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TMI Blog1958 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the wakif. There is the usual provision relating to maintenance and support of the settlor during her lifetime and for the maintenance and support of her family consisting of her daughter and the children of that daughter from generation to generation. Mutavalis were appointed, the settlor herself being one, and the property was conveyed and transferred to them. The property settled by the wakifnama consisted of 12 immoveable properties of large value and a sum of ₹ 1 lakh. It is the provisions for maintenance contained in the deed that have given rise to the dispute between the Revenue and those who represent the estate of Aishabai. The settlor reserved for her maintenance during her lifetime 62?% of the net income, 3 1/8% of the income was given to her daughter Khatizabai for her maintenance and the remaining 34 3/8% was given of the maintenance of Khatizabai's children, the share of each male child being double that of each female child. Clauses 5 and 6 of the deed are material and relate to reservation and dispositions after the demise of the settlor: 5. From and after the demise of the wakif, the mutavalis shall out of the said 62?% of the net income herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the appeal and the applicant has come before us on this reference. The question we are asked to determine is: Whether in the facts and circumstances of the case, the entire wakf property (including the sum of ₹ 1 lakh) or only 62? per cent. of the wakf property (including 62? per cent. of ₹ 1 lakh) is chargeable to estate duty? On this question, numerous points arise for discussion. To state it without refinement, the principal and the crucial question is what property passed on the death of the settlor? The contention in the forefront of the argument of Mr. Palkhivala, learned counsel for the applicant, has been that there was actual passing of the interest of Aishabai, the settlor, on her death. That interest being 62? per cent. of the income, the property that can be brought to death duty can only be 62? per cent. of the corpus and not the whole of it as held by the Board. Reliance has been placed on section 5 of the Act and the main argument is that section 12 on which the Revenue has taken its stand--and which is one of the provisions relating to property which is deemed to pass --has been erroneously applied by the Board. The archstone of the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Act. It embraces property settled as well as not settled and it touches property on the death of a person. The expression property is defined in section 2(15) as including any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale and also includes and property converted from one species into another by any method. The expression settled property is defined in section 2(19) to mean: Property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession, whether the settlement took effect before or after the commencement of this Act. The expression property passing on the death has been defined in section 2(16) which is as under: Property passing on the death' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and 'on the death' includes 'at a period ascertainable only by reference to the death'. It will be noticed that the word passing has not been defined in the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h to the extent to which a benefit accrues or arises by the cesser of such interest, including, in particular, a coparcenary interest in the joint family property of a Hindu family governed by the Mitakshara, Marumakkattayam or Aliyasantana law. 8. Gifts mortis causa.--Property taken as a gift made in contemplation of death shall be deemed to pass on the donor's death. 9. Gifts within a certain period before death.--(1) Property taken under a disposition made by the deceased purporting to operate as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide made two years or more before the death of the deceased shall be deemed to pass on the death:... (2) the provisions of sub-section (1) shall not apply to gifts made in consideration of marriage or which are proved to the satisfaction of the Controller to have been part of the normal expenditure of the deceased, but not exceeding rupees five thousand in the aggregate. 10. Gifts whenever made where donor not entirely excluded.--Property taken under any gift, whenever made, shall be deemed to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited interest disposed of within a certain period before death. Section 14 deals with policies kept up for a donee. Section 15 relates to annuity or other interest purchased or provided by the deceased. Section 16 relates to annuity or other interest purchased or provided out of property derived from the deceased. Section 17 brings within the field of taxation property transferred to a controlled company. Although, the sections 6 to 16 were headed property which is deemed to pass and proceeded to embrace all types of property and interest in property, there was no express provisions in the Act when enacted in 1953, that duty was leviable on property deemed to pass. A plain reading of section 5 would have meant that the section only touched property which would ordinarily pass on the death of a person under the general law. In a taxing statute this was a serious lacuna and that was amended by the Finance Act of 1954, by adding sub-section (3) to section 3: For the avoidance of doubt, it is hereby declared that references in this Act to property passing on the death of a person shall be construed a including references to property deemed to pass on the death of such person. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of considerable guidance if utilised with due care and caution. While we do not accede to the argument of Mr. Joshi that the scheme of the two Acts is different, we agree that the provisions of our Act must be understood in their background and setting and in interpreting them regard must be had to the conditions, customs and religious beliefs of those affected by the provisions. In a branch of the law, rules of which are inspired by the broad general principles of the English law on the subject and are so adopted as to be in pari materia, reference to the decisions under that law can be of great importance. Danger, however, lies in phrases used aptly enough, no doubt, in a particular context and opinions weighty and useful in their own sphere and context being treated as expressing doctrines of universal application or adopting those principles as riders to the actual statutory language. The rule of construction relating to provisions of enactments in part materia is one of great convenience and aid from outside may legitimately be derived when any doubtful point of interpretation of any provision has to be solved. But reference to it simply on the ground of similarity has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 12 uninfluenced by any extrinsic evidence. Now, we have already set out section 3(3) and sections 5 and 12 of the act and it is evident that for the purpose of the present reference, they must be read together. It will be convenient to write out the material part of section 5 with the rule of interpretation enacted in sub- section (3) of section 3 and then consider it with section 12. In that way the material part of section 5 would read as under: In the case of every person dying after the commencement of this Act, there shall,...be levied and paid upon the principal value ascertained...of all property, settled or not settled,...which passes on the death of such person-including property deemed to pass on the death of that person--a duty called 'estate duty' at the rates fixed in accordance with section 35. Section 5 to 17 are in Part II of the Act and that Part is headed imposition of estate duty. The heading of section 5 is extent of charge and the heading of section 6 to 16 is property which is deemed to pass . One thing is clear from the incorporation of sub-section (3) of section 3 by the amendment made in 1954 that any of the provisions relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d depart from the cardinal rule of interpretation according to which the grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or some inconsistency with the rest of the enactment. The principal contention pressed before us by Mr. Palkhivala, learned counsel for the applicant, is that distinction has to be drawn between actual passing of property or any interest in such property and deemed passing of property . In the former case, it is said, section 5 must be applied to the exclusion of any of the provisions relating to all property which is deemed to pass under any of the sections 6 to 16; and this must be so even if the case falls wholly within the ambit of any such provision contained in any of those sections. If the property or any part of the property passes on death, it is not permissible to refer to any of those sections--no matter what they say--because they speak only of what is deemed to have passed. The argument is that in the Act there are two categories of rules; one the provisions in section 5; the other, the provisions of sections 6 to 16; and the two categories it is emphasized are mutually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of redemption. The ratio decidendi of that case evidently is that in case of a deed of settlement of the nature which was under consideration, if there were prior encumbrances and an annuity reserved what would pass on the death of the annuitant cannot be the whole estate but only the equity of redemption. In the course of this speech in that case Lord Macnaghten, however, made certain observations which dicta have been considered thereafter in a number of cases. Since so much reliance has been placed on the dicta of Lord Macnaghten in that case, we shall first turn to the observations made by that eminent Law Lord at pages 212-213 of the report: But section 2 does not apply to an interest in property which passes on the death of the deceased. That is already dealt with in the earlier section. For property in the lifetime of the deceased subject to a charge or interest which ceased on the death must of course pass free from that charge or interest. And, so passing, it must of course be valued accordingly. That is section 1. You do not want section 2 for that. You cannot resort to section 2. For that would be giving the duty twice over. The Crown cannot have it both ways. Dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvite the operation of section 1. In re Northcliffe [1929] 1 Ch. 327 was another decision cited before us. That case also was cited for the purpose of showing that a specific percentage of income as residuary may be reserved by a settlor in the subject-matter of the trust and it was not necessary that any specific parcel of the property should be reserved. Another case to which out attention was drawn by Mr. Palkhivala was In re Duke of Norfolk [1950] 1 Ch. 467. The facts of this case were somewhat peculiar. One continuing annuity was given to two or more persons in succession and charged on that property on the death of the annuitant. The dicta or Lord Macnaghten were considered in that case by the Court of Appeal. It was held that an annuity charged on property is not, nor is it equivalent to, an interest in proportion of the capital of the property charged sufficient to produce its yearly amount on the death of the annuitant and the Crown is not entitled to charge duty under section 1 on a slice of capital ascertained by means of calculations on the lines prescribed by section 7, sub-section (7). Our attention has been drawn by counsel to observations in the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether Lord Macnaghten was strictly correct or not in saying that the two sections were mutually exclusive seems to me to matter little. At any rate--and that is all that is material--section 2 sweeps into the net various things which section 1 would have failed to secure, or, as Lord Watson put it in the case of Attorney- General v. Beech [1899] A.C. 53, 59, 'it extends it to all cases where a survivor of the deceased takes a succession, or I should say rather, derives a benefit by reason of the death of the deceased dependent upon and emerging upon the death of the deceased.' How does section 2 do this? It does not do it by being conceived in the words of a taxing section imposing the duty on certain specified kinds of property. It does it by saying that property passing on the death of the deceased--which is already taxed by virtue of section 1--shall be deemed to include the property following, that is to say--and then follow the various sub-sections. It seems to me that that is as much as to say that the words, 'property passing on the death', in the first section, are to be read as if the words, 'including the property following, that is to say' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and those dicta may desirably be forgotten. The question cropped up once again in a very recent case before the Court of Appeal in Public Trustee v. Inland Revenue Commissioners [1958] 2 All E.R. 720; 37 I.T.R. (E.D.) 43. That also we may point out was a case not under clause (1)(a) of section 2 or clause (1)(c) or clause (1)(d) of section 2 but clause (1)(b) of section 2. Lord Evershed M.R. it seems was considerably impressed with the arguments which went counter to the dicta of Lord Macnaghten. He observes at page 722 of the report: It cannot, I think, be disputed that the argument of counsel for the trustee has formidable and attractive points in its support. The argument put for ward on behalf of the trustees was characterised by the Master of the Rolls as a forceful contention. He also referred to the opinion expressed by Lord Radcliffe in the case to which we have already referred, but ultimately agreed with the view of Jenkins, L.J., in In re Duke of Norfolk [1950] 1 Ch. 467 that it was not open to the court to depart from the construction placed on section 1 and section 2 over fifty years ago by the House of Lords in Earl Cowley's case The Master of the Roll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between section 1 and section 2(1)(b): It is not entirely clear how far this principle goes, but it does not apply to a life interest in an aliquot share of income... There is a case to which we have so far not made any reference and that is the case of Attorney-General v. Grey [1898] 1. Q.B. 318. Mr. Palkhivala himself drew our attention to this case and observed that presumably the Department would strongly rely on the same. In that case section 38(2)(c) of the Customs and Inland Revenue Act, 1881, as amended by section 11 of the Customs and Inland Revenue Act, 1889 (and which corresponds to section 12 of out Act) came up for consideration and at page 325 of the report Channel, J., said that any reservation of interest however small was sufficient to bring the property within the ambit of section 38(2)(c) provided the interest issued out of that property. Much has been said about Grey's case [1898] 1 Q.B. 318 in some later decisions in England, but it is not necessary for us to go in any detail over the matter. At page 185 Dymond refers to the case of In re Cochrane, Cochrane and Another v. Turner [1945] Ch. 285.. In that case the deceased on his marriage settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act, 1894. The celebrated dichotomy between section 1 and section 2(1), it is true, is enshrined in the speech of Lord Macnaghten. But the dicta should be confined to a case under section 1 and section 2(1)(b) of the English enactment. They were certainly not made in considering or in the context of the other sub-clauses in section 2. But that is how Mr. Palkhivala wants us to read the English decisions. It has been observed that there are formidable considerations which support the other view that section 1 and section 2(1)(b) are not mutually exclusive. In the case reported in Public Trustee v. Inland Revenue Commissioners [1958] 2 All E.R. 720; 37 I.T.R. (E.D.) 43. Lord Evershed speaks of the wellrecognised principle of finality for feeling compelled to reach the conclusion that the applicability of the dicta should not be disturbed. The concept is akin to the doctrine of stare decisis. In this state of the law on the point in England we do not think we would be justified in constraining ourselves to adhere to the binary classification of Lord Macnaghten. It seems impermissible to us to accept that dicta as applicable to all cases of property deemed to pass. In an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass. The expression deemed is used a great deal in many modern statutes and for many purposes. It is at times used to give a special glossary or paraphrase to an expression or artificial construction to a word or a phrase. It is at times used to introduce artificial conceptions which are intended to go beyond settled legal principles. It is at times used to remove uncertainly or leave no scope for doubts and debates which may involve refined and ingenuous points. At times it is used to give extended or restricted operation to a rule which cannot be given to it if it be read as enacted. This last is of considerable importance when the Legislature lays down a rule the extent and operation of which according to ordinary canons of construction would be confined we shall take an illustration close to the case before us to property or interest in property of a particular nature or type or class and the intention is that the rule should have wider extent and embrace more than what it states. In such a case the Legislature may well lay down and add that more than what is stated in the rule shall be deemed to be included in the meaning and concept of the words or phrase used in the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven to it. There is neither principle nor authority for departing from the fundamental rule of interpretation and we see no reason for doing so and launching into a sea of difficulties not easy to fathom. The sure conclusion seems to us to be that section 12 wholly governs the case before us. Another contention urged before us by learned counsel for the applicant was that section 10 and not section 12 should apply to the settlement before us. The argument here was rather feeble and somewhat involved. It was said that section 9 in dealing with gifts includes any category of gifts inter vivos actual gifts as well as those made through the instrumentality of trusts and settlements. Now, section 9 cannot possibly be relied upon as foundation for any argument of the nature before us. That section clubs under one heading gifts and settlements which are not made bona fide and settlements which are made two years or more before the death of the deceased. Section 10, which we have already set out in the earlier part of our judgment, deals with gifts whenever made where donor is not entirely excluded. It is true that to an extent section 10 and 12 may be overlapping. But in the case befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that it is a permanent dedication by a person professing the Mussalman faith of any property for any purpose recognised by the Mussalman law as religion, pious or charitable. The concept of retention or detention is not wholly absent and is even permissible. A wakf extinguishes the right of the wakif and transfers ownership to God. The mutavali is the manager of the wakf, but the property does not vest in him as it would in a trustee in the case of an ordinary settlement. Of course, as we have already mentioned in the case before us, there is the vesting of the property in the trustees. When we refer to the basic principles of the law of wakf and the provisions of the relevant statute validating certain wakes, it is extremely difficult to see how it can be said that there is any gift in case of a wakf which gift can be brought within the ambit of section 10 of the Estate Duty Act. A wakf of the nature before us must necessarily fall within the scope of section 12 read with the Explanation to the same and that is the only section in the enactment which can apply to a wakf-al-ulad. In the view we take of the matter it is unnecessary to discuss the point in any detail. It is la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estate Duty Act, 1953. One Aishabai, widow of the Mahomed Saleh Haji Jackeria Patel, a Sunni Hanafi Mahomedan, died on 12th August, 1954. Prior to her death, on 31st March, 1951, she executed a deed of wakf. By that deed of wakf she appointed herself and two other persons as the mutavalis and transferred to them 12 immovable properties and a sum of Rs. one lakh. By the said deed of wakf she provided that after making all disbursements and meeting all out goings in connection with the properties, 10% of the net income of the said 12 immovable properties was to be set apart every year for repairs that may be required to be done to the wakf properties and was to be credited in an account to be called the repairs fund account . In connection with the balance of the income, she provided by clause 4 as under: For and during the lifetime of the wakif (Aishabai) the mutavalis shall distribute and pay the balance of the income which remains after providing for the expenses mentioned in the above clauses hereinafter referred to as the net income amongst and to the following persons for their respective maintenance, support and benefit in the manner following, that is to say: (a) 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 12 immovable properties and the sum of Rs. one lakh, passed on the death of the said Aishabai and that estate duty was payable thereon. The applicant being the accountable person within the meaning of sub-section (1) of section 53 of the Estate Duty Act, 1953, contends that only 62?% thereof passed upon Aishabai's death and that estate duty is payable only in respect thereof. Mr. Palkhivala, the learned counsel for the applicant, very ably urged before us all that could possibly be urged in support of the contention that only 62?% of the corpus of the trust properties existing at the date of death of Aishabai passed on her death and said that it would be inequitable to hold that all the trust properties held under the said deed of wakf should be deemed to have passed on the death of Aishabai and that estate duty was livable thereon. Now, it is well- known that there is no equity about a tax. The only thing we have to consider is whether the Legislature has used clear language having regard to which we can fairly say that all the properties settled upon trust are deemed to have passed on the death of Aishabai. As has been observed by Lord Cairns in Partington v. Attorney-Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlor and of any benefit to him by contract or otherwise, for at least two years before his death. Explanation: A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in section 27) shall be deemed to reserve an interest for himself within the meaning of this section. (2) Notwithstanding anything contained in sub-section (1) where property is settled by a person on one or more other persons for their respective lives and after their death, on the settlor for life and thereafter on other persons and the settlor dies before his interest in the property becomes an interest in possession, the property shall not be deemed to pass on the settlor's death within the meaning of this section. In view of the fact that the Indian legislature has followed the pattern of the legislation in England on the subject and of the fact that a large number of authorities that have been cited at the Bar relate to the provisions of the law prevailing in England, it would not be out of place to consider the corresponding provisions of the law in England on the subject. Section 1 of the Finance Act, 1894, which corresponds to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and 'on the death' includes' at a period ascertainable only by reference to the death'. The corresponding provision in England is contained in section 22(1) of the Finance Act, 1894, which runs as follows: 22. (1) The expression 'property passing on the death' includes property passing either immediately on the death or after any interval, either certainly or contingently, and either originally or by way of substitutive limitation, and the expression 'on the death' includes 'at a period ascertainable only by reference to death'. The properties in question are settled upon the trusts mentioned in the deed of wakf. The expression settled property has been defined by section 2(19) of the Estate Duty Act, 1953, as follows: 2. (19) 'Settled property' means property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession, whether the settlement took effect before or after the commencement of this Act; and 'settlement' means any disposition, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the death of a person. As Aishabai had reserved 62?% of the net income of the wakf properties for herself during her lifetime, 62?% of the corpus of the wakf properties passed on her death within the ordinary natural meaning of the words property....which passes on the death of such person appearing in section 5(1) of the Act. It is urged on behalf of the respondent that as Aishabai had reserved for herself an interest in all the properties settled upon trust under the said deed of wakf for life, all the wakf properties are deemed to pass on the death of Aishabai under section 12 of the Act and that estate duty is payable in respect thereof under the provision of section 5(1). The Principal argument advanced by Mr. Palkhivala is that as 62?% of the corpus of the wakf properties passed on the death of Aishabai within the ordinary natural meaning of the words property settled....which passes on the death of such person appearing in section 5(1) of the Estate Duty Act, 1953, it is not permissible to invoke any other provisions of the Act under which properties are deemed to pass on death for the purpose of the levy of estate duty and he relied upon several English cases. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions are quite distinct, and section 2 throws no light on section 1. But, then, no doubt section 2 speaks of 'property in which the deceased...had an interest ceasing on the death of the deceased.' And that, it may be said, was just the position of the second Earl with regard to the Mornington settled estates. So it was. But section 2 does not apply to an interest in property which passes on the death of the deceased. That is already dealt with in the earlier section. For property in the lifetime of the deceased subject to a charge or interest. And, so passing, it must of course be valued accordingly. That is section 1. You do not want section 2 for that. You cannot resort to section 2. For that would be giving the duty twice over. He further observes at page 213: It is quite plain I think, that the provisions of section 2, sub-section (1)(b), of the Finance Act, 1894, have been borrowed and adapted from that section. But they do not, as I said just now, refer to the cesser of an interest in property which passes, but to the cesser of an interest in property which does not pass. These observations draw a line between section 1 and section 2 of the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imultaneous existence of a right to tax under section 1 and section 2 was inconsistent with the well-known statement of Lord Macnaghten in Cowley (Earl) v. Inland Revenue Commissioners**, and could not, therefore, be sustained. I agree with him. It is true that the actual language used by Lord Macnaghten, and particularly his words 'Section 2 does not apply to an interest in property which passes on the death of the deceased' was used in reference to a case in which only one possible subject-matter of taxation was under consideration; and that it is of the essence of the Crown's argument in the present case that there are two distinct proprietary interests. Mr. Stamp observed further that the celebrated pronouncement of Lord Macnaghten, which has constitute one of the most significant decisions on the interpretation of the Finance Act, 1894, did not in fact represent the determination of an issue argued in the Cowley case**. Nevertheless, I think with Wynn-Parry, J., that Lord Macnaghten's opinion ought not to be regarded as subject to such refinement, and that the law (at any rate in the courts of first instance and in this court) must be taken to be that, as regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the value of the deduction must be the value of annuity at the date of the death calculated on actuarial principles. The deduction in that case based on a concession and was not the result of any judicial pronouncement on the subject. The next case to which reference may be made is that of Sanderson v. Inland Revenue Commissioners[1956] A.C. 491; 30 I.T.R. (E.D.) 67, 73. In that case, the settlor had voluntarily settled on trust for his son and daughter shares in a private company in which he held a controlling interest. It was admitted that on his death estate duty in respect of these shares was payable under section 2(1)(c) of the Act of 1894. It was held that on its true construction, section 55(1) of the Finance act of 1940 was simply a valuation section applying equally to property which passes on the death within section 1 of the Finance Act, 1894, and property which is deemed by section 2 to be included in property passing on the death and that accordingly it applied to the shares in question. That case contains some interesting observations made by Lord Radcliffe. At page 498, he observes as follows: Estate duty is not charged by the Act upon two diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al v. Dobree [1900] 1 Q.B. 442, 450 per Channell J.), and since Lord Haldane himself gave a substantially different explanation of the relation of the two sections in Nevill v. Inland Revenue Commissioners [1924] A.C. 385, 389 when he said: 'The principle is contained in section 1. Section 2 combines definitions of such property with the extension of the application of the principle laid down in section 1 to certain cases which are not in reality cases of changing hands on death at all...', I think we may safely resign these passages to the list of the many minor mysteries of the law. Mr. Palkhivala cited the case of Public Trustee v. Inland revenue Commissioners [1958] 2 All E.R. 720; 37 I.T.R. (E.D.) 43. In that case, a testator appointed A to be one of his executors and trustees and directed that the income of his residuary estate be divided among a number of persons, of whom A was one, in specified shares and so that when one beneficiary died the total income was divided among the survivors or survivor. The income directed to be paid to A was expressed to be given to him in respect of his acting as executor and trustee and by way of remuneration for his so doing. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this case has disclosed, perhaps for the first time, an anomaly which a strict application of the dichotomy has hitherto concealed, and there may be other anomalies--one being in relation to a corporation sole--which, if the views of the Crown, which have been indicated in argument, are right, may add some emphasis to the view that the matter is one which ought property to be considered by, and resolved only by, the House of Lords itself. In this connection, reference may be made to the instructive observations of Lord Dunedin in his dissenting judgment in the case of Attorney-General v. Milne [1914] A.C. 765. At pages 774-775 he observed as follows: The paramount enacting section of the Act is undoubtedly to be found in section 1....had that section stood alone its reasonably clear that much property would have escaped which the farmers of the Act wished to tax. Accordingly we have section 2. That section was authoritatively discussed in your Lordships' House in the case of Eart Cowley [1899] A.C. 198. Whether Lord Macnaghten was strictly correct or not in saying that the two sections were mutually exclusive seems to me to matter little. At any rate--and that is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a passing on death, in the sense of section 1 of the Finance Act of 1894. Broadly speaking, it means merely property comprised in the settlement or subject to the trust. To a similar effect are the observations in Dymond's Death Duties, 12th Edition, at page 183. It is the property which is comprised in the settlement which is deemed to pass on the settlor's death on the conditions mentioned in section 12 being fulfilled. The property comprised in the settlement must be property in which an interest in such property for life or any other period determinable by reference to death is reserved. The words an interest in the context mean any interest however small. It has been so considered under the analogous provisions in England. It has been so stated in Green's Death Duties, 4th Edition, at page 129. There is a decision in Attorney-General v. Earl Grey [1898] 1 Q.B. 318, where a similar view is expressed. In that case by a deed made in 1885 the owner of certain estates gave them to his nephew in fee subject to the reservation of an annual rent charge payable to the donor and expressed to be issuing out of the estates so given. The annual income of the estates was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing observations of Lord Radcliffe in the case of St. Aubyn v. Attorney-General [1952] A.C. 15, 53: The word 'deemed' is used a great deal in modern legislation. Sometimes it is used to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible. It seems to me clear that the object of the Legislature in enacting section 12 was that where an interest, however small, is reserved by a settlor under any settlement not taking effect as a will for life or any other period determinable by reference to death, the whole of the property would be deemed to pass even though otherwise a lesser part thereof might pass, and that if he has reserved to himself the right by the exercise of any power to restore to himself or to reclaim the absolute interest in such property, the whole property would pass whether he has reserved any aliquot share in the income or any other inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the whole of the net income thereof, it is sufficient for the purpose of attracting the provisions of section 12 so that all the properties settled under trust would pass on her death. On the basis of the alternative argument of Mr. Palkhivala all the properties settled upon trust are liable to pass on the death of Aishabai. Mr. Palkhivala has lastly urged that even if section 12 applies in its entirety, effect should not be given thereto as section 10 can be said actually to apply. Section 10 is in terms following: Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the done and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise: Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give. The donee was the recipient of the gift; whether the son alone was the donee or whether the son and the body of trustees together constituted the donee seems immaterial. The trustees alone were not the donee. They were in no sense the object of the settlor's bounty. Did the donee assume bona fide possession and enjoyment immediately upon the gift? The linking of possession with enjoyment as a composite object which has to be assumed by the donee indicates that the possession and enjoyment contemplated is beneficial possession and enjoyment by the object of the donor's bounty. This question, therefore, must be answered in the affirmative, because the son was (through the medium of the trustees) immediately put in such bona fide beneficial possession and enjoyment of the property comprised in the gift as the nature of the gift and the circumstances permitted. In that case, bona fide possess in and enjoyment of the property comprised in the gift was assumed by the donee immediately upon the gift and thenceforth retained to the entire exclusion of the deceased or of any benefit to him. That case is clearly distinguishable from the facts of the present case. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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