1969 (7) TMI 122 - Other - Indian Laws

Issues Involved:
1. Applicability of Sections 1 and 2 of the Finance Act, 1894, to discretionary trusts.
2. Interpretation of "interest" under Section 2(1)(b) and its relevance post-Gartside v. Inland Revenue Commissioners.
3. Relationship between Sections 1 and 2 of the Finance Act, 1894.
4. Determination of estate duty liability on the husband's death under Section 1 simpliciter.
5. Analysis of precedents including Scott & Coutts & Co. v. Inland Revenue Commissioners and Burrell & Kinnaird v. Attorney-General.

Detailed Analysis:

1. Applicability of Sections 1 and 2 of the Finance Act, 1894, to Discretionary Trusts:
The court examined the relationship between Sections 1 and 2 of the Finance Act, 1894, particularly their impact on discretionary trusts. The case involved a settlement made in 1957, with a trust period defined, and the trustees given discretionary powers over the income for the benefit of the husband, wife, and their descendants. The Crown claimed estate duty on the trust funds upon the husband's death, arguing that an interest ceased on his death under Sections 2(1)(b) and 7(7)(a) of the Finance Act, 1894. However, the court found that the contention based on Section 2(1)(b) could not be sustained in light of the decision in Gartside v. Inland Revenue Commissioners, which determined that the rights of any one object of the discretion could not be described as an "interest" ceasing on death.

2. Interpretation of "Interest" under Section 2(1)(b) and its Relevance Post-Gartside v. Inland Revenue Commissioners:
The court referred to Gartside v. Inland Revenue Commissioners, where it was held that the rights of any one object of a discretionary trust could not be described as an "interest" under Section 2(1)(b). This case clarified that the term "interest" did not apply to the competing rights of discretionary objects. The court found it difficult to fit the concept of "interest" to the language of Section 2(1)(b), which refers to "property in which the deceased or any other person had an interest."

3. Relationship between Sections 1 and 2 of the Finance Act, 1894:
The court discussed the relationship between Sections 1 and 2, noting that Section 1 imposes the charge of estate duty on "property which passes on the death," while Section 2(1) states certain situations involving property that bring it within Section 1. The court emphasized that Section 2(1) was not intended to exhaustively define and limit the situations in which property involves estate duty. The court concluded that Sections 1 and 2 are a combined single enactment and do not offer the Crown a choice of two charging clauses.

4. Determination of Estate Duty Liability on the Husband's Death under Section 1 Simpliciter:
The court considered whether estate duty was leviable by force of Section 1 simpliciter, unaided by Section 2. The Crown argued that the trust funds passed on the husband's death under Section 1 simpliciter. However, the court found that the wife became entitled to receive the income as the sole object of the discretionary trust, not as a life tenant. The court distinguished the present case from previous cases like Scott & Coutts & Co. v. Inland Revenue Commissioners and Burrell & Kinnaird v. Attorney-General, where new trusts were created upon death, leading to a passing of property under Section 1 simpliciter.

5. Analysis of Precedents Including Scott & Coutts & Co. v. Inland Revenue Commissioners and Burrell & Kinnaird v. Attorney-General:
The court analyzed precedents such as Scott & Coutts & Co. v. Inland Revenue Commissioners and Burrell & Kinnaird v. Attorney-General, which involved the determination of discretionary trusts upon death. The court found these cases distinguishable, as they involved new trusts with new qualifications, whereas in the present case, the same discretionary trust continued with the wife as the sole object. The court concluded that there was no passing under Section 1 simpliciter in this case.

Conclusion:
The court held that:
1. Section 2(1)(b) is not applicable in this case (Gartside v. Inland Revenue Commissioners).
2. Arnholz does not preclude finding a passing on death.
3. Scott and Burrell were decisions under Section 1 simpliciter and remain sound in law post-Gartside.
4. The present case does not involve a passing under Section 1 simpliciter.
5. The appeal should be allowed.

Order:
Leave to appeal was granted conditionally upon the Crown not seeking disturbance of the order in the Court of Appeal as to costs and not asking the House of Lords to award costs.

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