1979 (11) TMI 98 - SC - Indian Laws

Whether all or any part of the properties which were the subject-matter of a trust can be treated as passing on the death of Panchu Gopal Banerjee ( the deceased ) for purposes of levy of estate duty under the E. D. Act, 1953? Held that - Only one-half of the properties covered by the trust corresponding to one-half of the total income which had to be spent on religious purposes should be considered as not passing on the death of the deceased since the religious endowment made in that regard would not fail despite the fact that the remaining one-half of the properties retained their private and secular character. We are also of the view that the remaining one-half of the properties which is held to be remaining undisposed of and which was held by the deceased immediately before his death should be deemed to pass on his death for purposes of s. 5 of the Act. The High Court was, therefore, in error in holding that the whole of the trust properties constituted a religious endowment and did not pass on the death of the deceased. The appeal is, therefore, partly allowed. We hold that only one-half of the properties which were the subject-matter of the trust deed dated June 27, 1939 (Jagadhatri Sampad Trust) passed on the death the deceased under s. 5 of the Act and the remaining one-half did not.

Summary

Issues:
Whether properties from a trust can be considered part of the estate for estate duty levy.

Analysis:
The judgment addressed the issue of whether properties from a trust constituted part of the estate for estate duty levy. The deceased was the trustee of a trust created by his father, which directed the management of properties for religious and family purposes. The trust deed outlined the allocation of income for taxes, repairs, religious activities, and family expenses. The Deputy Controller and the CBR held that the trust properties passed on the deceased's death due to the perpetual nature of the trust and its non-charitable purposes. However, the High Court of Calcutta ruled that the properties could not be included in the deceased's estate. The Supreme Court analyzed previous case law on complete vs. partial dedication to religious purposes. It was observed that a significant portion of the trust income was allocated for family expenses, indicating only a partial dedication to religious purposes. The court concluded that only one-half of the trust properties passed on the deceased's death, while the remaining half did not, as it retained its private and secular character. The judgment clarified that properties dedicated for religious purposes would not fail, even if other portions were void due to perpetuity rules. The court directed that each party bear its own costs, as the appeal succeeded in part.

In conclusion, the Supreme Court partially allowed the appeal, ruling that only one-half of the trust properties passed on the deceased's death for estate duty purposes. The judgment emphasized the distinction between properties dedicated to religious purposes and those retaining private and secular character. The court's decision was based on the allocation of income in the trust deed, indicating a partial dedication to religious activities. The ruling provided clarity on the treatment of trust properties in estate duty proceedings, balancing religious endowments with secular considerations.