1982 (1) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Construction of the trust deed dated 24th October 1944, and subsequent documents.
2. Applicability of section 12 read with section 27 of the Estate Duty Act, 1953.
3. Whether the estate of the deceased was rightly assessed to estate duty.

Detailed Analysis:

1. Construction of the Trust Deed and Subsequent Documents:
The primary issue revolves around the interpretation of the trust deed executed on 24th October 1944, and subsequent documents dated 25th June 1954, 30th July 1954, 10th September 1956, and 22nd April 1960. The trust deed indicated the object of the trust, which included preserving the properties, performing religious ceremonies, and maintaining the heirs. The settlor appointed himself as trustee for life, with provisions for the trustees to manage the trust estate without liability for personal debts.

The Assistant Controller found that the deceased had reserved certain interests in the trust properties for himself and his family, which included monthly maintenance payments and provisions for family members' expenses. The Tribunal noted that these provisions indicated a reservation of interest by the settlor, making the trust properties includible under section 12 of the Estate Duty Act.

2. Applicability of Section 12 Read with Section 27 of the Estate Duty Act, 1953:
Section 12 of the Estate Duty Act, 1953, deals with property passing under any settlement made by the deceased where an interest for life or any period determinable by reference to death is reserved to the settlor. The Tribunal observed that the settlor had reserved interests for himself and his family, which were charged on the trust property. This reservation of interest brought the trust properties within the purview of section 12.

The court examined whether the trust was revocable under section 77 of the Indian Trusts Act, 1882. It was concluded that the trust was not revocable since the power to make the trust effective and strong was given to the trustees, not the settlor. Therefore, the trust could not be revoked by the settlor's subsequent actions.

3. Whether the Estate of the Deceased Was Rightly Assessed to Estate Duty:
The Tribunal held that the deceased had reserved interests in the trust properties for himself and his family, making the properties includible under section 12. However, the court disagreed, stating that the trust deed did not reserve any power of revocation to the settlor. The court referred to various legal precedents to assert that a valid trust, once created, could not be revoked by subsequent acts of the settlor.

The court concluded that the properties covered by the first trust deed did not come within the mischief of section 12(1) of the Estate Duty Act. Consequently, the other properties were not includible for the levy of estate duty. The question was answered in the negative, in favor of the accountable person, with each party bearing their own costs.

Conclusion:
The court held that the properties covered by the trust deed dated 24th October 1944, and subsequent documents, did not fall within the scope of section 12(1) of the Estate Duty Act, 1953. Therefore, the estate of the deceased was not rightly assessed to estate duty under the said provisions. The judgment was in favor of the accountable person, and each party was ordered to bear their own costs.