1998 (4) TMI 133 - SC - Income Tax

Whether, on the facts and in the circumstances of the case, the Trust Fund Prince Shahmat Ali Khan is liable to be included in the estate of late Mir Osman Ali Khan Bahadur under section 10 of the Estate Duty Act, 1953? Held that - In the present case, the indenture of trust quite clearly provides that the shares have been transferred unconditionally under the deed of trust to the trustees for the benefit of the grandson of the donor. The gift under the trust deed of the shares is absolute. The donor has not reserved any right or interest to himself in the gifted property under the deed of trust. The only clause on which the Revenue has relied is a clause which provides that the trustees may, by unanimous resolution, provide for any remuneration to themselves subject to a maximum of Rs. 3,000 per annum. This refers to a subsequent act of the trustees. It does not, in any manner, make the settlement of shares conditional. Moreover, in the present case, we have been informed that no such resolution was ever passed, nor was any remuneration received by any of the trustees including the donor who was one of the trustees. In these circumstances, we fail to see how the provisions of section 10 are attracted. In the premises, we allow the appeal, answer the question in favour of the accountable person and hold that the corpus of the trust fund is not liable to be included in the estate of the deceased. The respondent will pay to the appellant the costs of the appeal.

Summary

Issues:
1. Interpretation of section 10 of the Estate Duty Act, 1953 regarding inclusion of trust fund in deceased's estate.

Analysis:
The judgment dealt with the interpretation of section 10 of the Estate Duty Act, 1953, specifically focusing on whether a trust fund should be included in the estate of a deceased individual. The case involved a trust created by the deceased for the benefit of his grandson. The trust deed explicitly stated that the trustees could charge remuneration, but it did not reserve any right or interest for the donor in the gifted property. The court emphasized that the provision allowing remuneration to trustees was for subsequent acts and did not make the settlement of shares conditional. Notably, no remuneration was ever passed or received by the trustees, including the donor. Therefore, the court found that the provisions of section 10 were not applicable in this scenario.

Moreover, the judgment referenced a previous case involving a deed poll creating a trust for the testator and his children, where the testator retained wide powers of management and entitlement to remuneration for managing the trust property. The court distinguished this case from the present one, highlighting that the circumstances and provisions were different. The court concluded that the ratio of the previous judgment did not apply to the current case.

In light of the arguments presented and the analysis of the trust deed, the court allowed the appeal, ruled in favor of the accountable person, and held that the corpus of the trust fund should not be included in the estate of the deceased. The respondent was directed to pay the costs of the appeal. This judgment provides clarity on the application of section 10 of the Estate Duty Act, emphasizing the importance of the unconditional nature of gifts and the absence of reserved rights or interests in determining estate inclusion.