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TMI Blog1961 (8) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... r death, she appears to have given a direction to her husband that a sum of ₹ 31,000 out of the amount standing to her credit in the family business accounts should be set apart for the creation of a permanent trust for establishing and conducting a Sanskrit Patasala in her name; she also directed her husband to take necessary steps in that regard. Nothing, however, appears to have been done towards the starting of the patasala for about three years after the death of Manbhari Bai. The amount standing to her credit was not even transferred to the name of her son, Jai Narayan, her sole heir. But that circumstance cannot make any difference as regards the ownership of the monies. On November 2, 1948, an entry was made in the account books of the business by which a sum of ₹ 31,000 was taken out of the account standing in the name of Manbhari Bai and put under a new ledger head with the title Dalooram Jai Narayan Trust account. The balance of the amount continued to remain in the name of Manbhari Bai as before. On April 5, 1951, Dalooram executed a registered trust deed; his son, Jai Narayan, signified his assent thereto by attesting the deed. There is no dispute that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider the question whether the credit entry in favour of Manbhari Bai was a sham one, the amount represented by it belonging only to the family. The questions that have been referred to us proceed on the footing that the monies represented by the credit entry in the books belonged to Manbhari Bai. Mr. Ranganathan appearing for the Controller of Estate Duty, however, contended that the questions are wide enough to include a case that the monies at no time belonged to Manbhari Bai. We cannot accept the contention. It is obvious from the form of the questions referred to us, that they proceed on the footing that the funds belonged to Manbhari Bai as her stridhana property. Even otherwise, there is ample material to support the view that the monies standing to the credit of Manbhari Bai in the family accounts were her stridhana property. As early as 24th of January, 1940, both Dalooram and his son, Jai Narayan, had executed a promissory note in favour of Manbhari Bai for a sum of ₹ 75,000 which represented the amount then due and was standing to her credit in the accounts of the family. There was further a registered agreement which evidenced deposit of title deeds as securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of a case; but a clear intention of waiver of his separate rights must be established. That cannot be inferred from acts which may have been done merely through kindness or affection. In Mallesappa v. Mallappa([1961] 3 S.C.R. 779; A.I.R. 1961 S.C. 1268) the Supreme Court has pointed out that before separate property belonging to an individual member of the joint family can be taken to have been put into the common stock, it should be established that the owner had put the property deliberately and voluntarily into the common stock with the clear intention of abandoning all his claim in respect of the property and with the intention of assimilating it to the joint family properties. That is to say, the separate property would lose its character as such only by reason of the owner's intention which intention can be ascertained from his conduct. Such conduct must clearly and unequivocally point out that the intention of the owner was to convert his separate property into joint family property. Therefore, equivocal circumstances or ambiguous conduct would not be sufficient to prove the clear intention necessary to constitute a waiver of rights of a member of the family in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of Manbhari Bai at all. No advantage was secured by keeping the money separate if it was really family property as the income-tax department had refused to allow any deduction in respect of the interest credited thereunder. The continuance of Manbhari Bai's name in the accounts was perhaps due to sentiment, indifference or it was allowed with a view to keep that fund distinct. But whatever that may be, we are unable to see how that would at all show that the entire amount standing to the credit of Manbhari Bai was thrown into the joint stock of the debtor family. What then remains is the fact that it was Dalooram and not Manbhari Bai's heir that executed the trust deed. Jai Narayan has only attested it. Assuming that Jai Narayan had knowledge of the contents of the trust deed, that would only imply that Dalooram had the right to execute the document and that the former acknowledged that right. But does the acknowledgment of Dalooram's right to execute the trust deed necessarily mean that Jai Narayan has thrown the rest of the money into the common stock? The answer can only be in the negative. But even in regard to the sum of ₹ 31,000 covered by the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the trust deed cannot be taken as implying(1) that the sum of ₹ 31,000 was part of the inheritance; (2) that Jai Narayan knew not merely that fact but had put the entire inheritance into the common stock. Even assuming that the execution of the trust deed evidences a right in Dalooram as owner, it can only show that Jai Narayan out of respect to his mother's wishes was willing to put it into the family to enable his father to execute the document. It cannot follow from this that the rest of Manbhari Bai's monies were also mixed up with family property. The conduct of the parties in continuing in the account the name of Manbhari Bai, adding interest to the amounts due thereon and continuing its distinctiveness would seem to indicate that there was no intention on the part of Jai Narayan to blend it with the family property. If any such blending was ever intended, the credit entries should have been wiped out, as the joint family, the erstwhile debtor, would have become the owner of the debt which would thereby be extinguished. In our opinion, there are no materials to show that Jai Narayan threw the sum of ₹ 1,33,277 into the joint family to make it part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is charged on all properties passing on the death of the owner subject to certain exceptions. Liability to duty exists regardless of the dispositions made by the deceased and the destination of the properties. Section 5 of the charging section authorities levy of estate duty on the principal value of all property settled or unsettled which passes on the death of the erstwhile owner. Section 6 states that the property which was within the disposing power of the deceased at the time of his death should be deemed to be property that passed. Section 7 provides that certain properties in which the interest of the deceased ceased on his death should also be deemed to pass on his death; for example, limited interest for life, Dalooram Jai Narayan v. Commissioner of Income-tax [1962] 44 I.T.R. 379. right of a member of joint Hindu family, etc. Broadly stated estate duty is leviable in respect of property which passed on the death of the deceased, those in respect of which he had a disposing power during his lifetime and those in which his interest ceased on death. Sections 8 to 17 deal with cases where the property could be deemed to pass on the death of the deceased. None of these sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to transfer a sum of ₹ 31,000 for the benefit of a Sanskrit patasala. That involves the discharge of the liability of Dalooram to the extent of ₹ 31,000 and the allocation of that amount in his hands for the purposes of the trust. Dalooram thereafter occupied the position of a debtor in regard to the balance of the money due from him and was also in fiduciary capacity in regard to the sum of ₹ 31,000. In other words he was charged with the duty of establishing the trust with that money. From the terms of the trust it is clear that it was not a mere precatory direction that was given by Manbhari Bai amounting to nothing more than a mere expression of a desire, wish, recommendation or hope that Dalooram will use it in the ways specified. So far as Manbhari Bai was concerned, there was a clear intention on her part to endow ₹ 31,000 for the starting of a Sanskrit patasala; the amount specified was certain; the beneficiary was also indicated with certainty. As all the elements to constitute a valid trust are present it was not open to Manbhari Bai herself to recall the direction as Dalooram was constituted the trustee as it were for effectuating the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration of trust, which ex facie they were not, but if a document is apt and proper to transfer the property--is in truth the appropriate way in which the property must be transferred--then it does not seem to me to follow from the statement of Turner L.J. that, as a result, either during some limited period or otherwise a trust may not arise for the purpose of giving effect to the transfer. In that case the deceased transferred certain shares owned by him to the trustees to be held in respect of a trust under a settlement made by him. The articles of the company in respect of whose shares the settlement was made contained a power in the directors to refuse registration of the transfer. The settlor had signed the necessary documents for transfer, duly stamped them, and before the company could recognise the transfer he died. A question arose whether the shares in question remained as the property of the deceased so as to be liable to estate duty or they were possessed by him in a fiduciary capacity on behalf of the beneficiaries under the settlement. The Court of Appeal held that as the deceased had done everything in his power by executing the transfer, the transferees ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to constitute a valid private trust, (1) there should exist an intention to create a trust; (2) the subject-matter of the trust should be certain and specified and (3) the beneficiary should be ascertained. As we pointed out earlier, in the case of a dedication to a public trust, what is essential is that there should be an unambiguous expression of intention to divest and an actual divestment of the interest of the donor for the benefit of the charity. Such divestiture can be proved by a written document or by other evidence as it is not necessary that there should be a writing to constitute a valid dedication. In a recent case, State of Madras v. Subramaniaswami Mahimai Paripalanasangam([1961] 74 L.W. 388) to which one of us was a party, dealing with the question how far a credit entry in the donor's account books would constitute dedication to the charitable purpose mentioned therein, it was observed: It is not an uncommon practice for the commercial community in this part of the country to make credit entries in the books in the names of various charities or for religious objects. Sometimes these allotments in accounts are made more as a matter of convenience o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further held that there was no trust. Muthappa Chettiar v. Commissioner of Income-tax([1945] 13 I.T.R. 311), was a case where there was a credit entry in the books of the assessee in favour of two persons. It was admitted that no assets or funds corresponding to the credit entries were actually set apart or allocated at any time for the purpose of benefiting the individuals in whose favour the entries were made. The entire assets of the firm were utilised in the business. It was held that mere credit entries in books of account without allocation of specific assets or funds corresponding to such entries did not operate as valid gifts or trusts of the sums credited. In Ramanathan v. Palaniappa (I.L.R. [1945] Mad. 500), there were credit entries in the account books on the basis of which it was claimed that there was a valid dedication to a public trust. There was no evidence apart from the book entries to show that any particular sum was separated from the general funds of the defendant's family or business and placed on a footing incompatible with the exercise of beneficial ownership by the defendant's family itself. It was held that a mere credit entry by itself in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing in the evidence as disclosed by the testator's subsequent conduct which could be regarded as showing an intention to create a trust or to constitute himself as trustees. The matter was taken up in appeal to the Privy Council whose judgment is reported in Chambers v. Chambers (I.L.R. [1944] Mad. 617 (P.C.). Their Lordships of the Privy Council held that there was no ascertainment of the subject-matter of the trust, as the sum represented by the credit entry was never set apart. What was done was merely an attempt to give an interest to the wife in the capital of the business to be measured on the basis of her having contributed two lakhs of rupees but the entire business remained throughout under the unfettered control of Mr. Chambers. Mr. Chambers did not declare in regard to the credit entry himself or any other person as the trustee. There being, therefore, no ascertainment and appropriation of trust funds it was held that there was no valid constitution of any trust. It cannot however follow from this that a credit in the account books except in cases where it is claimed to be sham or benami, is meaningless. The only principle is that standing by itself it would be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave made reference were all cases where the alleged donor did nothing more than make a credit entry in his books of account. The circumstances of those cases revealed that the ownership of the monies was never parted with or intended to be parted with. There was nothing to indicate that the donor assumed the character and undertook obligations as a trustee. It was held that in such cases mere credit entries in the account books would not by themselves show an intention to create a trust or the actual appropriation of the funds for the objects of the trust. But here the position is different. The credit entry is made not in the books of a donor but in the books of his debtor in favour of the trustee and that would amount to a specific appropriation for the trust. The learned judges who decided Ramanathan v. Palaniappa* were alive to this distinction. That case was concerned with a credit entry in the books of account styled pooja paditharam of Elamaikkakkara temple kattalai account. Certain entries were made in the books of the firm giving credit to the kattalai amounts. They included also certain contributions made by third parties for various subsidiary kattalais. It was observed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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