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TMI Blog1871 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... An appeal was preferred by the accountable person to the Board, and the appeal was dismissed. The present reference has been made at the instance of the accountable person. The deceased was the absolute owner of property worth Rs. 4,50,000. On January 1, 1940, he executed a deed of wakf in respect of this property creating a wakf-alal-ul-aulad. He appointed himself as the first mutawalli for the period of his life. After him, his wife was to be the mutawalli and after her the sons of the deceased in succession. The primary object of the wakf was to arrange for the maintenance of his sons and daughters and a daughter's son. The profits from certain properties were set apart for charitable purposes. Under paragraph 7 he reserved to himself the power to alter the provisions of the deed in his discretion including the power to modify the rights of the beneficiaries, to include some and exclude others and to increase or decrease their shares. On November 30, 1947, he executed a supplementary deed making certain changes in the order of succession of mutawallis but without affecting the provision that he would continue as the first mutawalli during his life to be followed by his wife du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself the right by the exercise of any power, to restore to himself or to re-claim the absolute interest in such property shall be deemed to pass on the settlor's death : Provided that the property shall not be deemed to pass on the settlor's death by reason only that any such interest or right was so reserved if by means of the surrender of such interest or right the property is subsequently enjoyed to the entire exclusion of the settlor 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled " pro- perty. What is " settled " property within the meaning of section 5(1) is indicated by section 22(1)(i) of that Act. It defines the expression "settlement " to mean an instrument whether relating to real property or personal property, which is a " settlement " within the meaning of section 2 of the Settled Land Act, 1882, or if it relates to real property, would be a settlement within the meaning of that section. Section 2 of the Settled Land Act, 1882 defines " settlement " as: " Any ... instrument ... under or by virtue of which. . . any land or any estate or interest in land, stands for the time being limited to or in trust for any persons by way of succession creates or is for purposes of this Act a settlement ....... " Examining the meaning of the expression " by way of succession " in Attorney-General v. Owen-Kennedy J. observed : " ' By way of succession' seems to me to be a phrase to which one ought, in dealing with this Act, not to assign a narrow or strictly technical meaning, but to treat it as equivalent to ' successively upon death ' ; and substantially under the present will the property out of which the annuities are paid is property to which, so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was payable to the deceased's descendants will be spent for ever on certain charitable deeds. The charitable deeds for the purposes of the wakf have been indicated as : " maintenance and support of the wakf's relations and of orphans and widows of the wakif's family, who are not heirs of the wakif ; Muslim widows, orphans, destitutes, helpless persons and travellers in general ; and granting of scholarship, for religious and wordly education and granting of aid to Muslim institutions. " The settlor clearly contemplated that successive generations would enjoy the benefit of the wakf and thereafter it would pass to the persons covered by the charitable purposes. It seems to us that upon these considerations the property must be considered to be " settled property " and the wakf, being a dedication or endowment, must be considered to be a settlement within the meaning of section 2(19). Inasmuch as the property comprised in the wakf passes under a settlement, it is property which falls within the scope of section 12. It is next contended on behalf of the accountable person that the deceased had no interest in the property which could attract the provisions of section 12. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money was to be held subject to trusts in favour of his widow and children. The question was whether section 38(2)(c) of the Customs and Inland Revenue Act, 1881, applied. That provision, it may be mentioned, is, in its material terms, comparable with section 12(1) of our Act. Stephen J. observed : " The whole question here is whether by this settlement an interest for life is reserved, either expressly or by implication, to the settlor. The clause on which this question turns ought to be interpreted with reference to the scheme of the Act, and adopting that principle of construction I have come to the conclusion that the word ' interest ' in the statute ought to be interpreted so as to include that which was reserved to the settlor in the present case. By the terms of the settlement during the life-time of the settlor the trustees were to apply the income of the settled property to his use or to that of certain other persons who were specified, but they had a discretion, which would have enabled them, if they had thought fit, to apply the whole for the benefit of such other persons to the exclusion of the settlor. I am clearly of opinion that what was reserved to the settlor was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the discretion which was vested in the trustees might be exercised in his favour, either partly or entirely, and that in my judgment is exactly the position that Major Alfred Stourton was in in this case. He had no legal right to force the trustees to give him anything ; at the same time he had in a colloquial sense ,in interest in the estate, because it was an estate out of which something might be allotted to him in the discretion of the trutees. Whether that is an interest within the meaning of the Act of 1881 has, I think, been determined by Attorney-General v. Heywood , and the decision has stood since the year 1887, a period of forty-three years. " Romer L.J. also came to the opinion that section 38(2)(c) came into play. In the instant case, it is true that the settlor had not included in the list of beneficiaries and that so long as he did not do so, he was not entitled to the benefits enjoyed by the other beneficiaries. But the power to do so vested in him absolutely. It was a power which he could exercise in his absolute discretion. We see little difference between a case where the settlor included himself among the beneficiaries and left it to the absolute discret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amending the wakf deed. In case, it can be said that clause 7(e) of the wakf deed does not have the effect which we think it has, the question next arises whether the right reserved by the settlor to reside in the residential properties covered by the wakf is an interest contemplated by section 12. In our opinion, it is. The settlor was entitled as of right under the terms of the wakf deed to reside in those properties. That right inhered in him to the date of his death. At no point of time was it surrendered. The Board has found that the settlor did reside in the wakf properties up to the date of his death. On behalf of the accountable person reliance is placed upon the proviso to section 12(1). We do not think that the proviso can be invoked. It cannot be said that the residential properties were enjoyed to the entire exclusion of the settlor or of any benefit to him by contract or otherwise. We have been referred to Mrs. Shamsun Nehar Mansur v. Controller of Estate Duty . In that case the Calcutta High Court found that the husband, after gifting the house to his wife, resided therein for the purposes of enjoying the company of his wife and not in the exercise of any proprie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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