1. This reference relates to a trust called 'Prince Shahmat Ali Khan Trust'. The trust was created by the former Nizam of Hyderabad who died on February 24, 1967. He was the last of Asifia Dynasty of Kings who ruled Hyderabad State. He had the reputation, at one time, of being the richest individual in the world. He was so referred in a book called 'Verdict on India'. In that, it is said if he opened his money bags, the world of business were to have received a great tremor. The author of the book was a conservative journalist from England who came to India in 1942. His name is Beverly Nichols. He was a master of invective. He met the Prince of Berar, the son of the Nizam, and heard him utter once 'shukriya' (thanks) in conversation. Nichols referred to that and recorded that in his long stay in the country, for the first time he heard such a word, otherwise there is no equivalent word in the numerous vernacular languages in India and people in India do not know or use such a word.
2. The Nizam of Hyderabad, after police action, became concerned for his dependants. He, therefore, created numerous trusts in protection of their safety and welfare. Prince Shahmat Ali Khan Trust is one such trust created with a corpus of Rs. 12,88,169 for the benefit of his grandson. The Nizam himself is one of the trustees of the trust. As to remuneration of trustees, clause 18 of the deed directs that the trustees are to be rewarded with a sum not exceeding Rs. 3,000 per annum, if only the trustees resolve to pay for the services rendered by them. Having regard to this direction, the Additional Assistant Controller of Estate Duty, A-Ward, the Appellate Controller of Estate Duty-the two-interpreted clauses 2 and 18 and held section 10 of the Estate Duty Act, 1953 (34 of 1953) ('the Act'), is attracted and included Rs. 12,88,169 in the principal value of the estate of the Nizam for purposes of duty to be paid under the Act. The Appellate Tribunal, however, reversed that decision. Thereupon, at the instance of the Revenue, the following question is referred for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Trust Fund Prince Shahmat Ali Khan is liable to be included in the estate of late Mir Osman Ali Khan Bahadur under section 10 of the Estate Duty Act ?'
3. The law as to remuneration payable to trustees is contained in section 50 of the Indian Trusts Act, 2 of 1882, which recites, unless directed otherwise, a trustee has no right to any remuneration for the trouble, skill and loss of time in executing a trust. Whether or not there is a direction is not is controversy in the instant case. What is urged on behalf of the accountable person is, no resolution was passed by the trustees and no enforceable or legal right was created in favour of the trustee, therefore, section 10 is inapplicable. In view of what is found in clause 18 of the deed of must, it cannot be said that no right is created in favour of the trustees. The trustees in England and in India are generally not rewarded for services rendered unless there is direction to the contrary. This is authoritatively laid in Thorley v. Massam  2 Ch 613 (at p. 621) : 'trustee as well as an executor, the law requires him, in the absence of express provision to the contrary, to perform the duties which he undertakes, without any remuneration for the trouble which he incurs in performing those duties.'
4. The Tribunal, in the instant case, found on facts a direction in the deed of trust to pay trustees remuneration after 'outgoings' (including remuneration to trustees) were discharged. The balance of the amount only is to be paid to the beneficiary. Therefore, section 10 is not applicable. This reasoning of the Tribunal cannot be sustained. The issue is whether such a benefit as is found incorporated in the deed, attracts the application of section 10 of the Act. This aspect directly depends on the interpretation of section 10 of the Act. In interpretation, the courts in India have had an initial advantage, for the section is modelled on the pattern of section 102(2)(d) of the Stamp Duties Act, 1920-56, of Australia. The Privy Council considered section 102 in numerous decisions. In considering section 102, the case from Ireland in In re Cochrane  2 IR 626 the decision under the British Acts which interpreted section 11 of the United Kingdom Customs and Inland Revenue Act, 1889, and section 43 of the United Kingdom Finance Act, 1940, were considered. The Australian cases were treated as authority in New Zealand as in In re Adams  N.Z.L.R. 741 and vice versa. Speaking of the British Acts, it was held, they are alike the provision in Australia. The only substantial difference between the two it was noted-section 102 brings in 'any benefit to him of whatsoever kind or in any way whatsoever whether enforceable at law or in equity or not', whereas section 11 and section 43 bring in 'any benefit to him by contract or otherwise'. The interpretation of the British Acts in Attorney-General v. Seccombe  2 KB 688 was elaborately considered in St. Aubyn v. Attorney-General  AC 15 and the decision helped in considering the Australian Act.
5. The Australian High Court in John Lang v. Thomas Prout Webb (Commissioner of Taxes for Victoria)  13 CLR 503 interpreted section 102 before the words 'any benefit to him by contract or otherwise' were inserted by the Stamp Duties Amendment Act of 1931. This case was approved by the Privy Council once before the amendment was inserted and later after amendment in Clifford John Chick v. Commissioner of Stamp Duties  37 ITR 89;  AC 435 at 446. In John Lang's case  13 CLR 503 the facts showed a testatrix gifted certain lands to her sons and on the same day took leases of the same land from them. The lessor gave possession to the testatrix and she had thus the enjoyment of the land. The question was whether the donor was entirely excluded from the land Whether the enjoyment and occupation of land was not a benefit It was held, the lease 'at whatever rent prevents the entire exclusion of the donor'. There is another leading case in Commissioner of Stamp Duties (New South Wales) v. Owens (88 CLR 67) decided by the Australian High Court, which interpreted the case in H. R. Munro v. Commissioner of Stamp Duties  AC 61 touching on the subject of gift and benefit. In that case, there was a difference of opinion. The majority view in the High Court of Australia was approved in Chick's case  AC A35;  37 ITR 89 by the Privy Council. These are the foundation cases from Australia. The reasoning in these cases is adopted by the Supreme Court of India in interpreting section 10 of the Act.
6. The case in George da Costa v. CED : 63ITR497(SC) is the first case under section 10 where the leading cases in Australia, as interpreted by the Privy Council, were approved. What is more, in so doing, the method adopted by the Privy Council to hold the section is 'in two limbs' was followed. Section 10, it was said, was in two parts (at page 501) - '(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 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.' As for the words 'by contract or otherwise' in the second limb of the section, it was held, will not control the words 'to the entire exclusion of the donor' in the first limb. To this aspect, we will return later. This reasoning and conclusion in this first case after Parliament passed the Act shows the decision of the Privy Council, the High Court of Australia and the cases rendered under the British enactments were followed. Soon thereafter, it was realised that the conclusion relevant to' the two limbs' is 'cumulative' created problems, whereas the Privy Council said the two limbs are to be satisfied. Both conclusions created problems but in different spheres. In India, the problem as to cumulative satisfaction intermittently brought forth the question of interpretation of section 10 again and again for reconsideration in the High Courts as well in the Supreme Court.
7. In CIT & CED v. N. R. Ramarathnam : 91ITR1(SC) , the case shows a vain attempt was made by the Revenue to review the whole approach in interpretation. That attempt was repelled and at page 4, it is observed, 'Mr. Karkhanis, the learned counsel for the Department, sought to satisfy us that that decision requires reconsideration. We have not prevented him from rearguing the question of law which has already been concluded by our decision'. In CED v. Smt. Parvati Ammal : 97ITR621(SC) , it was argued and repeated (at page 638) that George da Costa's case : 63ITR497(SC) was not correctly decided. In CED v. R. V. Viswanathan : 105ITR653(SC) , it was held, on facts. section 10 was not attracted applying the tests. This was a case where interpretation of the section was seriously disputed. It was argued in this case that the State High Courts including the Supreme Court in applying the tests have overreached the principles laid down in the first case.
8. In CED v. C. R. Ramachandra Gounder : 88ITR448(SC) , the discussion shows (any event the argument) that the tests laid down were not adhered to. In CED v. Kanakasabai : 89ITR251(SC) , the counsel for the Revenue suggested a review of the interpretation by considering section 10 not in two parts, but from the standpoint of three parts. Then, the Supreme Court said (at p. 257) : 'the main part of section 10 is not happily worded' and it is so difficult to find out the true effect of the expression' of any benefit to him by contract or otherwise'. 'Do these words mean any benefit under the gift If that was so, the Legislature should have said so'. The suggestion of the Revenue to divide the section in three parts was not accepted. The difficulties referred in application of the tests or principles nevertheless persisted. The Supreme Court in CED v. Kamlavati : 120ITR456(SC) accepted this aspect and said (at p. 460)' in the application of the principles, courts are still faced with difficulty resulting in some cleavage of opinion. We, therefore, think it necessary to review some of those cases'. Having reviewed (at page 463) the cases, it was added, 'to avoid the conflict in the application of the ratio of the various cases, it was necessary to highlight some of the settled distinctions and, therefore, thought that it is necessary to clarify and elucidate some of the aspects and facets of the matter a bit further'. Curiously, when similar distinctions and clarifications made by the High Courts were brought to its notice (the cases of Allahabad, Calcutta and two of Madras High Courts are referred at page 465), the Supreme Court observed, 'it is not necessary for us to enter into the fine distinction drawn by the High Courts in each of the cases'. The matter of interpretation thus rests there. The situation rests where much is left to be desired.
9. The Privy Council experienced difficulties in the interpretation not of the type of difficulty experienced in India. In Norman Clyde Oakes v. Commissioner of Stamp Duties of New South Wales  AC 57 Lord Reid observed, 'the two limbs have given rise to much litigation' and identified the difficulty : '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 advantage which have some relation to the settled property; it is necessary to consider the nature and source of each of these advantages and determine whether or not it is a benefit of such a kind as to come within the scope of the section'. Lord Simonds referred to the observations of Lord Reid as respects 'benefit' in second limb and said, the subject requires 'further examination' and observed, 'it is possible that in the consideration of this very difficult part of the sub-section, it may be pertinent in some cases to enquire whether the benefit derived by the donor is one that impairs or detracts from the donee's enjoyment of the gift. Their Lordships, with great respect, think that this is a matter which may require further examination, but, as they have already said, they are clearly of the opinion that it is not a relevant consideration where the question arises under the first limb of the sub-section and is whether the donor has been entirely excluded from the subject-matter of the gift, and they repeat that in the present case that question can only be answered in the negative' The 'further examination' indicated does not appear to have been made in any cases to date by the Privy Council. In no case, 'the further examination' indicated is discussed by the Supreme Court though such a situation did arise in the decided cases referred to earlier in connection with the 'distinctions' brought out by the High Courts and elucidated by the Supreme Court.
10. The Nizam of Hyderabad carved out in the deed of trust a benefit for himself having founded the trust. In Oakes' case  AC 57 at page 80, such a benefit (as is referable to clauses 2 and 18 of the deed in question) was construed as a 'potential benefit' when they said, 'it may be that the deceased could legitimately have used those powers to his own advantage, but, in fact, he made no use of them at all. So, at most there were here potential benefits. As their Lordships have already decided that taking remuneration was a benefit within the scope of the section.' A similar conclusion in the above case obviously has to be drawn in the instant case.
11. It was next argued on behalf of the accountable person that the doctrine in Munro's case  AC 61 be applied to the facts of the case and indirectly it was suggested that the ratio in Oakes' case  AC 57 may not be applied. This plea requires consideration of facts in Munro's case : Munro was a registered sole proprietor of land in Australia in three holdings 'used for grazing business'. In 1913, by numerous gifts, Munro transferred the three holdings including some other lands to his six children. Before the gifts were made, there was a verbal partnership agreement executed in 1909 between the father and his six children. The agreement in 1919 was reduced to a formal deed. The two agreements covered the three holdings. Munro died in 1929. The gifts in 1913 were referred to have created 'right' in the six children. The Privy Council interpreted the two partnership agreements and held, 'the 'right' following the gifts was subject to partnership agreement.' This interpretation itself led to difference of opinion in Australia in Owens' case (88 CLR 67) and the majority view in that case was approved at page 446 in Chick's case  AC 435, adopting the reasoning in British statutes in St. Aubyn's case  AC 15. The dissent expressed by Williams and Taylor JJ. in Owens' case (88 CLR 67) was not approved. That is the history of Munro's case  AC 61.
12. We are, in the instant case, unable to concur with the view of the Tribunal that remuneration of trustees relates to 'outgoings' (even without considering what the expression connotes), since we hold the remuneration directed to be paid to the trustees in law is a potential benefit, hence, a benefit within the meaning of the second limb and the Nizam of Hyderabad retained by contract a benefit of the kind indicated in the second limb and, therefore, section 10 is attracted on the facts.
13. It is next argued that the value of potential benefit be ascertained and only such value of the benefit be included for purposes of duty, not the entirety of the amount, i.e., Rs. 12,88,169. Such a contention, it is argued, is not supported by the decision in Parvati Ammal's case : 97ITR621(SC) . We do no better than refer in that case how the contention was repelled (at p. 637) : 'the view urged on behalf of the respondent and accepted by the High Court that the estate duty is payable only in respect of the value of the right to possession and enjoyment in the hands of the deceased as a lessee of Mayavaram Lodge runs, in our opinion, counter to the plain language of section 10 of the Act. 'Later in the order, the contention was further tested and said' if the view propounded on behalf of the respondent were to be accepted, in that case the property which passed on the death of the deceased in the case of George da Costa : 63ITR497(SC) , could only be the value of the right to possession. In our opinion, the stand taken on behalf of the respondent in this respect is clearly untenable.'
14. Lastly, it is urged, that section 7 of the Act applies to the facts of the case, therefore, section 10 of the Act may not be applied, for it is argued that with the death of the Nizam of Hyderabad, the potential benefit ceased to remain for consideration. This contention is preferred for acceptance from the terms of causes of section 7. A passage in Chaturvedi & Pithisaria's Estate Duty Law, second edn., page 255, was cited.
15. The Supreme Court referred to the 'complexities' arising from sections 7, 39 and 40 of the Act in CED v. Alladi Kuppuswamy : 108ITR439(SC) , but interpretation of section 7 was not attempted as it did not arise in the case. In the interpretation of section 7, there may be complexities but whether the section is attracted or when it is not attracted, section 7 does not create any difficulties. Section 7 has four sub-clauses. Two of the clauses contain Explanations. Clause (1) indicates that the section relates to personal laws. In clause (4), it is clear (more so after the Explanation is added by Parliament), that holders of office or recipient of benefits of person relevant to Mitakshara, Marumakattayam or Aliyasanthana law. The clauses in section 7 thus have reference only to incident of Hindu (personal) law. Therefore, we hold that section 7 has no application on the facts of the instant case.
16. For all the aforesaid reasons, we reverse the view taken by the Appellate Tribunal. On facts, we hold section 10 of the Act is applicable. The trust fund is to be included in the estate of the deceased. The question is answered in favour of the Revenue and against the accountable person. We order costs be paid to the Revenue. Advocate's fee we fix at Rs. 300.
17. On an oral application made by the counsel for the accountable person, we certify that it is a fit case to grant leave to appeal to Supreme Court. Leave granted.