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TMI Blog1990 (6) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Under the said Act, the income from these properties and the use of the same was conferred on the baronet during the term of his natural life and from and immediately after his death to the use of the male heirs of the body of Sir Jamsetjee Jejeebhoy, first baronet who may succeed to the title of baronet conferred originally by the letters patent but as to each of the said male heirs to the use only during the term of their natural life. (See section 2 of Act 10 of 1915). In other words, under the Sir Jamsetjee Jejeebhoy Baronetcy Act, 1915, each of the baronets in succession is entitled to the income of the baronetcy fund during his lifetime. The properties under the said Act have been vested in the Commissioner for the Northern Division of the Presidency of Bombay, for the time being, the Accountant-General for the time being of Bombay and the Collector for the time being of Bombay. These persons have been, under section 3, made a corporation with perpetual succession and a common seal under the style and title of "Sir Jamsetjee Jejeebhoy Baronetcy Trustees". Under the Act, each of the baronets who succeeds the first baronet must adopt the designation of Sir Jamsetjee Jejeebh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of the deceased sixth baronet ? The relevant portion of section 5(1) of the Estate Duty Act is follows: "5. (1) In the case of every person dying after the commencement of this Act, there shall,... be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled... which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with section 35." We have, therefore, to determine which property passes on the death of the sixth baronet. The phrase "property which passes" is not explained in the Estate Duty Act. It is used in a general sense of property changing hands on the death of the deceased. It is not disputed by Mr. Dastur who appears for the accountable person that the beneficial interest which the sixth baronet had in the income of the baronetcy fund does pass on his death. Mr. Jetley, however, goes further and submits that under section 5 read with section 12, the entire corpus of the baronetcy fund must be deemed to pass on the death of the baronet. Under section 12(1), it is provided as follows : "12. (1) Property passing under any settlement made by the deceased by de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, there is an Act of Parliament under which a certain fund has been vested in the trustees appointed under the Act in perpetuity. The Act confers on a person holding the office of the baronet for the time being a life interest in the income of the fund so vested. The provisions of section 12, therefore, have no application to the present case. Moreover, as the Act clearly provides, the corpus remains with the trustees in perpetuity and the title of the trustees is not affected in any manner by the death of the baronet. The corpus, therefore, does not pass on the death of the baronet. In the alternative, it was submitted by Mr. Jetley that in view of the provisions of section 7(1) of the Estate Duty Act read with section 40, the corpus of the trust fund must be deemed to pass on the death of the sixth baronet. Section 7(1) provides as follows : "7. (1) Subject to the provisions of this section, property in which the deceased, or any other person had an interest ceasing on the death of the deceased, shall be deemed to pass on the deceased's death to the extent to which a benefit accrues or arises by the cesser of such interest . .." Section 40 of the Estate Duty Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the persons named in the will became beneficially interested or whether, under section 2(1)(b) of the said Act, estate duty became payable on the capital value of the proportion of the testator's residuary estate required to produce the annuity. The court held that, in order that property may be deemed to pass under section 2(1)(b), it is necessary that there should be two elements, first, an interest which ceased on the death of the some person and, secondly, the benefit accruing or arising by the cesser of that interest. The court referred to an earlier judgment in the case of Attorney-General v. Watson [1917] 2 K B 427, and said that the benefit accruing under section 2(1)(b) must necessarily be benefit to the Property and not to any person having a interest in the property. Where there is a continuing annuity in which there are successive interests, upon the death of the first life to fall, the fund upon which the annuity is charged is not discharged from the annuity at all, but the annuity continues to be payable and is charged on that fund. It may be that the interest of certain persons entitled to the fund subject to the annuity would be increased in value by the drop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 268 (Bom) at p. 290 CED v. Fakirchand Fatehchand Sachdev). When section 7(1) does not apply, section 40 cannot apply either. In our view, therefore, the deeming provisions of section 7(1) read with section 40 have no application to the present case. Hence, the principal value of the corpus of the baronetcy fund cannot be considered as the value of, the property passing on the death of the sixth baronet. Mr. Dastur, learned counsel for the respondent, submitted that even if section 7(1) is held to apply to the present case, the provisions of section 7(4) would exclude the corpus of the trust fund from the levy o estate duty because, under section 7, sub-section (4), the provisions of sub-section (1) shall not apply to a property in which the deceased or any other person had an interest, inter alia, only as a holder of an office. Mr. Dastur submits that the sixth baronet had an interest in the trust property only as a holder of an office, namely, the office of a baronet. Is a baronetcy an office ? What is an office ? In the case of Attorney General v. Eyres [1909] 1 KB 723, a property was settled upon three named trustees. Under the indenture, an annual sum of pounds 200 was to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss public character." All these observations of Rowlatt J., Lord Atkin and Lord Wright have been cited with approval by the Supreme Court in the case of Smt. Kanta Kathuria v. Manak Chand Surana, AIR 1970 SC 694. The observations of Rowlatt J. and Lord Atkin are wider in content than those of Lord Wright. While Lord Wright would require that an office should have duties attached to it, this requirement is not spelt out by Rowlatt J. or Lord Atkin. Since the Supreme Court has approved of all these definitions, we consider the wider definitions as equally valid. An office, therefore, has to be a subsisting, permanent position which is held in succession by a number of persons. In this wide sense, an office may or may not have any duty attached to it, though generally it does have some duty attached to it. There are, however, some offices which are sinecures because no duty is attached to them, but only benefits such as receipt of an income by the holder of such an office. We do not see any reason for excluding the latter from the definition of an office. Mr. Jetley, in this connection, relied upon a decision of the Madras High Court in the case of S. C. Sree Manavikraman Raja v. CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of section 7(4), however, requires to be considered only if it is held that section 7(1) is attracted to the present case. In view of our finding that section 7(1) is not attracted, the alternative submission under section 7(4) does not strictly require consideration. In view, however, of the fact that arguments were advanced at some length on this aspect, we have considered this alternative submission also. It was also submitted by Mr. Dastur that, under section 7(4) of the Estate Duty Act, the present baronetcy can also be considered as a corporation sole. We have already considered one alternative and held in favour of Mr. Dastur. We need not consider the second alternative submission as to whether this baronetcy would qualify for exemption on the ground that it is a corporation sole. In our view, therefore, only the provisions of section 5 are attracted in the present case. The property which passes on the death of the baronet is the actuarial value of his beneficial interest as well as of his wife's interest, as laid down by the Tribunal and not the corpus of the baronetcy trust fund. Accordingly, we answer question No. 1 in the negative and against the Revenue. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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