CONTROLLER OF ESTATE DUTY Vs. HUSENBHAI MOHAMEDBHAI BADRI

JUDGEMENT

(1.) THIS reference raises a question relating to the applicability of S. 5 of the ED Act, 1953, in relation to the settlement made by one Essoofalli Ebrahimji. The settlement was made on 15th July, 1938, and the subject matter of the settlement consisted of several freehold and leasehold immovable properties. The settlor had a wife by the name of Safiabai and two sons, namely, Mohmedbhai and Salebhai. The settlor appointed Bai Safiabai, Mohmedbhai and himself as the trustees of the settlement and settled the immovable properties described in the Schedule on certain trust, which, so far as material for the purpose of the present reference, were as follows :

(2.) THE settlor died thereafter leaving his widow, Bai Safiabai, and his two sons, Mohamedbhai and Salebhai, but we are not concerned with his death, for the claim to estate duty in the present reference arises on the death of Safiabai and not on the death of the settlor. Bai Safiabai (hereinafter referred to as the deceased) died on 6th Oct., 1955, and on her death a question arose as to whether estate duty was exigible on the whole of the trust property or on any part of it and if so on what part. The Assistant Controller took the view that one third of the trust property passed on the death of the deceased and was therefore includible in the principal value of the estate of the deceased. The contention of the accountable person was that no part of the trust estate could be said to have passed on the death of the deceased and he therefore preferred an appeal to the Appellate Controller. Subsequently, however, realising that the stand adopted by him was incorrect, he sought permission to withdraw the appeal but the Appellate Controller did not grant such permission as in his view the whole of the trust estate and not merely one third part of it was includible as property passing on the death of the deceased. He accordingly issued a notice of enhancement to the accountable person calling upon him to show cause why the assessment should not be enhanced by including the entire value of the trust estate instead of merely one third part of it. The accountable person raised a preliminary contention that the Appellate Controller had no power to enhance the assessment suo motu but this contention was rejected and the Appellate Controller taking the view that the whole of the trust estate passed on the death of the deceased, included the value of the entire trust estate in the principal value of the estate of the deceased. The accountable person thereupon carried the matter further in appeal to the Tribunal. The Tribunal took the view that the Appellate Controller was within his jurisdiction in issuing the notice for enhancement but on merits the Tribunal came to the conclusion that only one third of the trust estate passed on the death of the deceased and not the whole of the trust estate as held by the Appellate Controller and accordingly modified the assessment. The Controller being aggrieved by the decision of the Tribunal made an application for reference of the questions of law arising out of the order of the Tribunal and, on the application of the Controller, the Tribunal referred the following two questions for the opinion of this Court :

(3.) WE may mention straightaway the third question was not pressed by Mr. Bhabha on behalf of the accountable person and we need not therefore say anything about it.