CONTROLLER OF ESTATE DUTY Vs. GOVINDJI JETHABHAI VIRJI

JUDGEMENT

(1.) ONE Jetha Virji died leaving behind his widow, Ramavahu, and sons and daughters whose exact number at the date of death of the said Virji is not known. However, the material point of time for the purposes of this reference if July 9, 1959, which is the date of death of the widow, Ramavahu. It is not in dispute that at that time the children of Virji living were two sons and two daughter. This disposition of the property made by the deceased, Virji, was made by a deed of trust dated February 13, 1922, and a will dated April 25, 1927. We are not concerned in this reference with the deed of trust dated February 13, 1922. We are only concerned with that part of the will of the deceased, Virji, which deals with his residuary property with regard to which directions were given by the deceased, Virji, in paragraph 9 of the will which reads as follows :

(2.) NOW , after the death of Ramavahu, the accountable person, Govindji, who is the son of the deceased, Virji, filed return in respect of the property which, according to him, was assessable to estate duty. As already stated, we are not concerned with the other trust properties. With regard to the residuary property in respect of which clause 9 of the will operated, the value of that property was found by the Assistant Controller of Estate Duty to be Rs. 69,221. This property consisted of house property, securiets, shares and debts due. The Assistant Controller took the view that on the death of Ramavahu, the remainderman, that is, the sons became entitled to receive the whole income of the estate which before the death was primarily applicable for the estate of the objects of a discretionary trust, namely, for the maintenance of the testator's family. The Assistant Controller, therefore, took the view that there was thus a clear change of hands of the beneficial titled or possession of the property as a whole occurring on the death of the deceased and this constituted a passing of the property within the meaning of s. 5 of the Act. The Assistant Controller further took the view that since deceased, Ramavahu, was a member of the family of Virji Jetha and was herself interested in the income during her lifetime, this estate was also agreeable with the rest of the estate.

(3.) WHEN the matter was taken in appeal before the ITA Tribunal, the Tribunal took the view that the deceased, Ramavahu, had no interest in the corpus at all and the only interest which she had in the estate of the testator was the enjoyment of the income therefrom as a member of the family of the testator. The Tribunal found that since the deceased had no interest in the corpus at any time, the benefit that accrued or arose by the censer of her interest which was confined to her right to enjoy the income from the corpus could not extend beyond that limited interest and, therefore, at the most the proportionate share which the deceased had in the enjoyment of the corpus could be said to be her interest in the said property and that interest alone could be deemed to have passed on her death. The Tribunal treated the case as one under s. 7 of the ED Act and held that only a proportionate interest was liable to be included in the principal value of the property, the proportionate interest being found to be 1/5th Share value of the residuary estate as computed by the Asst. Contr. of ED. The contention of the revenue that the entire property passed and the case was one to which s. 5 of the ED Act had been attracted having been negatived, the following question was referred at the instance of the revenue to this court :