9911796707
TMI Blog1989 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... surrender of right two years before the death of the deceased ? Sri. W. S. Seshachala Gramani died on June 4, 1958. Under a settlement deed dated February 15, 1942, the deceased settled certain properties in favour of his son, Sri. W. S. Sivakolundu Gramani. Since, according to the Assistant Controller of Estate Duty, the properties dealt with under the settlement deed were conveyed to the settle after the lifetime of the deceased and the deceased had retained a life interest in respect of the properties covered by the settlement deed, the value of the properties covered under the settlement deed were included in the dutiable value of the estate, invoking the provisions of section 12(1) of the Act. On appeal by the accountable person before the Appellate Controller of Estate Duty, it was contended that owing to the default committed by the deceased-settlor in the payment of Rs. 75 per mensem to the settlee, the settlee, viz., the accountable person, took possession of the properties and had been in enjoyment of the same to the exclusion of the settlor and, therefore, section 12(1) of the Act could not be invoked. The Appellate Controller of Estate Duty took the view that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to the decision in CED v. R. Kanakasabai [1973] 89 ITR 251 (SC). It was further submitted that the proviso to section 12 (1) of the Act would apply, as at least one of the items of the properties had been established to have been taken possession of by the settlee two years prior to the death of the settlor. Before considering the aforesaid contentions, it would be necessary to notice the provisions in the deed of settlement executed on February 15, 1942, by the deceased in favour of his son. The following clauses are found therein : "Now, this deed of settlement witnesseth that the settlor hereby gives and grants to and up to the settlee/upon the settlee from after the lifetime of the settlor a life interest in the immovable properties mentioned and described in the schedule hereunder written to have and to hold the same for and during the lifetime of the settlee after the lifetime of the settlor ... And this deed of settlement further witnesseth that as the settlor has reserved in and for himself a life interest in the said properties described in the schedule hereunder written, the settlor shall and will be bound to pay regularly to the Government, Corporation of Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision has reference only to the payment of the amounts to the settlee consequent upon the relinquishment by the settlee of his interest in all the other immovable properties of the settlor and has no bearing upon the reservation of an interest in favour of the settlor. Even so, it is seen that the consequence of non-payment of this amount is also reflected, in that, the settlee will have a right of action against the settlor and the settlee shall also be entitled to a charge over the life interest of the settlor. This again is affirmative of the reservation of life interest in favour of the settlor, as there cannot be a charge over an interest stated to belong to the settlor, without a reservation or creation thereof in his favour. The other right, which had been conferred on the settlee, arising out of the non-payment of the monthly payment of Rs. 75 by the settlor is, that the settlor shall deliver possession of the properties to the settlee which will be adverted to later. It is thus seen from the very recitals in the settlement deed, referred to earlier, that the settlor had, in clear and unmistakable terms, retained a life interest in himself and after his lifetime, conferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlor. It is important to note that the applicability of section 12(1) of the Act had not been disputed at all before the Tribunal. Even on the assumption that the accountable person did so, on the terms of the settlement deed referred to above, the conclusion is irresistible that section 12(1) of the Act stood attracted. We may also usefully refer in this connection to the decision in T. A. Devaki Ammal v. CED [1978] 111 ITR 403 (Mad) and Trustees of H. E. H. The Nizam's Pilgrimage Money Trust v. CED [1985] 153 ITR 496 (AP). In the former case, it has been pointed out that though normally, any property passing under a settlement passes from the settlor to the settlee when the settlement deed comes into effect, section 12 of the Act constitutes a special provision to cover a case where, under a settlement, the settlor reserves to himself a life interest and in such a case, section 12 creates a fiction by providing that the property should be deemed to pass on the settlor's death. Likewise, in the latter case, it has been held that it would be a reservation of an interest within the meaning of section 12(1) of the Act when the settlor could require the trustees to defray expenses, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlor in that suit. The suit was dismissed as withdrawn on September 27, 1951, as could be seen from annexure "D". There is nothing to show the terms upon which the suit instituted in C. S. No. 423 of 1950 was dismissed as withdrawn. Therefore, the institution of C, S. No. 423 of 1950 relied on by the Tribunal cannot establish the surrender of the interest reserved by the settlor in the properties under the settlement deed or the exclusion of the settlor by the accountable person and enjoyment of the properties by him two years prior to the death of the settlor on June 4, 1958. The first circumstance has, therefore, been rightly characterised by learned counsel for the Revenue as an irrelevant circumstance. The second circumstance on which reliance has been placed by the Tribunal is that one of the properties comprised in the settlement deed had been leased out by the accountable person, by a lease deed dated January 1, 1953, for a sum of Rs. 200. An affidavit dated June 24, 1970, to the effect that the property was leased out by him in 1953 was also relied on by the Tribunal. If there was a lease deed on January 1, 1953, executed by Kannappa Gramani in favour of the accountable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the settlor in C. S. No. 57 of 1957, in paragraph 6, the settlor had accepted that two items, viz., items Nos. 4 and 10, were allowed to be taken by the accountable person and Sivabooshanam Gramani, respectively, under the settlement deeds. The obvious reference is to those two items of properties having been dealt with under the settlement deed in favour of the accountable person and another and, therefore, not available for partition. That stand so taken cannot be construed to be an acceptance by the settlor of the surrender of possession of the properties covered by the settlement deed to the settlee two years prior to the date of death of the settlor, viz., June 4, 1956. None of the circumstances relied on by the Tribunal would assist the accountable person to establish that the properties dealt with under the settlement deed, in which the settlor had reserved a life interest in himself, could be deemed to pass, owing to the surrender of that right by the settlor or the enjoyment of those properties by the settlee to the exclusion of the settlor, two years prior to the date of death of the settlor. We are constrained to observe that the finding arrived at by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlor or for enforcing the charge on the life interest of the settlor. The provision for yielding up possession of the properties to the settlee by the settlor, for the non-payment of a sum of Rs. 75 per mensem, cannot be construed to operate by itself, as a surrender of interests in the absence of any action taken by the settlee in that regard and proof of factual surrender. Inasmuch as under the terms of the settlement deed, the settlor had expressly reserved in himself an interest in the properties for his life, the extinction or cessation of such an interest could be brought about only by the execution of a properly executed document by the settlor and duly registered. We, therefore, hold that the default of payment of Rs. 75 per mensem would not per se lead to the surrender of the interest reserved in favour of the settlor and that a proper document would also be necessary to evidence the surrender of the rights two years prior to the death of the settlor. We, therefore, answer the second question referred to us also in the negative and in favour of the Revenue. The Revenue I be entitled to the costs of this reference. Counsel's fee Rs. 500. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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