CONTROLLER OF ESTATE DUTY Vs. PANNALAL SETHI

JUDGEMENT

(1.) One Smt. K.K. Sethi who died on May 10, 1960, executed a deed of settlement dated August 21, 1940 by virtue of which she purported to create a trust of certain immovable properties and included therein three properties; (1) 70, Nalini Sett Road (house) and two plots of land at (2) 103, Lake Road and (3) 18/1, Mudiali Road. The said deceased and one Sri Mohanlal Putni were the trustees of the said trust. In the estate duty proceedings, the accountable person, Pannalal Sethi, one of the sons of the deceased, claimed, inter alia, on the basis of the said deed that the property should be held to be liable to estate duty under Section 10 of the Estate Duty Act, 1953, only to the extent to which the settlor was not excluded from the possession and enjoyment of the gifted property.

(2.) The Assistant Controller of Estate Duty, however, on a consideration of the terms of the deed of settlement mentioned above, held that the settlor had reserved to herself an interest for life and was in fact in enjoyment of the income. He accordingly included the full value of the said properties covered by the said deed of settlement in the estate of the deceased.

(3.) The deceased had been taking periodical loans from the trust. These loans were advanced to her out of the income of the trust. The outstanding liability as on the date of death was Rs. 61,917. The accountable person claimed a deduction of liability to the extent of the said amount as it was found that the amount was owed by the deceased to the trustees of the settlement referred to above. The Assistant Controller held that the trust was created by the deceased by transferring her own property mainly for her own benefit and benefit of her children and the money was lent out to the deceased by the trustees out of the properties transferred by the deceased. Accordingly, he disallowed the said liability as claimed by the accountable person under Section 46(1) of the Estate Duty Act.