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TMI Blog1986 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing investments after meeting all outgoings including taxes, the expenses for maintenance of the family of the settlor, viz., the surviving trustee, the four sons of the settlor, viz., Nanilal Roy, Rangalal Roy, Kshirode Lal Roy and Jaladhilal Roy, and their wives and children and the grandchildren and the great grandchildren and the grandsons in the male line; (b) The surviving trustee would spend amounts in her discretion to carry on the seba of a Deity Sri Sri Lachminarayan Thakur installed at Bhagyakul; (c) The surviving trustee was empowered to spend amounts for the marriage expenses of the members of the family of the settlor including daughters and grand-daughters in the male line ; (d) All expenses of the children and grandchildren in the male line were directed to be borne by the surviving trustee from the income of the trust including expenses for education abroad; (e) The surviving trustee was directed to bear the expenses of the education of Jaladhilal Roy, the youngest son of the settlor, abroad to the extent of Rs. 600 per month ; (f) The surviving trustee was directed to satisfy and settle the legitimate debts and dues of Rangalal Roy, the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and determine save and except that out of the properties both movable and immovable then existing, the said Rangalal Roy would upon her death be paid a sum of Rs. 50,000. Clause 17 : " Subject to the aforesaid trusts, all the unexhausted residue of the trust estate both movable and immovable and the equitable and beneficial interest therein would vest in equal shares in the settlor's said four sons, Nanilal Roy, Rangalal Roy, Kshirode Lal Roy and Jaladhilal Roy, absolutely and for ever and be their absolute property for ever." Nundalal Roy, the settlor, died on August 5, 1930. After the death of Nundalal, Shyamrangini Roy Chowdhurani continued as the surviving trustee. During her period of trusteeship, Jaladhilal Roy, the youngest son of the settlor, died. On September 19, 1940, Shyamrangini Roy Chowdhurani, the surviving trustee, executed two deeds. By the first deed, Shyamrangini Roy Chowdhurani, the surviving trustee, relinquished her share in the estate of Jaladhilal which devolved on her, in favour of her three remaining sons including the beneficial interest under the said deed dated September 12, 1929. On the same day, another deed was executed by Shyamrangini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three surviving sons, Nanilal, Rangalal and Kshirode Lal. On September 7, 1965, Rangalal Roy died. On the death of Rangalal Roy, his estate was assessed to estate duty. A claim was made by the accountable person that 1/3rd of the amount of Rs. 3,50,000 for which a charge had been created over the properties should be excluded from the estate. The Assistant Controller of Estate Duty rejected the claim of the accountable person and held that under section 44A of the Estate Duty Act, 1953, the claim that the said amount should not be included was not tenable. In respect of the debt created in favour of the trust fund, the deceased had made a disposition of his own interest to the extent of 1/3rd of Rs. 3,50,000, viz., Rs. 1,16,666.67. There was no consideration in money or money's worth for the debt and the debt was not wholly for the own use and benefit of the deceased. Being aggrieved, the accountable person preferred an appeal to the Appellate Controller of Estate Duty. The Appellate Controller upheld the decision of the Assistant Controller. The Appellate Controller held that in order to be allowed deduction in the computation of estate duty, a basic requirement was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be allowed. It was also contended that in the deed of relinquishment it was recorded that the relinquishment was made in consideration of a charitable disposition for a hospital. Relying on clause 14 of the original deed dated September 12, 1929, it was submitted that Shyamrangini had been prohibited from making any gift or gratuitous transfer and, therefore, in any event, the trust and the charge created were invalid. It was contended in reply on behalf of the accountable person that under the deed dated September 19, 1940, no gift or gratuitous transfer was made but the said deed resulted in an alienation which was at the most an avoidable transaction at the instance of the persons affected. The Tribunal noted the contents and the clauses of the deed of settlement dated September 12, 1929, including clauses 11 and 14 thereof as also the provisions of the deed dated September 19, 1940. The Tribunal found that in the deed of endowment dated September 19, 1940, it was mentioned that the hospital was being set up for perpetuating the memory of Nundalal which was also the last wish of Jaladhilal. Under the trust deed dated September 12, 1929, Shyamrangini was entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiesced in the same and were not in a position to avoid the transaction. The validity of the charge created by Shyamrangini was not affected by a mere possibility of an action by the sons which could not affect the validity of the transaction at the relevant time. The Tribunal also noted that it was on record in the wealth-tax assessment that under the endowment of 1940, land had been acquired for the purpose of putting up a charitable hospital. On an application by the Revenue under section 64(1) of the Estate Duty Act, 1953, the following question has been referred by the Tribunal as question of law arising out of this order for the opinion of this court : " Whether, on the facts and in the circumstances of the case and on a proper interpretation of the trust deed dated September 12, 1929, and the trust deed dated September 19, 1940, the Tribunal was justified in law in directing the deduction of Rs. 1,16,667 and holding that section 44(a) was not attracted ? " This is the subject-matter of the above Reference No. 311 of 1974. On an application by the Revenue under section 64(3) of the Estate Duty Act, 1953, this court directed the Tribunal to refer also the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 100 of the Transfer of Property Act, 1882, which reads as follows : " Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge." The learned advocate also drew our attention to section 11 of the Indian Trusts Act, 1882, the material part whereof is as follows : Section 11 : The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract." The learned advocate for the Revenue contended that Rangalal, the deceased, was a party to the deed of endowment dated September 19, 1940, and to the charge or encumbrance created by the said deed and the disposition made thereby. Without the concurrence of her sons, Shyamrangini could not have made or effected the disposition or created the charge and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of property. It was held that partition in a Hindu undivided family could not be considered to be disposition within the meaning of the said section of the Gift-tax Act. The Supreme Court said that the word " disposition " should also be construed in a similar manner in section 24 of the Estate Duty Act. Two main questions fall for our determination in the above reference. The first question is whether the deceased, Rangalal, had any part to play in the creation of the endowment under the subsequent deed dated September 19, 1940. If we construe the said deed dated September 19, 1940, in the background of the original deed of settlement dated September 12, 1929, it would appear that the legal ownership of the trust property remained vested in the surviving trustee, Shyamrangini, as long as she was alive and it was she who could transfer or dispose of the property held under the said trusts. It also appears that the disposition by Shyamrangini under the deed of endowment dated September 19, 1940, was not with the consent of all the beneficiaries under the first deed of settlement. Apart from the sons, there were other beneficiaries who did not consent to the disposition in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Question No. 1 referred in Matter No. 632 of 1979 has also to be answered in the affirmative in view of our answer to the question in Matter No. 311 of 1974 and in favour of the accountable person. Question No. 2 referred in Matter No. 632 of 1979 is corrected as follows : " 2. Whether, on the facts and in the circumstances of the case, the disposition made by Smt. Shyamrangini Roy Chowdhurani of the sum of Rs. 5,00,000 under the indenture dated September 19, 1940, was void and, accordingly, the deduction of any part of the unpaid sum of Rs. 3,50,000 was not allowable in computing the value of the estate of the deceased ? " The said question is answered in the negative and in favour of the accountable person. Question No. 3 referred in Matter No. 632 of 1979 is answered as follows: By the indenture dated September 19, 1940, a valid debt and encumbrance were created to the extent of Rs. 1,16,667. We further state that section 44 of the Estate Duty Act, 1953, was not attracted to the facts of the case. The said debt was allowable otherwise in determining the value of the estate of the deceased. Question No. 3 is also answered in favour of the accountable person. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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