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Issues Involved:
1. Applicability of Section 12(1) of the Estate Duty Act to the properties settled by the deceased. 2. Applicability of Section 6 of the Estate Duty Act to the properties settled by the deceased and Bai Jasud. 3. Determination of the principal value of the estate of the deceased for estate duty purposes. Issue-Wise Detailed Analysis: 1. Applicability of Section 12(1) of the Estate Duty Act to the properties settled by the deceased: The primary question was whether the properties settled by the deceased could be deemed to have passed on his death under Section 12(1) of the Estate Duty Act. Section 12(1) states that property passing under any settlement made by the deceased, where an interest in such property for life or any other period determinable by reference to death is reserved to the settlor, shall be deemed to pass on the settlor's death. The court examined whether any interest in the settled properties for life was reserved to the deceased under the settlement. Clauses 3 and 8 of the settlement were scrutinized: - Clause 3 created a discretionary trust in regard to the income of the settled properties, allowing trustees to apply the net income for the maintenance and personal support of the deceased and other beneficiaries. The trustees had absolute discretion to pay the whole or any part of the net income to any one or more of the beneficiaries, including the deceased. The court held that this created an interest in the settled properties for life for the deceased, as the trustees could pay the entire income to him. - Clause 8 allowed the trustees, at the request of the deceased, to pay out of the income or corpus of the settled properties for meeting expenses of illness, medical treatment, education, and other heavy expenses for the benefit of the deceased or his family. This clause also reserved an interest in the settled properties for the deceased, as he could direct the trustees to make payments for his benefit under specified conditions. The court concluded that since an interest in the settled properties for life was reserved to the deceased, Section 12(1) applied, and the properties settled by the deceased must be deemed to have passed on his death. 2. Applicability of Section 6 of the Estate Duty Act to the properties settled by the deceased and Bai Jasud: Section 6 states that property which the deceased was at the time of his death competent to dispose of shall be deemed to pass on his death. The court examined whether the deceased was competent to dispose of the settled properties at the time of his death, focusing on clauses 8 and 10 of the settlement: - Clause 10 required trustees to act according to the directions of the deceased in the administration and management of the settled properties. However, the court held that this did not confer any estate or interest on the deceased enabling him to dispose of the settled properties altogether. - Clause 8 allowed the deceased to require the trustees to pay out of the income or corpus of the settled properties for specified purposes. The court determined that this power was not absolute, as it was limited by conditions such as expenses of illness, medical treatment, education, and other heavy expenses. Therefore, the deceased did not have the absolute power to dispose of the settled properties at his will. The court concluded that the deceased was not competent to dispose of the settled properties at the time of his death, and therefore, the properties did not fall within the ambit of Section 6. 3. Determination of the principal value of the estate of the deceased for estate duty purposes: The Assistant Controller had included the value of the properties forming the subject-matter of the settlement in the principal value of the estate of the deceased. The Central Board of Direct Taxes upheld this inclusion for the properties settled by the deceased but excluded the property settled by Bai Jasud, applying Section 6 to include the value of the latter. The court held that the value of the properties settled by the deceased was liable to inclusion in the principal value of the estate under Section 12(1). However, the value of the property settled by Bai Jasud was not liable to inclusion under either Section 6 or Section 12. Conclusion: The court's judgment determined that the value of the properties settled by the deceased was includible in the principal value of his estate under Section 12(1) of the Estate Duty Act, while the value of the property settled by Bai Jasud was not includible under Sections 6 or 12. There was no order as to costs of the reference.
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