated that :

'In their Lordships' judgment it is now clear that it is not sufficient to bring a case within the scope of these sections to take the situation as a whole and find that the settlor has continued to enjoy substantial advantages which have some relation to the settled property.'

86. In Oakes' case : [1954]26ITR1(SC) it was deemed necessary to considered the nature and source of each of the advantages and 'determine whether or not it is a benefit of such a kind as to come within the scope of the section'. The word 'benefit' would seem to suggest that the observations in Oakes' case : [1954]26ITR1(SC) were principally in reference to the second limb of the second part of the section where it would appear to be necessary to consider each advantage enjoyed by the donor and to considered whether the same constituted a benefit within the meaning of section 10 specifying all the requirements postulated by that section in regard to benefit. It would appear to me, however, that in a case falling within the first part or the first limb of the second part of section 10, the transaction must be viewed as a whole in order to find out whether there under the donee had immediately assumed beneficial possession and enjoyment of the subject-matter of the gift and thenceforth retained it to the entire exclusion of the donor.

87. The last of the cases decided by the Privy Council also arising from New South Wales is Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR 89. In that case a father in 1934 transferred by way of gift to one of his sons a pastoral property, the gift being made without reservation or qualification or condition. In 1935, some 17 months after the gift, the father, the donee son and another son entered into an agreement to carry on in partnership the business of graziers and stock-dealers. The agreement provided, inter alia, that the father should be the manager of the business and that his decision should be final and conclusive in connection with all matters relating to its conduct : that the capital of the business should consist of the livestock and plant then owned by the respective partners; that the business should be conducted on the respective holdings of the partners and such holdings should be used for the purpose of partnership only; that all lands held by any of the partners at the date of the agreement should remain the sole property of such partner and should not on any consideration be taken into account as or deemed to be an asset of the partnership. It was further provided that any such partner should have the sole and free right to deal with his property as he might think fit. Each of the three partners owned a property, that of the donee son being that which had been given to him by his father in 1934, and each partner also brought into the partnership livestock and plant, and their three properties were thenceforth used for the depasturing of the partnership stock. This state of affairs continued up to the death of the father in 1952. On these facts it was held that the value of the property given to the son in 1934 was to be included in computing the value of the father's estate for the purposes of death duty. It could not be disputed that the son had assumed bona fide possession and enjoyment of the property immediately upon the gift to the entire exclusion of the father. However, on the facts, the son could not be said to have thenceforth retained it to the father's entire exclusion, for under the partnership agreement the partners and each of them were in possession and enjoyment of the property so long as the partnership subsisted. It is clear that the Privy Council was considering the first limb of the second part of the New South Wales statutory provision corresponding to section 10 of the said Act. In passing it may be mentioned that the type of gift which was found existing in Munro's case [1934] AC 61; 2 EDC 462, shorn of certain right, was distinguished from the gift in question in Chick's case [1959] 37 ITR 89, which gift was described as being made without reservation, qualification or condition. Oakes' case : [1954]26ITR1(SC) was also cited before the Privy Council and was distinguished. It was observed that in Oakes' case : [1954]26ITR1(SC) the Board appears to have been dealing with the second limb of the sub-section, viz., the question of benefit. According to the Privy Council, it did not matter that the partnership agreement and all that was done under it by the deceased may have been beneficial to the donee or that the benefit and advantage derived by the donor did not impair or diminish the value of the gift of the property to the donee. According to the Privy Council, the question is 'whether the donor has been entirely excluded from the subject-matter of the gift', that is the single fact to be determined. If he has not been so excluded, the eye need look no further to see 'whether his non-exclusion has been advantageous or otherwise to the donee'. It is clear that, according to the Privy Council, the case fell within the first limb of the second part of corresponding New South Wales statutory provision.

88. It may be pointed out that earlier Mr. Dastur's submission has been rejected on a comparison of positions to assignment under a trust with that arising in a gift simpliciter. An instance of the latter type of case is Controller of Estate Duty v. Smt. Parvati Annual : [1974]97ITR621(SC) , already cited earlier, where the donor subsequently came in possession of the property under a lease from the donee. It had been held in that case that the donees had not retained possession and enjoyment of the gifted property to the entire exclusion of the donor, although the possession which the donor subsequently obtained was possession as lessee and there was no question of his not having paid the rent or full rent. It was held that such a lease would impair the retention by the donee of full possession and enjoyment of the gifted property. The case appears to have been decided on an application of the first limb of the second part of section 10, and in my view it is that limb of section 10 which will govern the facts of the case before us although the gift is not a gift simpliciter but through the medium of a trust. The possession of the donor, it appears, need not necessarily be the possession and enjoyment of the donees and could be possession and enjoyment of a totally different type or in a totally different capacity.

88. From this it would not necessarily follow that entire amounts lying to the credit of the trusts, viz., Rs. 4,63,400 for Monie A. Baria Trust and Rs. 1,20,117 for Rohinton A. Baria Trust, would be includible in the estate as properties deemed to pass on death by reason by the provisions contained in section 10 of the said Act. It was submitted by Mr. Dastur that the only property which could be deemed to pass was property taken under any gift made by the deceased, and accordingly the property which would be deemed to pass under section 10 for the two trusts concerned would be the amounts of Rs. 3,60,000 representing the amount initially given by the deceased to the trustees of Monie A. Baria Trust and Rs. 50,001 given by the deceased initially to the Rohinton Baria Trust. As far as the third trust, viz., Piloo A. Baria Trust, is concerned, the initial amount and the amount found to the credit of the trust on the date of death of the deceased are identical, viz., rupees two lakhs, and this question, therefore, would arise only for the first two trusts.

89. Mr. Dastur referred us to three decisions in connection with this branch of arguments. The first of these decisions is that of the Gujarat High Court in Controller of Estate Duty v. Chandravadan Amratlal Bhatt : [1969]73ITR416(Guj) In that case the Gujarat High Court was considering the gift of Rs. 30,000 made by the deceased, who was a partner in a firm, originally to his three minor sons and subsequently the gift of the aggregate amount of Rs. 24,000. As far as the first gift of Rs. 30,000 was concerned, the same was effected by debiting the account of the deceased with the sum of Rs. 30,000 and crediting the accounts opened in the names of the three minor sons. As far as this gift was concerned, it was held that section 10 clearly applied and the case fell within the first limb of the second part of the said section. However, with regard to the accumulated interest referable to this amount the Tribunal had taken the view that it was not the subject-matter of the gift and, therefore, not includible in the estate, which view was confirmed by the High Court. As far as the second gift was concerned, the sum of Rs. 12,000 each was paid in cash to two sons who initially deposited their respective amounts with the State Bank of India and subsequently brought them into their account with the firm before the death of the deceased. It was held, following Chick's case [1959] 37 ITR 89, that this interval of time was immaterial and even this amount was liable to be included in the estate of the deceased. The relevant observations are to be found at page 422 of the report.

90. We were also referred to a Full Bench decision of the Delhi High Court in Controller if Estate Duty v. Prahlad Rai : [1972]83ITR321(Delhi) . The full Bench of the Delhi High Court was considering the question of excludability in the estate of an amount of Rs. 25,000 which was the corpus of the gift made by the deceased person and the sum of Rs. 10,824 credited as interest thereon. The provisions of section 10 were held applicable to the corpus but not to the interest on the footing that what had been gifted by the deceased was the sum of Rs. 25,000 and the further right to earn interest on that amount did not form part of the property gifted and, therefore, could not be deemed to be property passing on the death of the deceased. It was observed as follows :

'In the present case what was gifted by the deceased was a sum of Rs. 25,000. The further right to earn interest on that amount was never gifted by the deceased......... Accretion to the gifted property which, in the present case, has taken the form of interest did not form part of the bundle of rights in the gifted property as it stood at the time the gift was made. Once possession and enjoyment of the gifted property was taken over by the donees, they could invest the money either in the partnership or elsewhere. The right to earn interest, therefore, did not form part of the gifted property and whatever interest was earned by the donee was credited to their accounts by the partnership firm. That amount cannot be held to form part of the net estate of the deceased.'

91. Our attention was also drawn to Controller of Estate Duty v. T. N. Kochhar : [1973]89ITR216(All) , where the Allahabad High Court was considering facts involving a property brought into existence by converting a gifted property. In the case before the Allahabad High Court the deceased had made a gift of cash money, from out of which the house property in dispute was built. It was observed that section 10 would not apply to properties which may have been brought into existence after converting the gifted property. It was submitted by Mr. Dastur that a fortiori section 10 could not be made applicable to interest or income which has been earned from gifted property.

92. Mr. Joshi, on the other hand, drew our attention to section 34 of the said Act. Sub-section (4) of section 34 provides :

'Every estate shall include all income accrued upon the property included therein down to and outstanding at the date of the death of the deceased.'

93. It was accordingly submitted that the accretions to the subject-matter of the original gift must be included in the estate of the deceased. Our attention was drawn in this connection to a decision of the Kerala High Court in T. O. Hydrose v. Controller of Estate Duty : [1971]81ITR745(Ker) in construing and applying sub-section (4) of section 34. It was observed by the Division Bench of the Kerala High Court at page 750 of the report as follows :

'In section 34(4), (section 6(5) of the British Finance Act of 1894), the word used is 'accrued'. 'Accrue' means 'to fall (to any one) as a natural growth or increment; to come as an accession or advantage', in the Shorter Oxford English Dictionary. And Murray's Dictionary defines 'accrue' to mean, inter alia, 'arise or spring as a natural growth especially interest'. It is in the light of this meaning that we have to interpret section 34(4) which will also recognise the principle of the Sneddon case [1954] AC 257; 25 ITR 6; 3 EDC 491. If, in the cash or property gifted either by way of an out and out gift or by way of a settlement, the donee gets absolute dominion and he invests the same in any manner he likes, then the profit or the income resulting from such investment will not form part of the estate of the deceased. In such a case, the profit or income cannot be said to have 'accrued' - to have resulted as a natural growth, accession or increment from the property gifted. On the other hand, if the property gifted yields as natural growth or result, without the intervention of the donee, income or profit, then such income or profit can be said to have 'accrued' from the property gifted, with the result that the income or profit will also form part of the estate left by the deceased. If the property or cash gifted is converted into another type of property, the property into which the gifted property is converted will be the property gifted, but, in such a case, the income or profit derived from the converted property may not form part of the estate left by the deceased, since the income or profit can very well be said to be the result of the intervention of the donee.'

94. If the Gujarat and Delhi High Courts' decisions are applied, it is clear that the amounts standing to the credit of the two trusts in excess of the amounts originally given to the trustees by the deceased would have to be excluded when provisions of section 10 were sought to be applied to the trust amounts. Even if the provisions contained in section 34(4) were sought to be made applicable, the Kerala High Court decision would sees to suggest that the said sub-section would only come into play if the increase could be said to have resulted as natural growth, accession or increment from the property gifted without the intervention of the donee. If the view of the Kerala High Court were to be accepted, then also unless the increase in the initial amounts could be regarded as on account of natural growth, accessioned increment would have to be excluded from a consideration of section 10. There is no finding that this increase or accretion was as a result of natural growth, accession or increment from the amounts originally handed over to the trustees of Monie A. Baria Trust or Rohinton A. Baria Trust. As far as the latter trust is concerned, it is clear that the amount of Rs. 50,001 had been given by the wife of the deceased to the trustees in 1934 and a further amount of Rs. 12,501 by the relatives of the deceased. The aggregate amount made up of these amounts, which must be part of balance can never be an accretion in the sense understood by sub-section (4) of section 34 of the said Act. Whilst applying our mind to this question, it has to be noted in the first place that section 34 appears in Part IV, being the chapter heading 'Aggregation of property and rates of duty', and is really concerned with aggregating for the purpose of determining the rate of estate duty. It does not appear to be concerned with the question of what property is chargeable either as property passing on death or property which shall be deemed to pass on death. Another way to look at this aspect of the matter would be to observe that section 34(4) tells us what every 'estate' is to include. Now, the term 'estate' is not denied in the said Act. But the scheme of the Act would show that it comprises property passing on death under section 5 as well as property deemed to pass on death under section 6 to 16. For the purpose of considering what is deemed to pass on death under any of the latter sections, it is the terms of the relevant section that will have to be construed. In the present case, therefore, we will be required accordingly to attribute proper meaning to the words 'taken under any gift' to be found in section 10 and giving to that expression its proper meaning as a matter of plain language it is clear that the differences or increases noted cannot be brought within the operation of the deeming provisions contained in section 10 of the said Act.

95. The next question which I have to consider is whether the amounts standing to the credit of Monie A. Baria, Piloo Antia, Khorshed Billimoria, Minoo Antia and Laila Antia were held by the deceased on trust or whether these amounts were debt due by the deceased. Now, it is clear that the credits to the first three individual accounts, viz., Monie A. Baria, Piloo Antia and Khorshed Billimoria, represented the interest on the corpus of the amounts standing to the credit of the respective trusts. If these amounts or any portions thereof are found to be held by the deceased on trust, then even on the basis that section 10 was applicable, the amounts or those portions thereof as are determined to be held on trust would be governed by the legal position which I have just indicated, viz., that this was not property taken under gift made by the deceased and, therefore, such portions of these amounts as are deemed to be held on trust would not be hit by the provisions contained in section 10 and would not constitute property deemed to pass on the death of the deceased.

96. It now becomes necessary to deal with the amounts standing to the credit of the individual accounts. The question which we have to consider is whether, on the facts and in the circumstances of the case, the amounts lying to the credit of these five individual accounts were moneys held by the deceased on trust or were they amounts liable to be considered as debts due by the deceased to the respective parties.

97. It is to be found from the consolidated order of the Tribunal that before the Tribunal it was argued by learned counsel for the accountable persons that moneys in the said accounts were held by the deceased in a fiduciary capacity inasmuch as the deceased stood in such capacity towards his wife, daughters and grand-children and, therefore, the provisions contained in section 46(1) of the said Act would not be applicable. This contention was rejected by the Tribunal. According to the Tribunal the deceased could not have been considered to be acting in fiduciary position with regard to his grand-children. Similarly, according to the Tribunal, the mere relationship of husband and wife was not by itself sufficient to raise the fiduciary relation. Even as regards the two daughters, the Tribunal rejected the contention advanced on behalf of the accountable persons by their counsel on the footing that both had attained majority, the younger having attained in 1955. In my view this aspect, viz., whether or not the deceased could be said to have posed a fiduciary capacity qua his wife, daughters and grandchildren, would not be conclusive of this aspect of the matter. A person may stand in a fiduciary capacity qua another, but any amount owed by that person to the other would not necessarily be regarded as an amount held on trust merely on that account. A fiduciary capacity merely imports certain additional obligations and safeguards and if a person stands in a fiduciary capacity qua another, his dealings with the others' property or moneys would be required to be scrutinised more carefully and, before they could be considered as valid and binding, would be required to satisfy the conscience of the court that all things proper had been done. Any advantage which the person in a fiduciary capacity would derive from his control over the property or moneys of the other person or even from the relationship would have to be handed over to the latter person in respect of whom he had such capacity. This, however, is not the same thing as saying that the property or money of that other person was held by the first named person on trust. Reference may be made in this connection to section 16 of the Indian Contract Act.

98. Now, out of these persons Monie, Piloo and Khorshed form one class and Minoo and Laila another. As far as the first class is concerned, the basis of this distinction is quite clear. As regards the first three, viz., Monie, Piloo and Khorshed, their individual accounts were primarily the result of interest in their respective trust accounts being credited to the individual accounts. This is, however, subject to a slightly different position for Khorshed, which I will clarify immediately. The Tribunal brought to charge in Khorshed's account the aggregate amount of Rs. 2,89,757 under section 46(1)(a) and 46(2). A further amount of the Rs. 10,000 was brought to charge as gift received by Khorshed from Piloo under the provision or section 46(1)(b) of the said Act. Similarly, an amount of Rs. 67,948 was brought to charge as far as Khorshed is concerned as gift received by her from Monie in 1956. It has already been stated that the total amount received by Khorshed as gift from Monie was Rs. 3,92,000; but, according to the Tribunal, Rs. 67,948 only could be linked to the amounts which Monie had received from the trust created by the deceased. The Khorshed's account comprises two types of amounts, Rs. 2,89,757 which are identical with the amounts standing in Monie's and Piloo's accounts and Rs. 77,948 which appears to me substantially similar to the amounts standing in Laila's and Minoo's accounts.

99. I now propose to consider each of these individual accounts one by one. As far as Monie is concerned, we are concerned with the amount of Rs. 81,078 which was standing at the foot of her individual account on the date of death of the deceased and an additional amount of Rs. 12,494 which had been withdrawn within a period of two years prior thereto. In paragraph 8 of the statement of case the position as regards these amounts has been succinctly set down. There is a clear and complete finding that from time to time she received amounts from the trust which she deposited in her individual account with the deceased. There are further statements in the said paragraph that from this account Monie withdrew from time to time amounts for the purpose of purchasing jewellery, investment, advances and gifts to others. It is after these withdrawals that the two amounts indicated earlier are found left in her account which amounts were sought to be made chargeable under section 46(1)(a) and section 46(2), respectively. As far as Monie is concerned, the findings in my opinion are clear and complete and would totally exclude the possibility that the amounts in this account can be considered as standing on trust. If the income from an amount held on trust is handed over to a beneficiary who, in turn, re-deposits the same again with the trustee, the latter amount must be considered to represent an ordinary debt due by the trustee to the beneficiary and qua these amounts the jural relationship between the two would be that of a debtor and creditor simpliciter.

100. Paragraphs 10 and 11 of the statement of cases deal with Piloo and Khorshed. It is said that Piloo similarly received amounts from the trust for her benefit and a statement substantially to the same effect is to be found made for Khorshed. It is, however, not very clear that by such statement the Tribunal meant that as a matter of fact the amounts were handed over to the parties concerned and then re-deposited by them with the deceased. A clear statement to this effect as earlier stated was made in the case of Monie which is significantly not there for Piloo and Khorshed. Mr. Joshi drew our attention to paragraph 14 of the consolidated order of the Tribunal where it is observed, 'now it is clear to us that once any moneys from the trust income reached the hands of the beneficiaries, they ceased to be trust moneys and they became moneys belonging to the beneficiaries, who, in their turn, deposited the amounts with the deceased.' As a general proposition no fault can be found with this. The question is whether the Tribunal could be said to have given a finding, as they seem to have given in the statement of case, in the case of Monie, that for Piloo and Khorshed also the income from the trust amounts reached their hands and in their turn they consciously deposited the same back with the deceased. It has been submitted by Mr. Dastur with some justification that the statement made even as far as Monie was concerned was not justified by the findings to be found in the consolidated order of the Tribunal. He pointed out that in the consolidated order the amounts standing to the credit of the individual accounts of Monie, Piloo and Khorshed have been dealt with on essentially the same footing. I am afraid, however, that Mr. Dastur's clients must bear the consequences of the finding in express terms to be seen as far as Monie is concerned in paragraph 8 of the statement of case. As far as Piloo and Khorshed are concerned, the findings are couched in somewhat vague and unsatisfactory language and, indeed, it is not possible to say definitely what the Tribunal's finding is. The amounts in these two account (omitting from consideration for the time being the aggregate amount of Rs. 77,948 which represented the gifts received by Khorshed from Piloo and Monie, respectively) would represent debts if the trust income had reached actually and not merely notionally the hands of the beneficiaries and was in turn consciously re-deposited by the said beneficiaries with the trustees. Similarly, it would be clear that the amounts would have to be considered as debts simpliciter if there had been an arrangement or agreement between the trustees and the beneficiaries concerned to open individual accounts in the manner done and to credit the trust income to such accounts. It would be possible to arrive at a necessary conclusion by observing the conduct of the parties over a sufficiently long period of time. In this case the fact that Khorshed attained majority only in 1955 would be somewhat pertinent. If, on the other hand, the factual position was that the amounts had not been paid over to the beneficiary concerned and re-deposited by the beneficiary with the trustee and that this was merely a method devised by the trustee on his own without instructions from the beneficiary concerned or without his consent, express or implied, by making entries in his own books in a separate account, that amounts could be regarded as being subject to the trust. One of the tests would be to consider whether the action which could be initiated by the beneficiary to recover this amount in case the amount was not paid by the trustees would be an action in trust or a simple suit by a creditor against a debtor.

101. It is clear, therefore, that the amounts of Rs. 81,078 and Rs. 12,494 as far as Monie is concerned are clearly debts and we will have to consider the applicability of sections 44 and 46 to these amounts. As far as the amounts for Piloo and Khorshed (excluding the gifts) are concerned, if the Tribunal intended to hold that they had not in fact been paid over to the beneficiaries concerned who had expressly re-deposited the same with the deceased then, in my view, these amounts would be held by the deceased on trust and in accordance with the finding already given as far as the accretions to the trust amounts are concerned they would not be hit by the provision of section 10 of the said Act. In other words, on the footing that they are trust amounts, they would not be includible in the estate of the deceased as property deemed to have passed on his death. On the other hand, if the Tribunal intended to hold that as a matter of fact the income from the trust amounts had been handed over to Piloo and Khorshed respectively who had in fact re-deposited the same with the deceased, or that the deceased had credited the same to these accounts by reason of express instructions of the beneficiaries, or as a result of some definite arrangement with the beneficiaries, then the amounts must be considered on par with the two amounts of Monie and it will become necessary to apply the provisions of sections 44 and 46 to these amounts.

102. This brings us to a consideration, before seeking to apply the provisions of section 46, of the two amounts standing to the credit of Minoo Antia and Laila Antia. As far as Minoo is concerned, the balance standing to the credit of his account on 13th August, 1958, was Rs. 1,33,030 and he had withdrawn Rs. 4,319 within two years prior thereto. It has been found that in 1955-56, he had received Rs. 1,05,000 by way of gift from Monie. I am quite clear that merely because the deceased was the grand-father, the amount standing to the credit of Minoo's account cannot be deemed to be held by the deceased on trust. This would be a debt simpliciter and the provisions of sections 44 and 46 would be required to be applied in so far as they are applicable.

103. Similarly, for Laila Antia it is found that the balance outstanding at the foot of her account in the books of the deceased was Rs. 1,36,333. In 1955-56, she had received a gift of rupees one lakh from Monie A. Baria. As regards the further amount of Rs. 25,000 it has been stated in the statement of case that there were no particulars. In the consolidated order of the Tribunal it is mentioned, however, that this amount was given to her by her aunt and father (this obviously being a mistake for her grand-father, the deceased). In this case also I am quite sure that the amounts could not be said to be held on trust and the provisions of sections 44 and 46 would be required to be considered for such amounts.

104. As far as the amounts standing to the credit of the accounts of Monie, Piloo and Khorshed are concerned (restricting ourselves to Rs. 2,89,757 for Khorshed and omitting Rs. 77,948 received by Khorshed as gifts) and proceeding on the footing that these amounts in the books of the deceased (in the accounts of Piloo and Khorshed are not held on trust) the provisions of section 44 and 46 would now be required to be considered. Section 44 of the said Act is to be found is Part VI dealing with deductions and provides for an allowance to be made for debts due by the deceased. It is clear that such debts are to be deducted in determining the value of the estate of the deceased for purposes of estate duty. Section 44 itself provides for four types of debts for which no allowances shall be made. It is the agreed position that we are not concerned with any of these four types of debts for which no allowance is to be made. Section 46 provides for abatement of debts in respect of which an allowance can be claimed under section 44 and provides as follows :

'46. Further limitations - (1) Any allowance which, but for this provision, would be made under section 44 for a debt incurred by the deceased as mentioned in clause (a) of that section, or for an incumbrance created by a disposition made by the deceased as therein mentioned, shall be subject to abatement to an extent proportionate to the value of any of the consideration given therefor which consisted of -

(a) property derived from the deceased; or

(b) consideration not being such property as aforesaid, but given by any person who was at any time entitled to, or amongst whose resources there was at any time included, any property derived from the deceased :

Provided that if, where the whole or a part of the consideration given consisted of such consideration as is mentioned in clause (b) of the sub-section, it is proved to the satisfaction of the Controller that the value of the consideration given or of that part thereof, as the case may be, exceeded that which could have been rendered available by application of all the property derived from the deceased, other than such (if any) of that property as is included in the consideration given or as to which the like facts are proved in relation to the giving of the consideration as are mentioned in the proviso to sub-section (1) of section 16 in relation to the purchase or provision of an annuity or other interest, no abatement shall be made in respect of the excess.

(2) Money or money's worth paid or applied by the deceased in or towards satisfaction of discharge of a debt or incumbrance in the case of which sub-section (1) would have had effect on his death if the debt or incumbrance had not been satisfied or discharged, or in reduction of a debt or incumbrance in the case of which that sub-section has effect on his death shall, unless so paid or applied two years before the death, be treated as property deemed to be included in the property passing on the death and estate duty shall, notwithstanding anything in section 26, be payable in respect thereof accordingly.

(3) The provisions of sub-section (2) of section 16 shall have effect for the purpose of this section as they have effect for the purpose of that section.'

105. The Tribunal had found that the amounts as mentioned earlier for these persons represent debts due by the deceased which were covered by the provisions of sections 46(1)(a) and 46(2) and for which, therefore, an abatement had to take place as provided by section 46. Mr. Dastur submitted that this conclusion of the Tribunal was erroneous. In the first place, it was submitted that income of trust funds to the credit of the accounts of the beneficiaries could not be properly considered to be property derived from the deceased and, therefore, neither section 46(1)(a) nor section 46(2) was attracted. The further submission was that even if it be regarded as a disposition made by the deceased, or property derived from the deceased, there was full consideration for payment by the deceased of such interest and, therefore, it would be outside the definition of 'property derived from the deceased' to be found in sub-section (2)(a) of section 16. In my opinion, both the submissions are erroneous and cannot be accepted.

106. The provisions of sub-section (2) of section 16 are incorporated for the purpose of section 46 by reason of sub-section (3) of section 46. Sub-section (2) of section 16 contains three steps which are relevant for our purpose and which would include within the ambit of the expression 'property derived from the deceased' interest paid on moneys lying to the credit of the trust accounts of the three persons viz., Monie A. Baria, Piloo Antia and Khorshed Billimoria. Under section 16(2)(a)' property derived from the deceased 'means any property which was the subject-matter of a disposition made by the deceased. Under section 16(2)(b) a 'disposition' includes any trust and under section 16(2)(c) 'subject-matter' includes in relation to any disposition any annual or periodical payment made or payable under or by virtue of the disposition. The combined result of these three clauses of sub-section (2) of section 16 would be that annual or periodical payment made or payable by virtue of a trust made by the deceased, and interest would seem to be clearly regardable as such payment, would be within the meaning of the expression 'property derived from the deceased'.

107. The second submission in this regard is also equally fallacious. We are not concerned with consideration that flowed in respect of the payment of interest by the deceased. When section 46(1) refers to consideration, it is consideration for the debts in respect of which allowance is provided under section 44 and that consideration is in respect of the latter relationship with the amounts as deposited to the credit of the individual account and the consideration which is required is one which is to flow from the creditor, i.e., the beneficiary to the debtor, i.e., the trustee. In view of the clear definition as I see it of 'property derived from the deceased' to be found in section 16(2), it is unnecessary to consider the general connotation the word 'derived' though it appears to be clear without expressing a final opinion that this is a word of very wide import. As far as the second submission is considered, the transaction to constitute a debt may be viewed from two angles : interest is paid by the trustee to the beneficiary; for payment of such interest there may or may not be full consideration, but we are not concerned with such consideration. The consideration referred to in section 46 is consideration for the debt which is a later stage arising when the beneficiary re-deposits the amount with the trustee, which gives rise to the different relationship of debtor and creditor. The consideration referred to in sub-section (2)(a) or in the proviso thereto is consideration for the disposition by the deceased with which we are not concerned whilst considering abatement under section 46 as far as the facts of this case are concerned.

108. It will now be appropriate to take up the amounts of Rs. 77,948 found in the account of Khorshed and of Rs. 1,25,000 each for Minoo Antia and Laila Antia, which, according to the Tribunal, were liable to abatement by reason of the provisions contained in section 46(1)(b) of the said Act. The question whether these amounts were held by the deceased on trust or did they represent debts due by the deceased does not admit of much discussion, nor does the question present any difficulty. They are clearly debts due by the deceased. The question to be considered is whether the consideration for these debts was such as is covered by section 46(1)(b) and in this connection the two parts of the proviso of section 46(1) do assume importance. It may now be stated that by reason of the latter part of the proviso the provisions contained in the proviso to sub-section (1) of section 16, which we have earlier set out in extenso, are made applicable mutatis mutandis.

109. It was submitted by Mr. Dastur in the first place that the Tribunal has misread and misapplied the provisions of section 46(1)(b) in considering whether Piloo and Monie in the case of Khorshed, and Monie in the case of both Minoo and Laila, had derived any property from the deceased for these amounts. According to his submissions, even whilst considering the provisions of section 46(1)(b) one is called upon to examine the consideration for the debts and in the three cases before us this consideration only moved from Khorshed, Minoo and Laila and it was irrelevant that before making the deposits with the deceased these amounts had been gifted to the persons concerned by persons who had property derived from the deceased. To put it in other words, according to this submission, section 46(1)(a) would come into the picture where the consideration for the debt is fully from the property derived from the deceased or immediately or directly traceable or linkable with the property derived from the deceased, whereas section 46(1)(b) would come into play in cases where such direct tracing or linking is not possible but it is found that such person who gave the consideration (for the debt) had in his resources at any time prior thereto property derived from the deceased which is with that person along with his separate or other property. There are three stages which are immediately perceivable in the cases before us. The first stage is the payment of interest by the deceased on the amounts held on trust by him. The payments would be to the respective beneficiaries. One of them was Monie who then in her turn gives a gift of an amount out of such interest to her grandchild. This gift may be regarded as the second stage. The third stage therafter is that out of the amount received as gift, some amount is deposited with the deceased which continues the relationship of a debtor and creditor between the depositor and the recipient. The question is whether despite such intermediate disposition the consideration for the debt can still be regarded as being given by any person amongst whose resources there was any property derived from the deceased.

110. Mr. Joshi drew our attention to the illustration given in Dymond's Death Duties (thirteenth edition), at page 568, which is in the following words :

'For example, A, more than five years before his death, settles British Pound 10,000 on his children, who transfer the sum to a private company in exchange for shares. The company lends the money, or part of it, to A. On A's death no deduction is permissible against his estate in respect of this debt because the consideration for it was given by the company, whose resources, by virtue of an intermediate disposition, included property derived from the deceased.' (Underlining supplied).

111. I may say speaking for myself that I found Mr. Dastur's argument quite attractive, and but for this illustration would have upheld his submission. There is, however, a further submission of Mr. Dastur which I am inclined to accept and, therefore, it is unnecessary to express a final opinion on this aspect of the matter, which, but for this illustration, I might have expressed in favour of Mr. Dastur's contention.

112. The second head of his argument is based on the later or the second part of the proviso to section 46(1) which incorporates mutatis mutandis the proviso to section 16(1). It was submitted by Mr. Dastur that ever if this amount may be considered to be property derived from the deceased then, by reason of the proviso to section 16(1) as would apply to section 46, there has to be excluded from the property derived from the deceased such part in respect of which it could be shown that the disposition was not made with reference to or with a view to enabling or facilitating giving of the consideration which resulted in debt. The idea has been expressed by Dymonds' Death Duties (13th edition) as 'under a disposition not made with reference to, or with a view to enabling or facilitating the transaction' (at page 569). It was submitted that Khorshed attained the age of majority in 1955 and hence was not even in existence when the trusts were created by the deceased for Monie and Piloo, respectively. It could not, therefore, be said that the dispositions in favour of Monie and Piloo made by the deceased could be said to have been made with a view to enabling or facilitating the subsequent gift to Khorshed which enabled her to make the deposit. What would apply to Khorshed would apply with equal force to the grandchildren also who were not in existence on the date on which the disposition was made and the trust constituted for Monie. Mr. Joshi submitted that it was not open to Mr. Dastur to seek reliance on the later part of the proviso to section 46(1) and consequentially upon the proviso to section 16(1) which was made applicable mutatis mutandis. Mr. Joshi further contended that in any case this was a matter for the satisfaction of the Controller and in view of the express provision to this effect in the proviso to section 16(1), it would not be open for High Court to apply the said statutory provision in favour of the accountable persons at the state of reference. Now, indeed, there would be something in Mr. Joshi's argument if there was any fact or circumstance which a reasonable authority would be required to consider in order to decide whether the disposition made by the deceased could be said to have been made with reference to or with a view to enabling or facilitating the transaction. Mr. Joshi submitted that in this case there was a circumstance which was required to be considered by the Controller and that circumstance was that the trust was made for the wife who subsequently made a gift to the daughters and the grandchildren, who, in their turn, deposited the amounts with the deceased. This relationship itself was material and sufficient for a finding, according to Mr. Joshi, against the accountable persons. Now, in my view, Mr. Joshi's contention is clearly fallacious and would represent an entirely impermissible approach were the same to be adopted by the Controller. At the time when the disposition was made none of the parties, viz., Khorshed, Minoo or Laila was in existence. If that be so, it would be a thoroughly perverse approach if any responsible authority were to hold or even to contend that when the disposition was made, it was with a view to facilitating or enabling the later stages of the transaction, which stages contemplated action by persons not in existence at the time when the disposition was made. In my view there could be and there is no fact or circumstance which would enable the Controller to reject the contention of the accountable persons that they were entitled for these amounts to the relief contemplated by the proviso to section 16(1) as may be applicable to section 46(1) and, in this view of the matter, I am of opinion that Mr. Dastur would be entitled to place reliance upon these statutory provisions even at this stage. It is quite clear that the disposition made by the deceased was not made with reference to or with a view to enabling or facilitating the subsequent intermediate disposition, viz., gift to Khorshed and gifts to Laila and Minoo and the final stage viz., depositing by these persons with deceased which gave rise to the debts. The Tribunal, in my opinion, did consider and gave to the accountable persons in the case of Khorshed the benefit of the provisions contained in the first part of the proviso to section 46(1). It was also required in may opinion, to give to these accountable persons the benefit of the second part of this proviso although this case, it is clear, was not urged before the Tribunal in the specific and precise manner in which it was urged in the High Court.

113. There is one further observation which is required to be made. According to the Tribunal's statement of case, there are no particulars whatsoever regarding the amount of Rs. 25,000 being the gift given to Laila, Antia other than the gift of rupees one lakh which it is found has been received by Laila from her grand-mother, Monie, in 1955-56. In the consolidated order of the Tribunal it is suggested that the amount came from her aunt and the deceased. If any part of this part amount had come from the deceased, then it would be the provisions contained in section 46(1)(a) which would be applicable. There has, however, to be a very clear and specific finding for this purpose, which is not there. If there is any doubt, then it would not be proper to apply the provisions contained in section 46(1)(a). If the amount could have come from the aunt or any other source, then abatement would not follow in respect of the amount by reason of the last-mentioned contention of Mr. Dastur relying upon the second part of the proviso to section 46(1) which contention, according to me, has to be accepted. It is clear to me further that the onus of seeking abatement under section 46 of the said Act is on the revenue and if it is found that the source is not clearly shown, the revenue must be deemed to have failed to discharge this onus, with the result that no abatement could be claimed in respect of this amount.

Vimadalal, J.

114. I agree with the judgment delivered by my brother, Desai J., on all the points which arose for our decision. As, however, the judgment deals with several points of considerable importance in regard to the law relating to estate duty, I would like to formulate our decisions on those points of law in the form of the following legal propositions :

I. A pure point of law or legal interpretation can be raised for the first time before the Tribunal, or even before the High Court on a reference, if all necessary findings of facts are already on record, provided that, in the latter case, the point could be said to relate to a question arising out of the order of the Tribunal.

II. The rule in Munro's case [1934] AC 61; 2 EDC 462 is applicable only to cases in which a gift or trust is made subject to a pre-existing or contemporaneous legal relationship, other than the relationship of donor and donee, or settlor and trustee or beneficiary. It is only in case in which a gift is made subject to such pre-existing or contemporaneous legal relationship that the gift of the property must be held to have been 'shorn of' the rights which had already arisen under that pre-existing or contemporaneous legal relationship. The rule in Munro's case [1934] AC 61; 2 EDC 462 has, however, no application to cases in which there is a mere power conferred on the donees or trustees to deal with the property in a particular manner.

III. Section 10 does not apply to disposition made without consideration by way of trust, except in the case of trusts falling under section 27 as amended by Act 33 of 1958 as from 1st July, 1960.

IV. In considering the first part of section 10, as well as the first limb of the second part of that section, the transaction must be viewed as a whole in order to determine whether bona fide possession and enjoyment of the property in question was immediately assumed by the donee, and thenceforward retained to the entire exclusion of the donor. We must not, however, be taken as having decided that that rule of interpretation is also applicable to the second limb of the second part of the section 10 which deals with the question of the exclusion of the donor from any benefit, by contract or otherwise, since that question did not arise before us.

V. The possession and enjoyment of the donor which negatives or excludes beneficial possession and enjoyment of the property by the donee need not to be of the beneficiary's interest under the trust in the case of a gift through the medium of a trust. Bare possession by the donor would not be sufficient to negative or exclude the same, but if that possession is accompanied by any enjoyment of the property by the donor, which excludes full beneficial possession and enjoyment by the donee, or interferes with the same to any extent, the property in question must be deemed to pass on death under section 10 'to the extent' of such exclusion or impairment. The proposition that the trustees' possession is ordinarily possession on behalf of the donees has no application when the trustee enjoys the property for his own purpose.

VI. The 'benefit' referred to in the second limb of the second part of section 10 must be any benefit which is enforceable in law. It is, however, a matter of doubt as to whether any advantage gained by the donor, by contract or otherwise, is not to be considered a 'benefit' within the meaning of this part of section 10, unless it impairs or diminishes the value of the gift or causes any loss or disadvantage to the donee. In any event, the question of loss or disadvantage to the donee is irrelevant in regard to the first part as well as in regard to the first limb of the second part of section 10.

VII. Trust funds deposited by the trustees with the deceased, who was himself one of the trustees, pursuant to a power in that behalf contained in a deed of trust, must be held by the deceased as trustee and subject to those trusts. If the view taken be that section 10 applies to a gift through the medium of a trust, such moneys would be deemed to pass on death under that section if the conditions mentioned therein are not satisfied.

VIII. An accretion to the trust property in the form of income or otherwise, or property into which the trust property is converted would also be impressed with a trust in the hands of the trustees. Even if section 10 is held to apply to gifts through the medium of a trust, such accretion or property cannot be deemed to pass on death, for it is not property 'taken under' the gift within the terms of that section. This would be the legal position even if the trustees have credited such income or accretion to a separate personal account of the beneficiary without the consent or concurrence of such beneficiary.

IX. Moneys received by the beneficiary from trustee but later on deposited by the beneficiary with the trustee in a separate personal account of the beneficiary maintained by that trust, as well as moneys credited by the trustee to such account with the consent or concurrence of the beneficiary concerned who did not desire to receive actual payment thereof, are not impressed with a trust but, in the event of the death of such trustee, are debts due by the trustee within the terms of section 44 of the Estate Duty Act, which, however, would be subject to abatement under section 46(1)(a) read with section 16(2)(a) and (b) of the Act.

X. Interest payable to a beneficiary on the corpus of the trust funds deposited with a deceased trustee will be property derived from the deceased by reason of the provisions contained in section 46(1) and (3) read with sections 16(2)(a), (b) and (c) of the Act.

XI. The consideration referred to in section 46(1) is different from the consideration mentioned in section 16(2)(a), in so far as the former relates to consideration for the debt, whereas the latter relates to consideration for the original disposition made by the deceased.

XII. We do not decide whether section 46(1)(b) is attracted also to cases in which the consideration for a debt has not proceeded directly from the person in whose favour the deceased had made a disposition, but has proceeded from a person whose resources could be said to include property derived from the deceased by virtue of an intermediate disposition.

XIII. A debt will not be subject to abatement under section 46(1)(b), if it is proved to the satisfaction of the Controller that the disposition was not made by the deceased with a view to enabling or facilitating the giving of the consideration for the debt incurred by the deceased, as stated in the proviso to sub-section (1) of section 16 which is applicable mutatis mutandis to cases governed by section 46(1)(b).

XIV. If a debt due by the deceased which would have been subject to abatement under section 46(1)(a) or (b) was wholly or partly repaid by him, the same must, under sub-section (2) of section 46, be included in property passing on death, if the repayment by the deceased was made within the period before his death prescribed in that sub-section.

BY THE COURT :- We answer the question as reframed by us as follows :

Q. 1 - In our view the amounts of Rs. 4,63,400 lying to the credit of Monie A. Baria Trust, Rs. 1,20,117 lying to the credit of Rohinton Baria Trust and Rs. 2,00,000 lying to the credit of Piloo Antia (nee Baira) Trust, respectively, were held on trust by the deceased and were not debts due by the deceased.

Q. 2 - In the affirmative, as all the facts necessary to arrive at a proper decision were already on record.

Q. 3 - In the negative and in favour of the accountable persons.

Q. 4 - In the affirmative, as all the facts necessary to arrive at a proper decision are on record.

Q. 5 - Section 10 does not apply to a disposition made without consideration by way of trust except in the case of a trust falling under section 27 as amended by Act 33 of 1958, which amended came into force from 1st July, 1960.

Q. 6 - On the assumption that section 10 applies to dispositions made by way of trust without consideration, the amounts of Rs. 3,60,000 representing the amount given by the deceased initially to the trustees of Monie Baria Trust and Rs. 50,001 given by the deceased initially to the trustees of Rohinton Baria Trust and Rs. 2,00,000 being the amount given by the deceased initially to Piloo Antia (nee Baria) Trust, would be includible in the estate of the deceased as properties deemed to pass on death under section 10 of the Estate Duty Act. The balance of Rs. 1,03,400 in the case of Monie A. Baria Trust and Rs. 70,116 in the case of Rohinton Baria Trust would not be includible in the estate as properties deemed to pass on death by reason of section 10 of the said Act. Further, since these two latter amounts were part of the amounts held by the deceased on trust and would not be covered by the provisions of section 10, they would not be properties passing on the death of the deceased and as such not chargeable as constituting part of his estate.

Q. 7 - In the view taken by us that the amounts were held by the deceased on trust, it is unnecessary to decide this question.

Q. 8 - The amounts lying to the credit of the individual accounts of Monie A. Baria, Minoo Antia and Laila Antia in the books of the deceased were debts due by the deceased to the respective parties. As regards the amounts lying to the credit of Piloo Antia (nee Baria), it would be a debt due by the deceased if the moneys paid by the deceased by way of interest on the trust amount had in fact been received by Piloo and then re-deposited by her in this account, or if the deceased had credited this amount to the individual account with the consent or concurrence of the said Piloo. If, however, there was no payment to the said beneficiary and re-deposit by her in such individual account or if credit was given by the deceased without the consent or concurrence of the beneficiary, the amounts to the extent that they represent income from the trust would be impressed with the trust and would have to be regarded as held on trust by the deceased although part of the individual account.

115. As far as the amounts lying to the credit of Khorshed is concerned, the amount of Rs. 77,948 being part of the amount of gifts received by Khorshed from Piloo and Monie, respectively, would be clearly a debt due by the deceased to the said Khorshed. As regards the amount other than the amount received by Khorshed as gift, i.e., the amount in her individual account as representing interest payment on the amount held to the credit of her trust account, the same would be a debt due by the deceased to her if the moneys had been in fact received by Khorshed and then re-deposited by her in this account or the deceased had credited the individual account with this amount with her consent or concurrence. If, however, there was no payment of the said amount to her in the first place and subsequent re-deposit by her in the individual account or if the credit was made by the deceased without her consent or concurrence, then so much of the amount in the account as would represent the payment of interest on the amount of her trust fund would be the amount held on trust by the deceased and not debt due by the deceased.

Q. 9. - If the amounts standing in the books of the deceased to the credit of the individual account of Piloo and any portion of the amount standing in the books of the deceased to the credit of the individual account of Khorshed are deemed to have been held on trust, then, in our opinion, the said amounts are not liable to be included in the estate of the deceased under section 10 of the Estate Duty Act.

Q. 10 & Q. 12. - As far as Monie is concerned, the amount of Rs. 81,087 in her account is liable to abatement under section 46(1)(a) of the said Act, and the amount of Rs. 12,494 is liable to abatement under section 46(2) of the said Act. As far as Piloo is concerned, if the amount standing to her credit in her individual account is held to be a debt due by the deceased to her but not otherwise, Rs. 34,067 will be a debt liable to abatement under section 46(1)(a) and Rs. 1,07,001 liable to abatement under section 46(2) of the said Act. If the entire amount in the account of Khorshed (and not only the sum of Rs. 77,947 or any amount received by her as gift from Piloo and Monie) is held to be a debt due by the deceased to her and not otherwise, Rs. 2,89,257 in her account (including the aggregate amount of Rs. 77,947 which represents amounts received by her as gift from Piloo and Monie and which amount is the subject is the subject-matter of question No. 11 answered he rafter) is liable to abatement under section 46(1)(a) of the said Act.

Q. 11. In the negative and in favour of the accountable persons.

116. As far as costs are concerned, though it would seem that on a majority of questions the accountable persons have succeeded, we find that the case advanced on behalf of the accountable persons has varied from stage to stage. Further, it has been observed that some of the arguments which were advantage in this court and which have found favour with us were not advanced at all or were not advanced clearly and specifically before the Tribunal. The provisions of section 10 and the effect thereof were canvassed, and canvassed extensively, for the first time, in this court only. Moreover, it is the nature of somewhat unusual disposition made by the deceased by which he sought to give certain amounts to the beneficiaries whilst at the same time retaining an almost full control over these amounts during his lifetime that has occasioned the proceedings before the estate duty authorities culminating in this reference and the protected hearing thereof. In view of all this, we are of opinion that the proper order as to costs would be to direct the Controller and the accountable persons to bear their respective costs of this reference. There will be an order accordingly.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //