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TMI Blog1972 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... hajaminan Wakf cannot be included in the dutiable estate under section 12 of the Estate Duty Act, 1953 ? " One N. M. Khajamian Rowther died on November 9, 1954. Prior to his death he executed on May 29, 1945, a wakfnama in respect of certain properties. The four sons and four daughters of the wakif were nominated as mutawallis of the trust properties and the properties themselves were transferred in the name of Khajamian Wakf Estate. The wakfnama provided for the utilisation of the income of the trust properties, firstly, for payment of taxes and other expenses, secondly, for meeting the expenses of certain charitable and religious objects mentioned in Schedule A to the wakfnama, thirdly, for setting aside 25 per cent. of the surplus as a reserve fund, and fourthly, for the maintenance and support of the " family, children and descendants of the wakif ". The wakfnama also provided that the ultimate benefit shall go to the poor. By clause 19 of the wakfnama, the wakif reserved for himself the right of control and supervision over the mutawallis with a power to alter, cancel or modify any of the proposals or resolutions of the mutawallis. In the return submitted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 go 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 : Provided further that a house or part thereof comprised in such settlement made in favour of the spouse, son, daughter, brother or sister, shall not be deemed to pass on the settlor's death by reason only of the residence therein of the settlor except where a right of residence is reserved or secured directly or indirectly to the settlor under the settlement or under any collateral disposition. 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. " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merely a superintendent or manager. The mutawalli could not legally spend the income of the wakf property for objects other than that provided under the wakfnama--vide Mulla's Mohamedan Law (16th edition, section 202) and Hafiz Mohammad Zafar Ahmad v. U. P. Sunni Central Board of Waqf). Under clause 19, the settlor is given a right to see that the mutawallis manage the properties in terms of the wakfnama. It may be that any of the acts of management contrary to the terms of the wakfnama could be set right under the power retained under this clause to alter, cancel or modify any of the proposals or resolutions of the mutawallis. There is no specific power reserved under this document for alteration of the beneficiaries or the objects for which the income is to be spent or for changing personnel of the mutawallis. In the absence of such a reservation, it is settled law that the settlor cannot alter the terms of the wakfnama nor can he make a change in the personnel of the mutawallis. On a plain reading of the provisions of the wakfnama, we have no doubt that the wakfnama has not reserved any interest in the settled properties to the settlor. It only now remains to notice the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, medical treatment, education and other heavy expenses which cannot be met from any other source for the benefit of the deceased, his wife or any child or remoter issue of the deceased. Having regard to these provisions in the deed, it was rightly, if we may say so with great respect to the learned judges, held that the settlor had reserved an interest in the settled properties for life within the meaning of section 12(1) of the Act. In the present case, as has already been noticed, the wakif reserved no such rights, as found in the above two decisions, in the settlor and, therefore, these decisions do not in any way help the revenue. In support of the second contention that to the extent the wakfnama provided for the maintenance of the settor's family, children and descendants, the settlor is relieved of the legal obligation to maintain and that would amount to a reservation of an interest for life to the settlor within the meaning of section 12(1) of the Act, the learned counsel relied on the decisions in Kikabhai Samsuddin v. Controller of Estate Duty and In re Cochrane. In the first of these cases, the settlor had executed five gift deeds settling different immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the revenue, it is clearly against them in so far as the applicability of section 12(1) is concerned. Of course, the learned judges held that to the extent the obligation of the settlor to maintain his wife and daughters is passed on to the donees concerned, it would attract the provisions of section 10. We are not concerned in this case with the applicability of section 10. It is therefore not necessary for us to consider that aspect. But we would like to add that, in addition to the obligation to maintain his wife, children and descendants which shall be deemed to have been passed on to the donees in this case being not for the life of the settlor or is not for any other period determinable by the death of the settlor and therefore, section 12(1) is not attracted, the Act itself does not contemplate any enquiry into the complex personal law of the parties and the determination of the rights and obligations of the settlor in the matter of maintenance of his wife and children. In In re Cochrane the marriage settlement in question provided that the trustees of the fund settled by the husband should hold the fund in trust to pay the income to the wife for life and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he death of the settlor. The court specifically relied only on the clause which made the wife a trustee in respect of the amount received with a duty to spend the money for current household expenses and management and a right on the husband to require that the wife should apply the income for a purpose which would wholly or partly relieve the husband of his liability to pay the household expenses and management. In the present case there is no clause similar to the one which was considered by the court in In re Cochrane. We, therefore, overrule this contention of the revenue. It is next contended by the learned counsel for the revenue that since the wakfnama is a settlement and provides for maintenance of the settlor's family and children it comes within the Explanation to section 12(1) of the Act. He submitted that the words " for the maintenance of himself and any of his relatives " should be read disjunctively as if for the word " and " the word " or " is used. According to the learned counsel, normally, property escapes from the levy of estate duty through relations only. Having regard to the natural human conduct one need not expect such escapement through third parties unr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh to attract this provision provided it is to enure for life or determinable on the death of the settlor. Thus, even if a partial interest in settled property is reserved in the deed and it is to enure for the life of the settlor, it would come within the scope of the section and in such a case the entire property comprised in the settlement shall be deemed to pass on the death of the settlor. It is immaterial for whom the balance of the interest in the settled property is given or settled. It could be in favour of any relative or a third party. This view of ours finds support in certain decided cases also. In Khatizabai Mohomed Ibrahim v. Controller of Estate Duty, the Bombay High Court held that in the case of settlement of property in which the settlor has reserved to himself for life any interest, however small it may be, by virtue of section 12, the whole of such property of the settlor, which was the subject-matter of the settlement and not merely the interest so reserved, shall be deemed to pass. The words " an interest " in the context of section 12 mean " any interest however small ". It may be an aliquot share in the income of the property settled. This view of the Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, when the settlor has reserved an interest in the settled property for maintenance of himself and if this reservation is for his life or any other period determinable by reference to the death of the settlor, then it would come in the main part of the section itself making that portion of the Explanation otiose. Secondly, under section 9 read with section 27, any settlement in favour of a relation shall be deemed to pass on the death of the settlor. Of course, the condition for such " deeming operation " under section 9 is that the settlement shall not have been made bona fide two years or more before the death of the settlor. But, we do not find any reason why Parliament should have excluded bona fide settlements made two years prior to the death of the settlor under section 9 and include them through the Explanation in section 12(1). The second proviso to section 12(1) also, in our opinion, goes against the construction of the word " and " as " or " in the Explanation. Under the second proviso, where the settlement related to a house or part thereof and was made in favour of the spouse, son, daughter, brother or sister, it shall not be deemed to pass on the settlor's death ..... X X X X Extracts X X X X X X X X Extracts X X X X
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