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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 ..... nt of the property passing on his death to the Assistant Controller of Estate Duty. The deceased had executed a deed of wakf, and the Assistant Controller held that the wakf properties valued it Rs. 3,61,939, must be deemed to have passed on the death of the deceased under section 12, Estate Duty Act, or, alternatively, under section 10 of that Act. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is urged on behalf of the accountable person that the wakf is not a "settlement " within the meaning of section 12, and the Board had erred in holding to the contrary. At the relevant time section 12 of the Estate Duty Act provided : " 12. (1) Property passing under any settlement made by the deceased by deed or any other instrument not taking effect 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which vests successively in one person after another, it is urged, and that is not what happens when wakf property vests in God. When can it be said that property stands limited to or in trust for any persons by way of succession ? In England, settlement estate duty is payable under section 5(1) of the Finance Act, 1894. It is a duty on the principal value of " 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-Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion after generation, in accordance with the shares is defined by Mohammedan law and as warranted by the conditions of the time subject to the other terms and conditions of this deed. If the line of descent becomes extinct and there does not remain any person alive having the right to income under the Mohammedan law then the income from the endowed property to the extent 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 endowme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench Division had before it a case where under the terms of the settlement the settlor assigned to the trustees a sum of money upon trust declaring that the trustees should apply the income for the benefit of the settlor and his wife and children, or at their discretion, for the benefit of one or more such persons to the exclusion of others, and after the settlor's death the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wood said : " In that case the only interest which the settlor retained in the sum of money settled by him was the expectation, well founded or ill founded, that the trustees would exercise their discretion in his favour ; but the trustees might quite lawfully have refused to give him anything, and have distributed the income among his wife and children. He had a mere expectation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dymond's Dealh Duties, 13th edition, volume 1, page 764 : " .... it not necessary that the power of disposition be exercised. These observations, although made in the context of the competence of a person to dispose of property and, therefore, referable to section 6 of the Act, are helpful in appreciating the dimensions of the power reserved by the settlor to himself in the matter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose recognized by the Mussalman law as religious, 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 mutawalli 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 wakfs, 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. " But as we have held that section 12 applies, we need not proceed further with this question. We hold that the sum of Rs. 3,61,939 was rightly included in the principal value of the estate of the deceased and charged to estate duty under section 12 of the Estate Duty Act. The question referred is answered accordingly. The Controller of Estate Duty is entitled to his costs, which we assess at Rs. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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