BANERJEE J. - This reference, under section 64(1) of the Estate Duty Act, has been made in circumstances hereinafter stated.
One Bhupendra Nath Mukherjee died intestate on December 27, 1955. During his life, on June 16, 1916, Bhupendra executed a deed of gift, in the Bengali language, in favour of his eldest son, Panchanan Mukhopadhyaya. The English translation of the material portion of the deed reads as follows :
'You are my eldest son and by virtue of succession after my death you are entitled to have a share of all those movable and immovable properties in which I have right, title, and interest and possession. With a view to preventing troubles, quarrels and litigations and also for avoiding various difficulties amongst my sons regarding settlement and preservation of the joint properties after my death, before demarcating to each of my heirs all the movable and immovable properties separately through a will or by deeds of settlement I desire to demarcate and give to you the two of my properties amongst other properties mentioned hereunder. In order, however, to remove any obstacle arising out of unforeseen causes to give the same to you through will or otherwise by or under this deed of gift I give the said two properties to you by this deed of gift subject to the following conditions. In the said two properties none of my sons and heirs shall have any right title or interest and I shall not have any interest right or power to give the same to anyone else. But as you are young in age and are not experienced in property matters and because you are not in need to spending much money I give, in gift, to you the following properties subject to the following conditions, that is to say, that, so long as I shall be alive, the said properties shall be in my possession as your trustee and I shall help you according to my discretion. You shall be able to take possession of the pucca house in property No. 2 occasionally complete possession and right will vest in you with respect to the said two properties.
Panchanan Mukhopadhyaya predeceased his father, sometime in the year 1930, leaving his son Sitanath Mukherjee, who is one of the accountable person before us. On the death of Bhupendra, Provash Chandra Mukherjee, one of the sons of Bhupendra, Mukherjee, the son of late Panchanan Mukherjee, were assessed, under the Estate Duty Act, 1953, as accountable person. The Assistant Controller of Estate Duty included the value of the properties covered by the deed of gift, referred to above, in the principal value of the estate of the deceased, proceeding on the basis of section 10 of the Estate Duty Act. The value of the properties covered by the deed of gift was taken to be Rs. 2,00,000.
Sitanath, thereupon, field an appeal before the central board of Revenue, to which the appeal lay under the law as it then stood. He objection to the inclusion of the value of the properties covered by the deed of gift in the principal value of the estate of the deceased, inter alia, on the following grounds.
(a) That there was a valid and complete gift made by the deceased more than two years before his death;
(b) That the deceased continued to hold the gifted property merely as a trustee and since possession and enjoyment by trustee was possession and enjoyment of the beneficiaries, the properties could not pass or be deemed to pass on the death of the deceased;
(c) That was a donor keeps back is not a gift and in this case the fact that the right to enjoyment of the gifted properties was not immediately given over by the deceased to his son, only meant that this was something which the deceased did not then purport to give and which should be ignored for purpose of liability under section 10 of the Act.
The Board dismissed the appeal holding, inter alia, that the gifted properties were correctly included in the estate of the deceased as property deemed to have passed on the death, under section 10 of the Act, and also that apart from the question of liability under section 10 of the Act, the properties clearly passed on the death of the deceased under section 5 of the Act, since a change in the beneficial interest took place on the death. Aggrieved by the order of the Central Board of Revenue, Sitanath Mukherjee asked for reference of several question to this Court, under section 64(1) of the Estate Duty Act. The Central Board, however, chose to refer the following question only for opinion of this Court, namely :
'Whether, on the facts and in the circumstances of the case, and on a proper construction of the deed of gift, dated the 16th June, 1916, the properties covered by the said deed have been rightly included in the estate of the deceased as property passing on his death under section 5 or alternatively, as property deemed to pass on his death under section 10 of the Estate Duty Act, 1953 ?'
At this, it is necessary for us to remind ourselves of the language of section 10 of the Estate Duty Act which reads :
'Property taken under any gift, whenever made, shall be deemed to pass on the donors 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 :
Explaining the sweep of the section, the Supreme Court observed in the case of George da Costa v. Controller of Estate Duty :
'The intention of the legislature in enacting section 10 of the Act was to exclude from liability to estate duty certain categories of gifts. A gift of immovable property under section 10 will, however, but dutiable unless the donee assumes immediately exclusive and bona fide possession and enjoyment of the subject-matter of the gift, and there is no beneficial interest reserved to the donor by contract or otherwise. The section must be grammatically construed as follows : Properly 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 of which property bona fide possession and enjoyment shall not have been thenceforward retained by the donee to the entire exclusion of the donor from such possession and enjoyment, or of any benefit to him, by contract or otherwise. The crux of the section 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. This view is borne out by the decision of the Court of Appeal in Attorney-General v. Earl Gray, with regard to an analogous provision under section 38(2) of the Customs and Inland Revenue Act, 1881, as amended by section 11 of the Customs and Island Revenue Act, 1889.
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. 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 genres and it must be interpreted to mean some kind of legal obligation or some transaction enforceable at law or in equity which, through not in the form of a contract, may confer a benefit on the donor... As a matter of construction we hold that 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. Even if the donor is content to rely upon the mere filial affection of his sons with a view to enable him to continue to reside in the house, it cannot be said that he was entirly excluded from possession and enjoyment within the meaning of the first limb of the section and, therefore, the property will be deemed to have passed on the death of the donor and will be subject to levy of estate duty.'
In making the aforesaid observations their Lordships were not oblivious of the amendment introduced to section 10 of the Estate Duty Act, by the Finance Act of 1965, by which there was a proviso added to the effect that a house or a part thereof taken under gift made to the spouse, son, daughter, brother or sister, shall not be deemed to pass on the donors death by reason only of the residence therein of the donor except where a right of residence therein was reserved or secured directly or indirectly to the donor under the relevant dissipation or under any collateral disposition. The Supreme Court observed that the aforesaid amendment had no retrospective effect and would not in any way control the statement of law made in the aforesaid judgment.
Keeping in view the law as hereinbefore summarised, we have now to examine the arguments advanced on behalf of the assessee. It was contended before us, in the first place, that there was a gift made by the deceased in favour of his son, Panchanan, and as result of the gift, the properties vested in the son; but by the same act, there came into existence a trust under which the donor began to hold the lifted properties as trustee for the donee. It was contended, in the next place, that the condition in the deed providing that the possession of the properties as well as the enjoyment of the usufruct of the donated properties shall remain in the donor was merely for the purpose of the trust which was created for the benefit of the son, Panchanan. It was argued, in the third place, that it was expressly laid down in the deed that the possession shall reside in the donor as the trustee of the beneficial owner and the words 'I shall enjoy the usufruct of such property' must be construed in the same light, that is to say, enjoyment shall be lamented to the donor in his capacity as trustee.
We are unable to interpret the deed of gift in the manner as contended for the learned counsel for the assessee.
The object of the gift was to prevent trouble, quarrel and litigation, which might arise on the death of the donor. The donor did not select to make a testamentary bequest in favour of the donee because he was afraid of unforeseen causes, which might prevent him from so doing in future. With the above object the donor executed the deed of gift in favour of his eldest son, Panchanan, which was conditioned in several respects. The conditions were :
(a) That so along as the donor would be alive the donated properties shall remain in the possession of the donor and the donor shall enjoy the usufruct of the said property. He may however, help the donee according to his discretion.
(b) The donee was given the liberty to go into possession of the house, which was the subject-matter of the gift, only occasionally according to his needs and even that with the permission of the donor.
By the deed of gift it was expressly provided that complete possession and right in the gifted property will vest in the donee only after the death of the donor.
As we read this deed, it appears to us that there was no intention of giving anything to the donee in praesenti : Everything was reserved for the future, both possession and enjoyment. The donor himself remained in possession and in enjoyment and reserved to himself the right to help the donee, in his hours of need, only according to his own discretion. The fact that the words as your trustee were used at several places in the deed, punctuating the transaction, will not convert, without more, the donor into a trustee. As we read the deed we do not find any beneficial interest created in the donee, until the time arrived when the donor died. During the lifetime of the donor the donee had to depend entirely upon the discretion of the donor either occasionally to posses the gifted properties or to have some enjoyment of the usufruct of such properties. In our reading the word trust was used either senselessly or as a matter of ornamentation in the deed of gift. Since on the interpretation of the deed we find that the donor was not excluded either from possession or enjoyment of the property, the revenue authorities were right in including the value of the gifted properties in the value of the estate on the they that the gifted properties also passed on the death of the deceased.
If the properties covered by the deed of gift did not fall outside the mischief of section 10, then they should be treated as property passing also under section 5 of the Act.
In the view that we take, we answer the question referred to this court in the affirmative and against the assessee.
The assessee must pay costs of this reference to the Controller.
K. L. ROY J. - I agree.
Question answered in the affirmative.