S BALAN Vs. CONTROLLER OF ESTATE DUTY MADRAS

JUDGEMENT

(1.) THIS reference arose out of the estate duty proceedings consequent on the demise of R. M. Sundaram on May 14, 1960. The deceased was a member of the Indian Civil Service. There were certain special regulations relating to the provident fund of the non-European members thereof. The said non-European members of the Indian Civil Service had to subscribe either to the Indian Civil Service Family Pension Fund or to the Indian Civil Service (Non-European Members) Provident Fund. The deceased subscribed to the Indian Civil Service (Non-European Members) Provident Fund and at the time of his death the amount, which was to his credit, was Rs. 1, 04, 794. He had nominated his wife as the person entitled to receive the amount in the event of his death before retirement. Accordingly, the amount was paid to her The Assistant Controller of Estate Duty brought this amount to tax under section 15 of the Estate Duty Act, 1953on his death. The Appellate Controller confirmed the assessment. In the appeal to the Appellate Tribunal it was contended that the amount did not form part of the estate of the deceased, since it was payable to the nominee direct and that the deceased had no disposable right over the amount. The restriction in the matter of nomination being confined to the members of the family of the subscriber was relied on in this context. The further submission was that the beneficiary had a vested right in the fund and that the amount did not form part of the estate of the deceased. Several decisions were relied on before the Tribunal. After considering all of them, the Tribunal also confirmed the assessment

(2.) AT the instance of the accountable person the following question of law has been referred to this court

(3.) THE summary of the Rules given above would go to show that the subscriber had (1) a power to nominate the person who was entitled to the fund at the time of his demise, (2) to withdraw the amount to the credit of the fund at any given time in accordance with the Rules, (3) to make changes of nomination as and when he considered necessary, subject of course to the nominee being a member of the family, and (4) to substitute the provident fund by the pension fund. THEre is nothing in the Rules given above to show that anyone else has title to the Fund during the lifetime of the subscriber. Throughout the Rules the amounts are referred to as being to his credit. THE power of disposal as shown above is consistent with his ownership of the Fund subject to certain restrictions imposed by the Rules. This is thus a peculiar kind of property where the owner is put under some discipline so as not to fritter away the fund to his credit. If he were not the owner, he would not be in a position to deal with the Fund without reference to the nominee or in accordance with his own wishes within the field open to him. He is not required to take anybody's consent before he makes a change in the nominationTHE learned counsel for the accountable person referred us to the Provident Funds Act, 1925. For the Controller of, Estate Duty, the submission was that this Act had no application, as the entire law relating to this Fund was to be gathered from the Rules framed by the Secretary of State under the Government of India Act, 1935