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Issues Involved:
1. Applicability of the proviso to section 12(1) of the Estate Duty Act, 1953. 2. Whether the default in payment of Rs. 75 per month by the settlor leads to an automatic surrender of interest or right reserved by the settlor. Issue-Wise Detailed Analysis: 1. Applicability of the Proviso to Section 12(1): The primary question was whether the value of the properties covered under the settlement deed dated February 15, 1942, should be included in the principal value of the estate of the deceased under section 12(1) of the Estate Duty Act, 1953. The Tribunal had held that the accountable person took possession of the properties and enjoyed them to the exclusion of the settlor two years before the settlor's death, thus invoking the proviso to section 12(1). The court examined the settlement deed, which clearly indicated that the settlor reserved a life interest in the properties. The deed stated that the settlor would enjoy the properties for his lifetime, and only after his death would the settlee gain a life interest. The deed also established a monthly payment of Rs. 75 to the settlee, which would cease upon the settlor's death. The court found that these provisions clearly reserved a life interest for the settlor, thus attracting section 12(1) of the Act. The court further noted that the Tribunal's reliance on certain circumstances to conclude that the settlee enjoyed the properties to the exclusion of the settlor was misplaced. The circumstances, such as the filing of a suit, leasing of property, and issuance of a summons, did not establish the exclusion of the settlor or the surrender of his interest two years before his death. The court held that the Tribunal's findings were based on irrelevant materials and conjectures, and thus, the value of the properties should be included in the principal value of the estate of the deceased. 2. Automatic Surrender of Interest Due to Default in Payment: The second issue was whether the default in payment of Rs. 75 per month by the settlor would automatically lead to the surrender of the interest or right reserved by the settlor. The Tribunal had held that no document was necessary to evidence the surrender of the right two years before the death of the deceased. The court examined the terms of the settlement deed, which provided that in the event of default in payment, the settlee would have a right of action against the settlor and a charge over the life interest of the settlor. Additionally, the deed stipulated that the settlor would deliver possession of the properties to the settlee if he could not pay the monthly amount. The court concluded that nonpayment per se would not lead to the surrender of the interest reserved by the settlor. The extinction or cessation of such an interest could only be brought about by a properly executed and registered document by the settlor. The court held that a proper document was necessary to evidence the surrender of the rights two years before the death of the settlor. Thus, the default in payment did not automatically lead to the surrender of the interest reserved by the settlor. Conclusion: The court answered both questions in the negative and in favor of the Revenue. The Tribunal's conclusions regarding the applicability of the proviso to section 12(1) and the automatic surrender of interest due to default in payment were found to be erroneous. The value of the properties covered by the settlement deed was to be included in the principal value of the estate of the deceased. The Revenue was entitled to the costs of the reference, with counsel's fee set at Rs. 500.
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