1978 (2) TMI 115 - AT - Income Tax

Summary

Issues:
1. Interpretation of settlement deed creating a trust.
2. Determination of the point of time when the trust came into existence.
3. Inclusion of properties in the estate of the deceased under the Estate Duty Act.

Analysis:
1. The appeal centered on the interpretation of a settlement deed executed by the deceased, determining whether it created a trust immediately or only after her death. The accountable person argued that the deceased divested herself of ownership by declaring the properties as trust assets and becoming the sole trustee for life. The Assistant Controller of Estate Duty (CED) concluded that the trust came into operation only after the deceased's death, based on the language of the settlement deed and the deceased's actions regarding the properties.

2. The CED (A) rejected the accountable person's contention, emphasizing that the deceased retained absolute power of management over the properties and had sold some of them, indicating the absence of an immediate trust creation. The Wealth-tax assessments also supported the view that the properties were owned by the deceased. The accountable person appealed, arguing that the deed registered with the sub-registrar established the deceased as the trustee of the Ashram, managing the properties for the beneficiary's interest.

3. The Appellate Tribunal analyzed the deed, considering the deceased's life history and the context of the settlement. The Tribunal found that a trust was created by the settlement deed, with the key issue being the timing of its establishment. Despite both parties agreeing on the trust's creation, they disagreed on when it became effective. The Tribunal determined that the settlor intended to create a trust immediately, appointing herself as the sole trustee for life and providing for trustees after her death. The deed's language and subsequent actions supported this interpretation, leading to the exclusion of the properties from the deceased's estate under the Estate Duty Act. The appeal was allowed, ruling in favor of the accountable person.