MATHAI T I Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) AT the instance of the accountable person, the Income-tax Appellate Tribunal (in short, "the Tribunal") has referred the following question of law for the decision of this court:

(2.) THE assessment to estate duty arose on the death of one T. C. Issac on December 10, 1970. THE deceased had executed a settlement deed in 1949, annexure D, dated 30-11-1124 (M. E.), in favour of his children. THEre was a reservation in the deed stating that the donees shall pay out of the income of the said properties to the donor and his wife annually an amount of Rs. 1,200 and 200 paras of paddy. It was further stipulated that the payment should be made to the donor during his lifetime and thereafter to his widow until her death. THE deed contained the stipulation that in case any one of the donees failed to discharge the obligation cast on them, the donor can proceed against the defaulting party and his or their properties. It was also reserved that the donor can also claim and create a charge on the properties to the extent of the arrears. It was also stipulated that if any default is committed, the donor could enter the property, take the yield and for arrears create a charge on the property and realise the amount due. THE Assistant Controller of Estate Duty, in determining the duty payable, held that on the death of the deceased, the value of the properties settled should also be taken into account. He said so, since possession and enjoyment of the properties by the donees was not to the exclusion of the donor. Section 10 of the Estate Duty Act was applied. En appeal, the Appellate Controller accepted the plea of the assessee and held that the provisions in the settlement deed did not create a specific charge. In the second appeal filed before the Tribunal, the Revenue contended that on a proper interpretation of the settlement deed, Section 10 of the Estate Duty Act was attracted, since the gifted properties could not be said to have been possessed and enjoyed by the donees to the exclusion of the benefit arising to the donor under the gift. On an interpretation of the relevant clauses of the settlement deed dated 30-11-1124 (M. E.) and Section 10 of the Estate Duty Act, the Appellate Tribunal held that the deed was one creating an interest in favour of the donor and it restricted enjoyment of the gifted properties by the donees. Applying the principle laid down by the Allahabad High Court in K.C. Srivastava v. CED [ 1979] 117 ITR 221, the Appellate Tribunal held that the deceased donor was not entirely excluded from possession and enjoyment of the gifted properties and so the value of the entire properties under the settlement deed should be included in the estate of the deceased for the purpose of estate duty. It is thereafter, on motion by the accountable person, that the Appellate Tribunal has referred the above formulated question of law for the decision of this court.

(3.) A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.