1. In this reference under s. 64(!) of the E.D.Act, 1953, the two question set out below have been referred to us for out determination by the Tribunal the first at the instance of the Controller of Estate Duty and the second at the instance of the accountable persons. These two questions are :
'(1) whether, on the facts and in the circumstances of the case, and on a true construction of the provisions of the will of Govindji Madhavji dated October 19,1913, the Tribunal erred in law in holding that only one half of the property left by Govindji Madhavji as it existed at the death of the deceased, Jamnabai, passed on her death and became liable for estate duty
(2) Whether whilst determining the valuation of shares of limited companies, the goodwill of such companies is to be computed with reference to the maintainable profits before deductions of income (tax) and other taxes or after deduction of such taxes ?'
2. Jamnabai, whose death has ultimately resulted in this case being stated to us by the Tribunal, was married to one Govindji Madhavji. In the year 1914 Govindji predeceased Jamnabai, leaving behind him a will executed on October 19, 1913, in respect of his self-acquired property. Under this will, certain dispositions were made by Govindji in favour of Jamnabai, his mother, Javerbai and his brother son. Damodardas. By clause 4 of the will, Govindji gave an authority to Jamnabai to adopt Damodardas as his son in case the time of his death he had no son. In pursuance of this authority to adopt given to her, Jamnabai adopted Damodardas on July 19,1915. This adoption was recorded in a memorandum executed on the same day. Further, on the same day an agreement was also executed between Damodardas Gangabai, the windowed mother of Damodardas and Jamnabai under which Damodardas agreed and confirmed that the properties in respect of which Govindji has made his will were Govindji own self-acquired properties and agreed that he would not at any time make any claim to any share or interest in any such property or any part thereof on the ground that it was not the absolute property of Govindji sometime thereafter Javerbai dies, and then on January 9, 1957, Jamnabai died. Damodardas died on March 27, 1957, before he could file the estate duty return in respect of the estate of Jamnabai. The respondents before us, who are the accountable persons, are the administrators under the letters of administration of the estate of Jamnabai granted by this court.
3. In the assessment proceedings, the respondents contended that under the will of Govindji a life estate was created in favour of Javerbai, Jamnabai and Damodardas, each of the these life tenants having an equal share in the income of the residuary estate, and that there was on absolute remainder created in favour of Damodardas which was to fall into possession the extinction of these life interest. They further contended that as there were only two life tenants, just prior to the death Jamnabai, namely, Jamnabai and Damodardas, each has an equal one-half share in the income of the residuary estate, and therefore, the property which passed on the death of Jamnabai was only a one-half share in the said property. This contention was negatived by the Deputy Controller on the ground that neither Javerbai nor Jamnabai nor Damodardas had any definite share in the income of the properties left by Govindji and that after Govindji's death Javerbai Jamnabai and Damodardas lived together as members of a family collectively and after Jamnabai's under the terms of the said will. The Deputy controller further held that in any event assuming Damodardas was entitled to a one-half share in the properties left by Govindji, by clause 3 of the said agreement entered into by him with Jamnabai at the time of his adoption he has relinquished all his interest in the trust created by Govindji by his will and, therefore, the entire estate passed to Damodardas. An appeal filed by the respondents was dismissed by the Appellate Controller. In the second appeal to the Tribunal, the Tribunal upheld the contentions of the respondents.
4. The determination of the question as to what passed on the death of Jamnabai depends upon a true construction of the will of Govindji and the effect on the dispositions made thereby by reason of the execution of the said agreement dated July 19, 1915. By the said will Govindji appointed Jamnabai, Damodardas and one Bhai Prabhuram Dewkrishana as the executrix and executors of the said will. In cl.2 he set out the movable and immovable properties which he possessed. By clause 3 he declared that the ornaments, jewellery, etc., which his wife, Jamnabai possessed were her stridhan property and she had full right of ownership over it. Clause 4, as mentioned earlier, conferred authority, upon Jamnabai to adopt Damodardas as a son to Govindji. Clauses 5, 11, 12 and 13 of the said will provided as follows :
'5. It is my chief desire that after my death my venerable mother my wife and the long lived Damodar should live with one another in peace and harmony and should carry on the expenses of the house peacefully as is done now. But if destiny decrees otherwise then as many as can mange to live together shall do so, and I recommend my executrix and executors to give the party who goes to live separate a monthly allowance as mentioned below. Should, however, the income of my property be not sufficient to meet payment of the monthly allowance, then I authorise my executrix and executors to make the necessary reduction in the said monthly allowance.
(a) Should my venerable mother go to live seperate, then in all Rs. 50 (fifty)(shall be paid to her) every month for house rent, maintenance and all other expenses.
(b) Should my wife go to live separate, then she also (shall be paid) in all Rs. 50 (fifty) every month for all the expenses as menti oned in the above clause.
(c) Should the long lived Damodar go to live separate, then in all Rs. 50 (fifty)(shall be paid to him) for all the expenses as mentioned in the above clause.
(d) I particularly recommend the long lived Damodar to remain obedient to my venerable mother and wife and he shall not allow any one of them to be dissatisfied in any way whatsoever.
11. Even if the long lived Damodar becomes my adopted son, still I do not give him absolute ownership over my property during the lifetime of my venerable mother and my wife. As along as my mother and my wife or any of the two are alive so long the long lived Damodar shall manage my property as their trustee and as to whatever he shall earn as my adopted son he shall add the same to my property. After the death of my mother and of my wife I appoint the long lived Damodar as the absolute owner of all my property.
12. In clause 3 mentioned above my wife has been given the right of absolute ownership upon her stridhan. If she be living with my other heirs, then she has the right together with my other heirs, namely, my mother and the long lived Damodar, to enjoy the income of my other property. But she no right whatsoever to give away such other property either by making a will or a gift in any way whatsoever. I empower my wife to spend to the extent of Rs. 5,000(five thousand) out of my property for charitable purpose and the executors shall pay to her a sum to that extent whenever she demands payment thereof.
13. In accordance with the clause immediately preceding if my mother be living with the long lived Damodar and my wife, then she too has the right to enjoy the income of my property along with the others, but she has no right to give away any property belonging to me either by making a will or a gift.'
5. Mr. Joshi, learned counsel for the applicant, submitted before us that in the will a definable, quantifiable and ascertainable interest, in the income of any particular individual has not been specified, but the income has to be spent only on meeting the expenses of the household. In his submission the trust that was created is to be found in clause 5 of the will, a trust whereby no part of the income is given to any individual beneficiary but the income is to be utilised merely in meeting the expenses of Javerbai, Jamnabai and Damodardas, and therefore, these three beneficiaries constituted a group, being members of the same family. In the alternative, Mr. Joshi submitted that even assuming that any interest in the nature of a life estate was created in favour of Javerbai, Jamnabai and Damodardas, they did not take the income in any specific or ascertained share but they took the income together jointly or, in other words, as joint tenants and not as tenants-in-common. For this purpose Mr. Joshi laid emphasis upon the sentence in clause 12 of the will, namely, 'If she (that is, Jamnabai) be living with my other heirs, then she has the right together with my other heirs, namely, my mother and the long lived Damodar, to enjoy the income of my other property.' The words in the sentence emphasised by Mr. Joshi in connection with this submission were the words 'together with my other heirs.'
6. This was the will of a Hindu made on October 19, 1913. This will was executed in Bombay. Accordingly, under clause (a) of s. 57 of the Indian Succession Act, 1925, the provisions of Pt. VI of the said Act set out in Sch. III thereto, subject to the restrictions and modifications specified therein, apply. Section 82 of the said Act provided that the meaning of any clause in a will is to be collected from the entire instrument, and all its parts are to be construed with reference to each other. This is one of the sections specified in Sch. III. Thus, in order to construe what was the interest created favour of Javerbai, Jamnabai and Damodardas under the said will, we must read the whole will together. Even without the said s. 82, that would be the position with respect to construction of documents. It is only when the court is unable to reconcile the different part of an instrument that a repugnancy or inconsistency would arise, in which event the position is well settled, namely, that where two clauses or parts of an instrument are repugnancy to one another, the earlier prevailed and the later is rejected in the case of deeds and documents (see Norton on Deeds, 2nd Edn., p. 89) and in the case of testamentary instruments the latter will prevail over the former, that is, the latter will be accepted and the former rejected over the former, that is the latter will be accepted and the former rejected. This principle of construction with respect to testamentary instruments has received statutory recognition in s. 88 of the Indian Succession Act, which also applies to Hindus.
7. Bearing these principles in mind, we will now turn to the relevant clause of the will. It is not disputed as in fact it cannot be, that by clause 11 of the will an absolute remainder is created in favour of Damodardas. The residue is vested in interest in Damodardas and it is to fall in possession on the death of Javerbai and Jamnabai. The question is whether this postponement of immediate possession of the residue by Damodardas is by reason of the creation of life interest in favour of Javerbai Jamnabai and Damodardas or by reason of the trust created for maintaining a household and meeting the household expenses. Under clause 12 of the will Jamnabai is given the right, together with Javerbai and Damodardas to 'enjoy the income' of the residuary estate. A right in identical terms has been created in favour of Javerbai by clause 13 of the will. Both these clauses specifically mention that Javerbai and Jamnabai will have the right to enjoy the income of the residuary estate along with the other herein and both Javerbai and Jamnabai are specifically prohibited from alienating or giving away by will or gift or otherwise any property. Thus, by clause 12 of the will what is created is a life interest in favour of Jamnabai subject to a condition of defeasance namely, that it she stops living together with the others she will lose her right to enjoy the income of the property. A similar interest has been created in favour of Javerbai by clause 13 of the will. The question which then remains is, what is the true construction and effect of clause 5 of the will If one carefully reads the whole of clause 5 and compares it with the other clauses in the will, to which reference will presently be made, it would be clear that this clause is couched in predatory words and does not cast or create any obligation. It is merely an expression of a pious wish or hope on the part of Govindji that after his death his nearest and dearest ones, namely, his widow, mother and his brother's son, whom he obviously looked upon as his won son, should live together in peace and harmony and in the same style as they were doing during his lifetime, a pious wish which many a testator has expressed and which very often has remained to be fulfilled. However, in this case this pious wish appears to have been fulfilled, because the admitted position is that all the three continued to stay together. Clause 5 of the will being by stating :
'It is my chief desire that after my death my venerable mother, my wife and the long lived Damodar should live with one another in peace and harmony and should carry on the expenses of the house peacefully as is done now'
8. There are no words to be found here which would cast an obligation or create a trust for meeting the household expenses. The wish is two fold; the first part being that the testator's mother, widow and brother's son should lice with one another in peace and harmony, and the second part is that expenses of the household should be carried on peacefully in the same manner as was done during Govindji lifetime. The whole emphasis is that they should live in harmony with one another without family disputes. However, since by cl.12 of the will the testator was creating a life interest subject to a condition of defeasance, namely, that if Javerbai and Jamnabai went to reside separately, their enjoyment of the income of the property that is their enjoyment of the income of the property, that is, their life estates, would terminate, he did not want in such an event to leave them penniless. By cl.5 of the will therefore, he further recommended to his executors and executrix to give whichever party who went to live separately a months allowance. The portent point to note is that the words used in cl.5 are 'it is my chief desire' and 'I recommended my executrix and executors'. We must contrast these words with the words used in the other clauses of the will, which create a binding obligation. Clause 6 of the will creates of the trust in respect of a sum of Rs. 10,000 in favour of Javerbai. Javerbai is to get the interest of the said fund during her lifetime and after her death the said amount is to be divided among the four person specified in the said clause. The opening sentence of this clause is, 'After my death my executrix and executors shall set part a sum of Rs. 10,000 (ten thousand) for my venerable mother.' So far as the distribution of this fund of Rs. 10,000 after the death of Javerbai is concerned, cl.6 stated : 'After her (my mother) death, the above-mentioned principal sum shall be dealt with in accordance with what is written below.' Clause 7 of the will provides for the marriage expenses of Damodardas's daughter, Shanta. There too, the testator has provided that 'an outlay to the extent of Rs. 1,500 (fifteen hundred) shall be made out of my property and Rs. 1,000 (one thousand) either in articles or in cash shall be given to her by way of Kanyadan'. Clause 8 of the will has provided for the funeral and obsequies ceremonies of Jamnabai. There to the words used are an outlay to the extent of Rs. 3,000 (three thousand) shall be made out of my property 'for this purpose. Even in respect of his won funeral and obsequies ceremonies and certain other charities to be made after his death the testator has provided in cl.10 of the will that these expenses' shall be made in accordance with what is written below. This amply shows that wherever by this will the testator has intended to create a binding obligation, he had used appropriate words for that purpose. The total absence of any such words in cl.5 of the will and suing in their place instead merely predatory words, clearly show that clause 5 was not intended to operate as a binding obligation or to create any trust in respect of household expenses. The position with respect to predatory words is thus set out in snell's Principles of Equity, 27th Edn., p. 112 :
'Modern attitude. - There never has been any such entity as a predatory trust; the question was whether predatory words had created an express trust, and at one time the Court of Chancery was very ready to infer a trust from such words (see, e.g., Harding v. Glyn (1739) 1 Atk 469; 5 ves 501; 2 W & TLC 285). But with Lambe v. Eames (1871) 6 Ch App 597, in 1871, the tide turned. For over a century the strong tendency has been against construing predatory words as creating a trust, and undoubtedly many of the order cases would not now be followed (see Sugden's Law of property (1849), pp. 375, 376). As James L. J. observed after hearing many of the older cases cited, I could not help felling that the officious kindness of the Court of Chancery in interposing trusts must have been a very cruel kindness indeed' Lambe v. Eames (1971) 6 Ch App 597 .'
9. We have, therefore, no hesitation in holding that under the said will Javerbai Jamnabai and Damodardas each took a life interest defeasible in the event of one of then not staying with the others.
10. The next question that arises is as to the extent of these life interest Mr. Joshi's submissions is that the share of these three persons in the income of the residuary property of Govindji not being definite, they all took the income jointly as a group. We are unable to understand what was meant by the word 'group'. The only light that was thrown by Mr. Joshi upon why he sued the word 'group' was that all three of them were members of the same family. In spite of this attempt at enlightenment, we still were unable to appreciate why these three constituted a group though we has a lurking suspicion that in some other connection the word 'group' had been used in a tax case which was decided in favour of the revenue. So far as the law of wills and trusts is concerned there are bequests and devises to individual and to a class. A legacy is to an individual where the beneficiary is specifically mentioned either by name or description. A legacy is to a class when it is given to persons all of where are either unascertained or some of who, are ascertained and others unascertained and who all fulfil a particular description, such as children of the testator or the settlor or the grandchildren of the testator or the settlor the sons of any one of the particular issues of the settlor or the testator. Section 121 of the Indian Succession Act, is one of the sections which, deals with legacies to a class. Javerbai Jamnabai and Damodardas did not constitute a class as understood in the law of trusts or of wills. They were three individuals named in the will to whom specific benefits were given by the will.
11. We now turns to Mr. Joshi's contention that the shares of the life tenants not being specified, they all took the income of the property of Govindji jointly. This amounts to saying that the income of the residuary estate was bequeathed to Javerbai, Jamnabai and Damodardas as joint tenants and not as tenants-in-common. A joint family tenancy connotes unity of title, possession, interest and commonness of title. In a tenancy-in-common there may be unity of possession and commonness of title but the other two features would be absent. Further in a joint tenancy on the death one of the joint tenants his interest would pass to the other joint tenants by survivorship. In a tenancy-in-common it would pass to the hairs of the deceased co-tenant. Here, of course, since the interest created is a limited interest, that question does not arise. In this connection, we must remember that we are dealing with a trust created by a will. Trusts are creations of equity and as Sir Robert Atkyns pointed out in the course of his arguments in Attorney-General v. Sir George Sands (1966) 145 ER 561 'a trust is altogether the same that an use was before 27 Hen. 8, and they have the same parents fraud and fear, and the same nurse a court of conscience.' Thus trusts, are creations of a court of equity and principles of equity as far as possible apply. One of the maxims of equity is 'Equality is Equity'. As snell has put it in his 'Principles of Equity', 27th End., p. 36.
'It has long been a principle of equity that in the absence of sufficient reasons for any other basis of division, those who are entitled to property should have the certainty and fairness of equal division, for equity did delight in equality., The maxim is equality is equity and this has been applied in a variety of ways.'
12. A little further Snell says that this maxim is illustrated by equity's dislike of a joint tenancy. The following passage at page 38 of Snell is also pertinent.
'In addition to equity's ancient dislike of a joint tenancy, the maxim 'equality in equity may be illustrated by a number of more modern instances. In general, the maxim will be applied whenever property is to be distributed between rival claimants and there is no other basis for division.' I think that the principle which applied here is Plato's definition of equality as a 'sort of justice'. If you cannot find any other equality is the proper basis.'
13. The quotation in the passage from Snell, reproduced above, is from the judgment of Vaisey J., in Jones v. Maynard (1951) Ch 572. Apart from this, we must remember that this is a will made by a Hindu. In Jogeswar narain Deo v. Ram Chandra Dutt ILR (1896) Cal 670 , the judicial committee of the Privy Council observed (p. 679) :
'The principle of joint tenancy appears to be unknown to Hindu law, except in the case of coparcenary between the members of an undivided family.'
14. In that case, a Hindu testator gave a 4 annas share of his estate to his daughter and son for their maintenance, with the power of making alienation thereon by sale or gift. It was held by the Judicial Committee that on a true construction of such gift each took an absolute interest in a two annas share of his estate and the words 'for your maintenance' did not reduce the interest of either to one for life only. The observation quotes above by us were made by the Judicial Committee while rejecting the argument that the interest created in favour of the window and son was a joint tenancy and not a tenancy-in-common. In Venkatakrishna Rao v. Smt. Sathyavathi : 2SCR395 , this question came u[p for consideration of the Supreme Court. The facts of that case were that the testatrix who was childless, herself brought up a boy and a girl from their infancy. In order to provide for them after her death the testatrix executed a will covering all her properties, Movable and immovable. The relevant clauses of the will provided that (head note) 'the entire property should be in possession of both of them and that both of them should enjoy throughout their lifetime the said property without powers of gift, transfer and sale and that after their death the children they may be born to them should enjoy the same with power of gift, transfer and sale.' The Supreme Court held that on a construction of the will the bequest in favour of the boy and girl was that of a life estate with a vested remainder in favour of the boy and girl was that of a life estate with a vested remainder in favour of their children and the children should take the vested remainder per stripes and not per capita. The Supreme Court further held that the testatrix never intended the foster children to take the property as joint tenants because joint tenancy was unknown to Hindu law, except in the case of coparcenary between the members of an undivided family, and therefore, a joint tenancy could not be spelt out from that will. It is pertinent to note that by this clause the two foster children were given the right to 'enjoy' throughout their lifetime the property without any power of alienation over such property. The word used in that will as also in the will before us was 'enjoy'. There too no shares were specified not was it said that they should enjoy equally or in equal shares of half shares. This decision is, therefore, binding upon us. In a matter which came up before the Calcutta High Court, namely. CIT v. Pulin Behari Dey : 20ITR314(Cal) , harries C.. who spoke for the Bench, said at p. 319 :
'It is now clear beyond all doubt that in Hindu law a gift to A and B without in words determining the exact shares must be regarded as a gift to A and B as tenants-in-common or in equal shares.'
15. After reviewing various authorities he further observed at p. 321 :
'It appears to me to be established beyond all doubt that a gift by a Hindu to two Hindus without specification of shares is a gift to the two persons in equal shares.'
16. In the case before the Calcutta High Court, a Hindu had executed a deed of trust and transferred certain properties to trustees for the maintenance and worship of two deities and for the performance of certain poojas. The wife of the settlor subsequently made a will by which she also dedicated all her immovable property to and for the worship of the two deities and for certain other charitable purposes which were set out in the will. After applying the income for those objects the executors were to spend the remainder of the income for the worship of the two dates. As the respective shares of the deities were stated either in the deed of settlement or in the will, a question arose in assessment to income-tax whether the shares of the deities were defined in law, and, therefore, the first proviso to s. 41 of the Indian I.T. Act, 1922, was inapplicable. As we have mentioned earlier, the Division Bench, on a revise of all the authorities, held that the two deities took as tenants-in-common, that is, in equal shares. If, in these circumstances, when even a God takes only an equal half shares, can a mere mortal presume to take more
17. Apart from this, there is intrinsic evidence in the will itself to show that the testator intended that each of the three life tenants should take an re in the income of the property. In the second part of cl.5 of the will the testator has recommended to the executrix and executors of the will to gives monthly allowance to a life tenant who goes to live separately. The amount of such monthly allowance in the case of each of the life tenants is the same namely, a sum of Rs. 50. This clearly shows what the intention of the testator was.
18. We, therefore, hold that as long as Javerbai was alive, Javerbai Jamnabai and Damodardas shared equally in the income of the property, namely, each had a one-third share in it. On the death of javerbai the remaining two life tenants continued to have equal shares in the income, that is to say they then had a one half share each in the income of the property. On the death of Jamnabai, since the only surviving life tenant was Damodardas, who was also the remainderman, the lesser interest became merged with the greater and the one-half life interest of Damodardas fell into the remainder.
19. Mr. Joshi, learned counsel for the applicant, next submitted that even if each of the life tenants had a one-third shares in the income of the property, none the less the entire property passed on the death of Jamnabai. In support of this submission. Mr. Joshi relied upon the decision of the Supreme Court in CED v. Hussainbhai Mohamedbhai Badri : 90ITR148(SC) . We are unable to see how this decision in any way supports the applicant's contention. On the contrary, this is a decision which is wholly against the proposition canvassed on behalf of the applicant. In that case, a settlor settled certain properties on trust under which he was entitled to the income of the trust during his lifetime, and after his death one-third of the income of the trust was to be given to the settlor's wife for her lifetime, one-third was to given to his eldest sons and the remaining one-third was to be entrusted to the eldest son to be utilized for the benefit of the family of settlor's youngest son. After the death of the settlor's wife the trustees were to hand over the corpus to the settlor's eldest son and the family of the settlor's youngest son in equal shares. The testator's wife was appointed as one of the trustees of the trust. After the death of the settlor's wife question arose whether the entire trust properties or only one-third shares thereof passed on her death under s. 5 of E.D. Act. The supreme Court held that only one-third share of the trust properties passed on her death, and the fact that after the death of the settlor's wife, the settlor's eldest son and his other heirs, who has only a beneficial interest in the income, became the legal owners of the trust properties did not enlarge either the extent or the value of the properties that passed on the death of the settlor's wife, and her right to the properties as a trustee was purely a personal right a it as no value in terms of money and that it conferred on right upon her but it only imposed duties upon her and that such a right was not 'property'. The Supreme Court further held that the words 'passes' in s. 5 of the E.D. Act means 'changes hands' and that what was relevant in determining the scope of the expression 'property passing on the death of the deceased' was the change in the beneficial interest and not title and that to ascertain whether property had passed, a comparison must be made between the persons beneficially interest the moment before the death and the persons so interested the moment Appeal from the Judgment and Order dated or the death. While in the case before the Supreme Court, there were three life tenants, two of whom took the remainder on the death of the other life tenants, in our case, there are three life tenants one of whom took the remainder on the death of the other two. This different in the number of the remainder men makes no difference. The case is on all fours with the case before us and must govern the decision of this reference.
20. We will not deal with the arguments advanced before us based on the said agreement dated July 19, 1915, executed on the same day as Damodardas was adopted by Jamnabai in pursuance of the authority conferred upon her by cl 4 of the husband's will. Reliance was placed upon cl 6 of the said agreement to support the argument that, under the trust created by the said will, Jamnabai did not take any defined share of interest or any share or interest in the income of the trust properties but t the trust was for meeting the expenses of the household. Reliance was further placed upon clause 3 of the said agreement in order of advance an argument that by the said clause Damodardas had relinquished all his beneficial interest under the said trust. Clauses 6 of the said agreement provided follows :
'The said Jamnabai, widow of Govindji Madhavji, shall so long as the lives have full control of the household and decided domestic affairs and the said Damodar Shamji will not directly or indirectly interfere in her management. After the death of the said Jamnabai. widow of Govindji Madhavji, Javerbai, the mother of the said Govindji Madhavji, if she shall be then living shall have the powers aforesaid during here lifetime. The expenses connected with the household and domestic affairs shall be incurred according to the name and positions of the said Govindji Madhavji's family and will not at any time exceed the income of the estate of the said Govindji Madhavji provided that if the expenses shall exceed Rs. 20,000 per year, then the said Jamnabai and the said Damodar shall jointly decide as trustees as to how much the excess should be incurred.'
21. We fail to see what relevance this clause has to the interpretation of Govindji's will. This agreement is a document executed two years after the date of the will and one year after the death of the testator, Govindji. Obviously, therefore, Govindji is not, as he cannot be, a party to the said document. What other persons stated in an agreement as to the meaning or effect of the said will can have no bearing whatever on the construction of the said will, assuming the said clause 6 bore the meaning which Mr. Joshi is seeking to attribute to it. We are, however, unable to read into clause 6, the meaning canvassed for by Mr. Joshi. One of the recitals of the said agreement is that jamnabai had expressed her willingness to take Damodardas in adoption, in accordance with the directions in that behalf given in Govindji's will, on conditions that Damodardas should admit and acknowledge that all the properties left by Govindji, to which he was in any way entitled, were Govindji's won absolute properties and that he had power to dispose of the same in the manner in which he had disposed of them by his will and that Damodardas would abide by and carry out the provision of the will and act conformably to the terms and conditions set out therein. By clause 1 of the said agreement Damodardas agreed that the properties and assets, which Govindji died possessed of or was entitled to, were Govindji own absolute property and that he had the power to dispose of the same by his will and that he would 'abide by and carry out the provisions contained in the said will'. By clause 2 of the said agreement Damodardas declared that would not at any time, either directly or indirectly, claim any share or interest in such property or any part thereof on the ground that the same was not the absolute property of Govindji. Now, one must bear in mind the background which would result in such an agreement being executed. In Krishnamurthi Ayyar v. Krishnamurthi Ayyar , the Judicial Committee of the Privy Council, after examining all the authorities, held that a disposition made inter vivos by a Hindus who has full power over property was not affected by the adoption of a son subsequent to such disposition and that the same was true when the disposition was by will and the adoption was subsequently made by a widow who had been given power to adopt, for, the will spoke a at the death of the testator and the property was carried away before the adoption took place. The Judicial Committee then pointed out as to what the position would be if the adoption was antecedent to the disposition of property to which, in the case of a minor boy taken in adoption, his natural father had given consent. With that part of the decision we are not concerned. This decision of the Privy Council which finally settled the law was, however, delivered in 1927. The agreement we are dealing with is of 1915, and it appears that at that time, there were deferring lines of authorities holding the filed, and the Madras and the Bombay High Courts had taken different view, and further there were difference between authorities of the same High Court. It is obvious that it was because of this legal uncertainty that it was felt necessary to get an express agreement and acknowledgment form Damodardas that the properties which Govindji died possessed of were his absolute properties and that he had the power of dispose of them by his will and that he would not in any manner claim any interest in these properties in his character as an adopted son or other wise than on the footing that they were the absolute properties of Govindji over which he had right of disposal by will, or, in other words, that he would claim no interest in any of these properties except as provided for by the said will. However, since Damodardas on his adoption would be the only male member of the family, Jamnabai protected herself by providing in clause 6 that during her lifetime she would have full control of the household and domestic affairs and Damodardas would not, directly or indirectly, interfere with the same and that after her death Javerbai would have the same power. Since the properties and the business of Govindji were to be managed and looked after by Damodardas in order to ensure that he made available the funds for running the household in the same style as was done during the lifetime of Govindji, the latter part of clause 6 was introduced into the agreement. Clause 3 of the said agreement in terms clearly states that during the lifetime of Jamnabai and Javerbai, Damodardas will hold the estate of Govindji and the investments representing the same as a trustee 'only for the trusts and purposes set out in the will'. The words in the concluding part of cl.3, namely, 'will not beneficially deal with the same or claim and beneficial interest therein', do not and cannot refer to the beneficial interest he had got under the said will. They would refer only to an interest or a right in himself in his character as an adopted son or de hors the will, otherwise this latter part would be inconsistent with and repugnant to the first part of clause 3 of the said agreement. Assuming for the sake of argument that this latter part were to suffer from this repugnancy, in such an event on the principle of construction of deeds referred to by us earlier, it is the first part which would prevail and the latter part would be rejected.
22. This brings us to the second question referred to us. The facts so far as they relate to the understanding of this question are that estate of Govindji, inter alia, comprised of shares of five private limited companies. Mr. Dastur, learned counsel for the respondents, at whose instance this question was referred by the Tribunal, has stated before use that this questions arises only with valuation of shares of two out of the said five companies, namely, shares of Bhor Industries Private Ltd., and of Govindji Madhavji and Company Private Ltd. For the purpose of valuing the shares of Bhoir Industries Private Ltd., the Deputy Controller has, after arriving at the net assets as equivalent to the amount of paid up capital and reserves and adding thereto the amounts which may be declared as dividends up to the date of death of Jamnabai, added thereto the goodwill of the business of the said company. For the purpose of valuing the goodwill of the business he followed what is known as the super profits or earning method, that is to say, he had taken a certain number of years' purchase of super profits or earnings. In applying this method, the Deputy Controller took the net profits as per the books of account of the company before allowing deduction of provision for taxation and after deducting divided income of the company for a period of three years, namely, the year ended March 31, 1955, the year ended March 31, 1956, and the year ended March 31, 1957, and took the total thereof to arrive at what is described as average profits or what is also known as maintainable profits. From this he deducted the normal return at 10 per cent. on capital of Rs. 34.2 lakhs, comprising the paid up capital and reserves, and thus arrived at the figure of Rs. 3,90,000 for super profits and he took three years, purchases of these super profits as the value of goodwill. Before the authorities it was contended that goodwill should not be taken into account in valuing the share. It was also contended that for the purpose of valuing goodwill by the method adopted by the Deputy Controller in arriving at the average profits or maintainable profits he should allow deduction of provisions for taxation. These contentions were rejected by the Deputy Controller and the Appellate Controller. Before the Tribunal, learned counsel for the respondents conceded that goodwill was an asset and its value should be considered in determining the value of the shares of the companies. He thereupon confined his objection to the valuation of the goodwill. The objection with respect to not allowing a deduction of provisions for taxation from the net profits was rejected by the Tribunal on the ground that since a provision for taxed has already been deducted in computing the net wealth of the companies, on the basis of which the valuation of shares of those companies was to be determined, to allow it again to be deducted from the net profits in order to arrive at the maintainable profits would amount to deduction of taxes twice. We are unable to agree with the reasoning. In order to arrive at the valuation of shares what the Deputy Controller was doing was first to value the net assets and then to add to it the value of the goodwill. Goodwill was not an asset shown in the balance-sheet of either of these companies. It had therefore to be valued separately. The taking into account of the provision for deduction of taxes in order to arrive at the net assets, was an entirely different matter. It has no bearing on the question of valuation of goodwill. Goodwill was being valued separately from the net assets, and assuming that for the purpose of valuing goodwill on the super profit method a deduction is to be allowed of provision for taxation, it cannot be said that this would amount to deduction of taxes twice. It must be stated that Mr. Joshi, learned counsel for the applicant, fairly stated that the view taken by the Tribunal on this point was not correct in law. So far as the shares of the other company namely, Govindji Madhavji and company Private Ltd., are concerned it does not appear that the Deputy Controller has for the purpose of valuing the shares of this company adopted the super profits method. For the purpose of arriving at the value of goodwill he has taken the profits of three years prior to the death if Jamnabai which were Rs. 90,000 a year as also the profits made by the company for a period of three years after the death of Jamnabai which were about Rs. 55,000 per year, and taking this factor into consideration he has estimated the goodwill at a rough and ready figure of Rs. 50,000. It was, however, stated by Mr. Dastur, learned counsel for the respondents, and this appears to be brone out by the record that the amounts of profits both prior to and after the death of Jamnabhai which were taken by the Deputy Controller were without making any deduction of provision for taxes. By reason of the view that it took that allowing a deduction for provision for taxation for the purpose of valuing the goodwill would amount to a double deduction of taxes, the Tribunal has not considered any of the contentions with respect to valuation raised by the respondents. The question which the Tribunal has referred to us on this part of the case has not at all been discussed before it, nor has it expressed any opinion upon it, nor does it arise out of the order of the Tribunal. The question which really arises is quite a different one. Accordingly, in order to bring out what the real controversy between the parties, is we have, with the consent and assistance of both learned counsel, reframed question No. 2 as follows :
'Whether the Tribunal was right in holding that in arriving at the value of goodwill of a company under the super profits method of valuation the maintainable profits (less tax thereon) are not to be considered on the ground that it would amount to deduction of taxes twice ?'
23. For the reasons set out above, we answer the questions as follows :
Question No. 1 : in the negative.
Question No. 2 as reframed by us : In the negative.
24. The Tribunal will now proceed to determine the respondents' objection to the valuation of goodwill taken in the second appeal before the Tribunal in the light of our judgment.
25. As the greater part of the hearing of this reference was taken up by the arguments on the first question, the applicant will pay to the respondents the costs of this reference fixed at Rs. 250.