CONTROLLER OF ESTATE DUTY Vs. K A KADER

JUDGEMENT

(1.) THE following question has been referred under section 64(1) of the Estate Duty Act, 1953 (hereinafter called "the Act") "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the properties comprised in the Khajaminan Wakf cannot be included in the dutiable estate under section 12 of the Estate Duty Act, 1953 ?" *One N. M. Khajamian Rowther died on November 9, 1954. Prior to his death he executed on May 29, 1945, a wakfnama in respect of certain properties. THE four sons and four daughters of the wakif were nominated as mutawallis of the trust properties and the properties themselves were transferred in the name of Khajamian Wakf Estate. THE wakfnama provided for the utilisation of the income of the trust propertiesfirstly, for payment of taxes and other expensessecondly, for meeting the expenses of certain charitable and religious objects mentioned in Schedule A to the wakfnamathirdly, for setting aside 25 per cent. of the surplus as a reserve fund, andfourthly, for the maintenance and support of the "family, children and descendants of the wakif"THE wakfnama also provided that the ultimate benefit shall go to the poor. By clause 19 of the wakfnama, the wakif reserved for himself the right of control and supervision over the mutawallis with a power to alter, cancel or modify any of the proposals or resolutions of the mutawallisIn the return submitted in the estate duty proceedings, the accountable person did not include the value of these trust properties in the estate of the deceased. THE Deputy Controller of Estate Dutywas of the view that, in view of clause 19 of the wakfnama, section 12 of the Estate Duty Act was applicable and the entire properties comprised in the wakf were liable to be included in determining the principal value of the estate of the deceased. He was also of the view that there are reasonable grounds for drawing an inference that as a matter of fact the deceased had derived benefit from the trust properties even subsequent to the creation of the wakf. While dealing with the applicability of section 12 of the Act to the instant case, the Deputy Controller of Estate Dutyobserved that, according to the interpretation of statutes, the word "and" could be read as "or" in certain circumstances and he would read the conjunction in the Explanation to section 12(1) as "or" and so read even a settlement of properties for the maintenance of any of the settlor's relations would come within section 12. In the appeal preferred by the accountable person, the Appellate Controller of Estate Duty, New Delhi, agreed with the accountable person that the Explanation to section 12(1) could not be read in the manner done by the Deputy Controller but did not agree with him on the scope of clause 19 of the wakfnama.

(2.) THE Appellate Controller was of the view that clause 19 amounted to a reservation of an interest in the settled properties for life within the meaning of section 12 and, therefore, the properties are liable to estate duty. On a further appeal, the Tribunal agreed with the contention of the accountable person that clause 19 of the wakfnama did not reserve any interest in the settled properties within the meaning of section 12 and that, therefore, those properties could not be included in ascertaining the principal value of the estate passing on the death of Khajamian Rowther. At the instance of the revenue the above question has been referredSection 12(1) of the Act reads".12. (1) Property passing under any settlement made by the deceased by deed or any other instrument not taking effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself the right by the exercise of any power to restore to himself or to re-claim the absolute interest in such property shall be deemed to pass on the settlor's deathProvided that the property shall not be deemed to pass on the settlor's death by reason only that any such interest or right was go reserved if by means of the surrender of such interest or right the property is subsequently enjoyed to the entire exclusion of the settlor and of any benefit to him by contract or otherwise, for at least two years before his deathProvided further that a house or part thereof comprised in such settlement made in favour of the spouse, son, daughter, brother or sister, shall not be deemed to pass on the settlor's death by reason only of the residence therein of the settlor except where a right of residence is reserved or secured directly or indirectly to the settlor under the settlement or under any collateral dispositionExplanation.--A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in section 27) shall be deemed to reserve an interest for himself within the meaning of this section. "Section 2(19) defines" settled property "as meaning" property which stands limited to, or in trust for, any person, natural or juridical, by way of succession whether the settlement took effect before or after the commencement of this Act " and" settlement "means" any disposition including a dedication or endowment whereby property is settled."THEre is no dispute in this case that the wakfnama in question is a" settlement "and the dedicated properties are" settled properties" *within the meaning of this definitionTHE learned counsel for the revenue raised three contentions. Firstly, that clause 19 of the wakfnama amounts to a reservation of an interest for life in the settled property and, therefore, section 12 is attracted. Secondly, to the extent the wakfnama relieved the obligation of the settlor to maintain his family, the settlor shall be deemed to have reserved an interest for life in the settled properties.

(3.) THE learned judges were, therefore, of the view that by making this provision the donor" *reserved to himself a benefit so far as the property gifted by him was concerned, in each of the given cases, inasmuch as he got rid of the obligation to provide maintenance for his wife and unmarried daughters ". But, though the learned judges were of this view, they held that since the condition or obligation for maintenance of the wife and unmarried daughters which the settlor has passed on to the donees concerned is not for the life of the settlor or is not for any other period determinable by the death of the settlor, but in each of the cases the beneficiary concerned is entitled to maintenance until marriage in the case of unmarried daughters and till her death in the case of the wife of the settlors section 12(1) is not applicable. Far from supporting the argument of the learned counsel for the revenue, it is clearly against them in so far as the applicability of section 12(1) is concerned. Of course, the learned judges held that to the extent the obligation of the settlor to maintain his wife and daughters is passed on to the donees concerned, it would attract the provisions of section 10. We are not concerned in this case with the applicability of section 10. It is therefore not necessary for us to consider that aspect. But we would like to add that, in addition to the obligation to maintain his wife, children and descendants which shall be deemed to have been passed on to the donees in this case being not for the life of the settlor or is not for any other period determinable by the death of the settlor and therefore, section 12(1) is not attracted, the Act itself does not contemplate any enquiry into the complex personal law of the parties and the determination of the rights and obligations of the settlor in the matter of maintenance of his wife and childrenIn In re Cochrane the marriage settlement in question provided that the trustees of the fund settled by the husband should hold the fund in trust to pay the income to the wife for life and after her death to the husband for life and after the death of the survivor in trust for children. It was also provided that the income so payable to the wife during her life "shall be expended by her in current household expenses and management". It was held that the effect of the income provision was to make the wife a trustee of each sum that was paid to her by trustees and when she received it the provision imposed a trust upon her to expend the whole of such sum in current household expenses and management. This, in the view of the learned judges, had given a right to the husband to require that the wife should apply the income of the trust fund for the purpose wholly or partly to relieve the husband of a liability, namely, the liability to pay the household expenses and management. Since this right which created an interest in the income of the property was determinable at his death the provisions of section 38(2)(c) of the Customs and Inland Revenue Act, 1881, and section 2(1)(c) of Finance Act, 1894, were attracted. It is seen from the statement of facts that the deed is a marriage settlement deed. It recited the intended marriage and that upon the treaty for the intended marriage it was agreed that certain investment should be settled by the husband and that this investment had been transferred to the joint names of the trustees. It further stated that after the intended marriage the trustees should hold the trust fund upon trust, pay the income thereof to the wife during her lifetime and after her death to pay the income thereof to the husband, if he survived the wife for his life, and that after the death of the wife and husband the trust fund should be held in trust for all the children of the husband whether of the intended marriage or any other marriage, but being a son or sons should attain the age of 21 years or being a daughter or daughters should attain that age or married under that age in certain proportion.