1979 (10) TMI 38 - HC - Income Tax

Summary

Issues:
1. Interpretation of provisions of the Estate Duty Act, 1953 regarding the deceased's interest under a trust deed.
2. Determining whether the value of the deceased's life interest in the trust property should be based on the date of death or the market value of securities at the time of death.

Analysis:
The case involved the interpretation of the Estate Duty Act, 1953, concerning the deceased's interest under a trust deed. The settlor had created a trust for his benefit and that of his sons and daughter-in-law, with the Imperial Bank of India as the trustee. The trust deed was modified to provide that after the settlor's death, the income of the trust funds would be paid to his son during his lifetime and then to his other son and daughter-in-law. The deceased son's widow claimed that the interest in the trust property should not be subject to estate duty. However, the authorities included the trust's face value in the deceased son's estate.

The Appellate Tribunal held that the trust fund constituted property in which the deceased had a life interest, which ceased on his death, passing the interest to the accountable person. The value of this interest was determined to be the face value of the trust funds. The court referred to a Supreme Court decision to support this conclusion, emphasizing the change in beneficial interest upon the deceased's death.

Regarding the valuation of the deceased's interest, the court referred to Section 40 of the Act, which specifies the valuation of benefits from interests ceasing on death. If the interest extends to the whole income of the property, the principal value of that property is considered for valuation. Since the deceased was entitled to the entire income from the trust funds, the face value of the securities was taken as the principal value of his interest.

In conclusion, the court answered both questions in favor of the revenue and against the accountable person, upholding the inclusion of the trust property's face value in the deceased's estate for estate duty purposes. No costs were awarded in this case.