R.R. Rastogi, J.
1. The following questions have been referred for our opinion :
' (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of the Estate Duty Act, 1953, were attracted in regard to the interest of the deceased under the trust deed as modified ?
(2) Whether, on the facts and in the circumstances of the case, thevalue of the life interest of the deceased on the date of death alone could bedeemed to pass or the market value of those securities at the time of thedeath? '
2. The facts giving rise to these questions briefly stated are that late Sri Pearey Lal Banerjee, an advocate, had created a trust for his benefit and the benefit of his sons and daughter-in-law. The trust was in respect of Govt. securities of the face value of Rs. 10 lakhs and the Imperial Bank of India (now State Bank of India), Strand Road, Calcutta, was appointed as the trustee. The instrument of trust was executed on October 26, 1937. The settlor had by Clause (3) of the instrument reserved to himself a right to revoke, vary or modify all or any of the trust and powers declared by the instrument or concerning the trust funds or the income thereof and by means of an instrument executed on April 28, 1950, certain provisions of the original trust deed were modified. The main modification so effected was that from and after the death of the settlor the bank shall pay the net income of the trust funds to the settlor's son, Pranab Kumar Banerji, during his lifetime, if he survived the settlor and in case he predeceased the settlor or in the event of his death after having survived the settlor, the income of the trust funds was to be paid in equal shares to the other son of the settlor, Sunab Kumar Banerji, and his daughter-in-law, Shakuntala Banerji. It is not necessary to notice the other modifications made by that instrument.
3. The settlor died in 1952 and the net income of the trust became payable to P. K. Banerji. P. K. Banerji died on July 20, 1962, and these estate duty proceedings relate to the estate left by him. The accountable person, Smt. Shakuntala Banerji, widow of the deceased, claimed that the interest of the deceased in the trust property was not liable to be subjected to estate duty under Section 5, 6 or 7 of the E.D. Act, 1953, and should not be treated as a part of the estate of the deceased. That contention did not find favour with the Assistant Controller and he included the face value of the trust being Rs. 7,21,884 in the computation of the principal value of the estate of the deceased.
4. On appeal before the Appellate Controller, the same contention was again advanced on behalf of the accountable person and, in the alternative, it was further contended that the interest of the deceased in the trust being only a life interest, the value of that interest could not be equated with the value of the corpus of the trust. The Appellate Controller did not accept this submission and dismissed the appeal. The accountable person took the matter in further appeal before the Appellate Tribunal. The Appellate Tribunal held that the trust fund constituted property in theincome of which the deceased had a life interest and that interest ceased on his death and corresponding interest accrued to the accountable person as a result thereof. The case was thus covered by Section 7(1) of the Act. The Appellate Tribunal also confirmed the value of this interest, which as noted above, was taken to be the face value of the trust funds, that is, Rs. 7,21,884.
5. On behalf of the accountable person; the very same arguments were once again canvassed before us. However, after hearing parties' counsel we do not find much substance therein. In our opinion the case is squarely covered by the decision of the Supreme Court in CED v. Hussainbhai Mohamedbhai Badri : 90ITR148(SC) . The material facts of that case were that one Eusufalli Ebrahimji had settled upon trust certain immovable properties and leasehold lands by an indenture dated July 15, 1938. Under the terms of the trust deed, the settlor was entitled to the net income of the trust properties during his lifetime and after his death that income was to be divided in three equal shares, one-third of which was to be given to Bai Safiabai during her lifetime. Out of the remaining two-thirds, one-third was to be given to Mohamedbhai and the remaining one-third was to be entrusted to Mohamedbhai for being utilized for the maintenance of the two wives and children of the settlor's youngest son who had died before the trust deed was executed. After the death of Safiabai, the trustees were to hand over the corpus to Mohamedbhai and the family of the youngest son in equal shares. Safiabai was also one of the trustees. On the death of Safiabai on October 6, 1955, the question arose whether the entire trust properties or only one-third thereof passed on her death under Section 5 of the Act. On appeal by certificate, it was held by the Supreme Court that only one-third of the trust properties passed on the death of Safiabai. Her right to the property was purely a personal right but that did not make much of difference because what is relevant in determining the scope of the expression ' property passing on the death of the deceased ' occurring in Section 2(16) of the Act is the change in the beneficial interest and not title. Reliance was placed on an earlier decision in Mahendra Rambhai Patel v. CED : 63ITR645(SC) . It would thus be seen that the deceased had beneficial interest in the trust property and that interest passed on his death.
6. Coming to the valuation of that interest, it would be seen that the deceased alone was entitled to receive the entire income from the trust funds. The face value of these Govt. securities was, at the material time, Rs. 7,21,884 and the question is as to whether this very value can be adjudged for the valuation of the deceased's interest in this property. This question also does not admit of any doubt in view of the provisionscontained in Section 40 of the Act. That section provides for the mode of valuation of benefits from interests ceasing on death. It says :
'40. The value of the benefit accruing or arising from the cesser of an interest ceasing on the death of the deceased shall-
(a) if the interest extended to the whole income of the property, be the principal value of that property ; and
(b) if the interest extended to less than the whole income of the property, be the principal value of an addition to the property equal to the income to which the interest extended. '
7. This section, therefore, clearly provides that in the case of a benefit from interest ceasing on death if such interest extends to the whole income of the property, its valuation shall be the principal value of that property. As stated above, there is no controversy that the interest of the deceased extended to the whole income of the trust property and as such the face value of this property would be taken to be the principal value of such interest.
8. In view of the above discussion, our answer to both the questions referred is in the affirmative, in favour of the revenue and against the accountable person. In the circumstances of the case, there will be no order as to costs.