IN RE SIR DAVID YULES ESTATE. Vs. STATE

JUDGEMENT

(1.) THIS is a reference by the Commissioner of the Income Tax under Section 66 (1) of the Indian Income Tax Act, made in the following circumstances : Sir David Yule died on the 3rd July, 1928. He left in India an Estate of the value of approximately pounds 10,000,000. The executors and trustees appointed by the testator by his will are his widow, The Mercantile Bank of India Ltd., Sir Onkarmull Jatia and Radha Krishna Iyer. Probate of the will was granted to the executors other than Radha Krishna Iyer in England on the 28th October, 1928, and in Indian on the 7th June, 1929. Under the power of appointment contained in the will Lady Yule has appointed her daughter to be a trustee of the will. The present trustees therefore are Lady Yule, Miss Yule, Sir Onkarmull Jatia and the Mercantile Bank of India Ltd.

(2.) THE testators estate in India consisted substantially of holdings of shares in a number of companies most of them formed by him between the years 1917 and 1921 as private companies. They appear to have been what is known as investment companies, holding at the time of the testators death nothing but shares and securities, for a few years before his death the gardens or other properties of the companies had been disposed of. The principal Company was the Calcutta Discount Company which acted as agent for most of the other companies and controlled their finances by deposits and advances, but for the purposes of this case no distinction need be made as regards this particular company.

(3.) THE Companies of which there were thirty have been sub divided by the Commissioner in his statement of facts into three groups with the first two of which alone we are concerned. In the first group which comprises six companies all the capital is ordinary share capital wholly held by the Trustees in their own names or through nominees. The second group comprises 14 companies including the Calcutta Discount Co., Ltd. of which the share capital was held by the Trustees, their nominees, and in addition other companies. The compositions of the third group is irrelevant to this case. All the companies had very large accumulations of undistributed profits. The actual figures are immaterial. The trustees had to meet very heavy outgoings for duties payable both in the United Kingdom and in India in relation to the estate of the deceased and it was to provide funds for such duties that a scheme was devised whereby accumulated profits would come into their hands and be available for the purpose of meeting such charges without, it was hoped, their rendering themselves liable to assessment to income tax in respect of such monies as by such means reached them, though a far more simple method of providing such funds, which the testator himself by his will suggested, viz., to wind up voluntarily one or more of the companies, was open to them.