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Issues Involved
1. Whether the interest settled on trusts for the deceased under the declaration of trust dated the 26th June, 1941, was an interest in possession chargeable to estate duty under section 5 of the Estate Duty Act, 1953. 2. Whether the inclusion in the estate duty assessment of the deceased of Rs. 10,43,050 being the trust funds in question was justified in law. 3. Whether the addition of Rs. 10,43,050 to the estate duty assessment of the deceased is authorized in law. Issue-wise Detailed Analysis 1. Interest in Possession Chargeable to Estate Duty The primary question was whether the interest settled on trusts for the deceased under the declaration of trust dated 26th June 1941, was an interest in possession chargeable to estate duty under section 5 of the Estate Duty Act, 1953. The court examined the trust deed and found that the trustees were to hold the shares until each beneficiary attained the age of 25. During this period, the trustees could use the profits for the maintenance and advancement of the beneficiaries, with any surplus to be accumulated. The court noted that the deceased was entitled to the whole income of his share, and this interest was in possession, meaning he had beneficial possession or enjoyment of the property. Therefore, the interest was chargeable to estate duty under section 5. 2. Inclusion of Rs. 10,43,050 in Estate Duty Assessment The court analyzed whether the inclusion of Rs. 10,43,050 in the estate duty assessment was justified. The Deputy Controller had included this amount as the value of the deceased's share in the trust properties. The court found that the deceased had a vested interest in one-half of the said 160 shares, and this interest was in possession. The court held that since the deceased was entitled to the whole income of his share, the inclusion of Rs. 10,43,050 was justified. 3. Addition of Rs. 10,43,050 Authorized by Law The court examined whether the addition of Rs. 10,43,050 to the estate duty assessment was authorized by law. The court noted that the interest of the deceased in the trust property had already fallen into possession, and only the full enjoyment was deferred. The accumulated unused income falling to the share of each beneficiary would, on his premature death, pass according to the normal law of succession. The court concluded that the interest of the deceased was an interest in possession, and the accumulated income was part of his estate. Therefore, the addition of Rs. 10,43,050 was authorized by law. Conclusion The court answered the question referred to it in the affirmative, stating that the inclusion of Rs. 10,43,050 in the estate of the deceased was justified in law. The applicant was ordered to pay the costs of the reference to the respondent.
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