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TMI Blog1968 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ho pre-deceased Mary, settled certain shares and securities of the then value of Rs. 2,48,000 on trust ; and the official trustee of Bombay was appointed the trustee of the settlors. Under the trust deed, the net income of the trust was to be paid to the settlors during their respective lives absolutely and on and after the death of the survivor to their brother, Prof. R. K. Nariman, for life and after his death to the trustees of the Parsi Panchayat, Surat, for charitable purposes. Thereafter by a deed of modification, dated December 29, 1944, it was provided that a quarterly payment of Rs. 375 should be made to the Parsi Panchayat even during the lifetime of the settlors ; and this amount was subsequently raised to Rs. 825 per quarter. Jarbanoo died on September 22, 1954, leaving Mary, the deceased, with whom we are concerned in the instant case. as the sole surviving settlor, and her brother, Prof. Nariman, as the reversionary life tenant. On November 24, 1954, the deceased and her brother jointly executed a deed of renunciation and modification. Under the terms of that deed, the quarterly payment to the Parsi Panchayat was raised to Rs. 900 ; Prof. Nariman renounced his reversi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case was taken up, the estate duty assessment of Jarbanoo was completed by another Assistant Controller of Estate Duty and, in that case, the Assistant Controller raised the duty on 50 per cent. of the corpus minus the value of the corpus proportionate to produce the annuity of Rs. 825 per quarter payable to the Parsi Panchayat as it was then payable. It is, therefore, clear that in the estate duty proceedings relating to the estate of Jarbanoo, the revenue proceeded on the footing that Jarbanoo had brought in 50 per cent. of the property settled upon trust in 1936, the remaining 50 per cent. having been brought in by Mary, the deceased concerned in the instant case. In the instant case, on the face of the deed of settlement of March 23, 1936, no indication whatsoever has been given as to whether Mary and Jarbanoo were tenants-in-common or were joint-tenants with right of survivorship to the property which they settled on trust by that document, nor is there any material to show whether each of them brought shares and securities of equivalent value in order to constitute the trust fund settled upon trust by that property. It is true that it is possible to read this deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all nonetheless be deemed to pass. This decision of the Bombay High Court having been delivered prior to May 1, 1960, is binding on us and we are also in full agreement with that decision ; and following this decision in Khatizabai's case, we hold that so far as 50 per cent. of the corpus in the instant case was concerned, it must be deemed to have passed on the death of Mary because she had reserved life interest to herself in the income of the property by the deed of settlement of March 23, 1936. It is true that under the document of renunciation and modification of November 24, 1954, Mary renounced and relinquished her right, title and interest to the extent of 35% at least in the entire income of the trust property ; but qua that share of the income which was referable to 50% of the trust fund, the principle laid down in Khatizabai's case would apply and, therefore, 50% of, the corpus traceable to the share originally brought in by Mary in 1936 must be deemed to pass under section 12 of the Act. Regarding the remaining 50% of the corpus, which was brought in by Jarbanoo, after Jarbanoo's death on September 22, 1954, Mary was entitled to receive the entire income from the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1894, and that estate duty was not payable by the remainder man under that Act. Earl of Halsbury L. C. observed in his speech : " The question here is whether upon a conveyance inter vivos of the interest that the mother possessed, that falls within the language of the statute, ' property passing by death '. When the mother had passed her life estate by a conveyance inter vivos to her son, would anybody in the world, untainted by technical views, have said that that estate passed from the mother to the son upon death ? Death had nothing to do with it. The moment that conveyance was made the son was completely master of the situation, and he might have sold the property the very next day. Then in what sense has it passed on the death? That seems to me to dispose of the question under section 1 ... That which passed the property, which did operate upon the property that passed, was the conveyance inter vivos which vested the property passed in the person to whom it was conveyed, independently of and having no relation to the death at all. " In the, course of his speech in this case, Lord Watson pointed out : " My Lords, the present case is said to fall within subsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreted, it is clear that where income is given to a life-tenant out of a particular property and an annuity is also payable out of the rest of the income or, as it is sometimes mentioned in the deeds of this kind, the income has been directed to be paid to the life-tenant subject to the payment of the annuity, and on the death of the life-tenant the entire property is to pass in a particular manner, then, under these circumstances, under the rule in Cowley's case, the estate duty is payable on the whole of the property and not merely on that part of the property representing the excess of the income of the trust fund over the slice or portion of the trust fund, which can be said to have been produced or represented the annuity. In the instant case, the Central Board has applied the principles in Cowley's case, as interpreted by the House of Lords in De Trafford's case, and as explained by the Court of Appeal in the case of Lambton's Marriage Settlement, In re : May v. Inland Revenue Commissioners and held that the entire property in which the life-interest of the deceased subsisted passed on her death under Section 5 without any deduction for the annuity, which ceased on her deat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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