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TMI Blog1980 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate the questions before us, it is necessary to state that the dispute about the assessability under estate duty arose due to the death of one Kumargangadhar Bagla (hereinafter referred to as "the deceased ") on September 20, 1964. The father of the deceased, late Raja Shew Bux Bagla, by a deed dated January 11, 1888, dedicated the properties situated at No. 41, Cotton Street, Calcutta, and Bisweswar Phatak, Varanasi, to Sri Satyanarayan Jew and other deities, appointing him as the sole shebait and trustee. It is instructive, to appreciate the controversy, to refer to certain parts of the said document. After reciting the necessary facts, the document provides as follows: "Whereas the said Shewbux Bagla is desirous of severing for ever the said houses at Calcutta and Benaras and the said articles and furniture from all secular purposes and concerns and of converting the same into absolute debuttar property and limitation reservation or restraint and whereas the expenses of the said Sheva or worship and for the maintenance of the said Chutter at the scale at which they are now performed and worked being considerably larger than the income derived or derivable from the said hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power and liberty to the said shebait or shebaits to set apart and accumulate such portion of the said income as the said shebait or shebaits shall in his or their discretion shall think fit in order to create a reserve fund therein against any sudden emergency or unforeseen accident in connection with or concerning or relating to the said house and premises or to keep up and maintain the sheba or worship of the said idols in a regular or systematic mode and manner as hereinafter prescribed ...... .." The deed provides for the different pujas and celebrations and thereafter provides, inter alia, as follows: ".. ...... Sree Sree Suttyanarainjee such funded property investment or money shall be deemed taken or-considered to all intents and purposes as Debuttar property and for ever absolutely and completely severed from the secular properties of the said Shewbux Bagla his heirs representatives or assigns or the descendants of any or either of them and shall be absolutely and completely subject to the provisions limitations and reservations of these presents and dealt with accordingly provided always the discretion hereinbefore reserved to the shebait or shabaits for the time b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se presents it shall be lawful for the eldest male descendants or representative or next of kin of the said Shewbux Bagla or if there be no such female next of kin then for the retiring or refusing shebait or the male nearest of him of the last acting shebait to constitute or appoint not shebait or shebaits in the place of the shebait or shebaits dying going to reside abroad or desiring to retire or refusing or becoming incapable to act as aforesaid with liberty upon any such appointment to increase or diminish the number of shebaits and upon every such succession or appointment the hereditments and premises and all additional properties hereby dedicated consecrated settled secured and consigned or which shall be hereafter dedicated consecrated settled assured and consigned under the provisons of these presents shall be so transferred or stand transferred as to become vested in the said shebait or shebaits as the case may require and ...... .." The deed concludes at p. 23 providing as follows: ".. ...... Provided and it is hereby agreed and declared that the heirs and descendants of the said Shewbux Bagla or any or either of them shall have full power to increase and schale(? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereditaments and premises hereby granted or expressed so to be unto and to the use of the said purchaser his heirs and successors in manner aforesaid. And the said purchaser his heirs and successors-in-office shall and may at all times hereafter peaceably and quietly possess and enjoy the said hereditaments and premises and receive the rents issues and profits thereof without any lawful eviction interruption claim or demand whatsoever from or by the said vendors or any person or persons lawfully or equitably claiming from under or in trust for them And that free from all encumbrances whatsoever made or suffered by the vendors or any person or persons lawfully or equitably claiming as aforesaid and Further that they the said vendors and all persons having or lawfully or equitably claiming any estate or interest in the said hereditaments and premises or any of them or any part thereof from under or in trust for them the said vendors or any of them shall and will from time to time and at all times hereafter at the request and cost of the said purchaser his heirs and successors-in-office do and execute or cause to be done and executed all such acts deeds and things whatsoever for furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same rights of free worship and free privilege or partaking and enjoying the ceremonies and festivals not repugnant to the Baistab faith and to avail of the accommodation and refreshments afforded or yielded by the auxiliary or subservient institution at Howrah mentioned and described aforesaid and which is hereby declared to be a part and parcel and forms a member of the said principal institution or temple of the said deity at No. 61, Cotton Street Provided further that the endowment or gift to the deities hereby and by the said several indentures dedicated or consecrated and the issue and profits thereof including Veti, Brith, and Chanda, Pranami and Darsani to be recovered in connection with the said deities shall be considered deemed and taken as public endowment or debutter in which the Hindu community at large and following the Baistab faith shall have a full free and unfettered right of worship without any obstruction opposition or interruption by the said Raja Shewbux Bagla his heirs representatives or by the shebait or shebaits for the time being or their successors in office appointed under the provisions of the said recited indenture of the 11th day of January 188 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of the said Raja Shewbux Bagla his heirs and representatives ........" During his lifetime the said Raja Shewbux Bagla and the member of his family used to reside in a portion of the Mukhram property. Before his death on October 5, 1908, by a deed dated July 11, 1907, the said Raja Shewbux Bagla appointed his wife, Rani Mohari Bibi and his son, the deceased, as joint shebaits and/or trustees for all the aforesaid properties. Rani Mohari Bibi died on June 5, 1910, and from that date onwards the deceased became the sole shebait and/or trustee of the aforesaid three properties. The deceased and the members of his family continued to reside in the said Mukhram property. The deceased died, as mentioned hereinbefore, on September 20, 1964. During the course of assessment proceedings, the question arose about the assessability of the privilege of the right of residence of the deceased to be included in the value of the property to be taxed as estate duty under the E.D. Act. The Assistant Controller of E.D. came to the conclusion that shebaitship was a right and the value of such right had to be included in the principal value of the estate left by the deceased for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being representing the proceeds of sale and also includes any property converted from one species into another by any method. Explanation 1-The creation by a person or with his consent of a debt or other right enforceable against him personally or against property which he was or might become competent to dispose of, or to charge or burden for his own benefit, shall be deemed to have been a disposition made by that person, and in relation to such a disposition the expression`property' shall include the debt or right created. Explanation 2.-The extinguishment at the expense of the deceased of a debt or other right shall be deemed to have been a disposition made by the deceased in favour of the person for whose benefit the debt or right was extinguished, and in relation to such a disposition the expression 'property' shall include the benefit conferred by the extinguishment of the debtor right. " Section 5 on the basis of which duty has been imposed in this case is important and s. 5(1) is relevant for our purpose. It provides as follows: " 5. (1) In the case of every person dying after the commencement of this Act, there shall, save as hereinafter expressly provided, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of Rs. 1 lakh from the computation of the value of the property upon which duty is leviable. The main question, as we have mentioned before, is whether any property as contemplated under s. 2(15) of the E.D. Act read with s. 5 of the Act has passed on the death of the deceased., This naturally brings us to the question as to whether the residence which the deceased had along with the members of his family in a portion of the debuttar property is a right which comes within the purview of property which passes on the death of the deceased. Now, in our opinion, it is not necessary to go into the broad question as to whether shebaitee is a right or property which is heritable on death, which is a question upon which and upon which only the Tribunal seems to have proceeded. We are not concerned with the general question of whether shebaitee as such is a right or a property which passes on the death to the next incumbent. This problem must be examined, in view of the provisions in Hindu law, in the background of the facts and circumstances and the intention of the parties as envisaged in the documents and the conduct of the parties thereafter. About the nature of shebaitee, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al sense of mal-administrator." In the same book at page 157, the learned author has noted that in the conception of shebaitship both the elements of office and property, of duties and personal interest are mixed up and blended together. Undoubtedly the duties of a shebait are to be regarded as the primary thing whereas the emoluments or beneficial interest enjoyed by him are only appurtenant to the said deities (see in this connection Nagendra Nath v. Rabindra Nath [1926] 30 CWN 389; AIR 1926 Cal 490). Neither of these elements, however, can be detached from the other, and in dealing with the law relating to the rights and obligations of the shebait, both these elements would have to be kept in view. For our present purpose, it is, therefore, important to remember that emoluments, if there be any, or beneficial interest, if there be any, enjoyed by the shebait are only appurtenant to the duties to be performed by the shebait and one cannot be detached from the other. In this connection, Dr. B. K. Mukherjee has referred to the observations of Lord Hobhouse in the case of Gossamee Sri Gridhariji v. Romanlalji Gossami [1889] LR 16 IA 137; ILR 17 Cal 3 (PC). Shebaitee right i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion were held by the shebait, which were supposed to have passed on the death of the deceased, as mere holder of office and, therefore, were not exigible to duty. In respect of property there cannot be two legal owners. The premises in question cannot belong to two separate and independent legal owners apart from the question of joint owners juristically speaking, either the property belongs to the deity or the legal title belongs to the trustee. Now, the expression " trustee " or " to bold it in trust " in the English law conveys as it does under the Indian Trusts Act that the legal title to the property vests in the trustee. But the Hindu law says that when there is a complete and absolute dedication, the legal title vests in the deity. Therefore, the expression " trustee " must be construed to have been used in the sense that the shebaits purchasing the property or performing the duties of shebait would act and perform as a trustee, that is to say, for the benefit of and on account of the deity as the human ministrant of the spiritual divine who cannot act in the temporal matters, but must act through the human agency. For action for the spiritual divine by human agency the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise the contention that the Hindus have been given access to the entire dedicated property and the shebait had been prevented from making any use of the property for the secular purposes. He, therefore, emphasised that where there is an express exclusion of the right of residence, the right of residence which normally follows the right of a shebait will not be attracted in this case. It is true that in this case access to the entirety of the dedicated property has been given to the Hindus of all communities. It is also true that the secular use of the premises of the dedicated property by the shebait had been prohibited by the express terms used in the deed. But from this, it does not follow that there is either an express prohibition of any right of residence of the shebait or the general principles had been excluded. In this connection, it has to be stated that learned advocate for the accountable person emphasised, and emphasised greatly, to bear in mind the use of the expression trustee. We find neither any express prohibition for the shebait residing in the dedicated property nor any such prohibition by necessary implication thereof. But then the main question which still rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue to the Finance Act of 1894 of England which dealt with the estate duty in Part I of the said Act and provided in terms more or less similar to s. 5(1) of the Act. That section is set out hereunder: " 1. In the case of every person dying after the commencement of this Part of this Act, there shall, save as hereinafter expressly provided, be levied and paid, upon the principal value ascertained as hereinafter provided of all property, real or personal, settled or not settled, which passes on the death of such person a duty, called 'Estate Duty' at the graduated rates hereinafter mentioned and the existing duties mentioned in the First Schedule to this Act shall not be levied in respect of property chargeable with such Estate Duty." This provision, came up for consideration before the House of Lords in the case of Scott v. IRC [1936] 3 All ER 752; 2 EDC 579. The question in dispute in that case was whether estate duty became payable on the death of the sixth Earl Cadogan in respect of property comprised in two settlements which were executed respectively on 26th and 27th July, 1889. By these two settlements dated July, 1889, certain estates were settled to the use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was passing of property on death. In that case, there was certainly a passing on death because though the benefit of the property accrued to the same person both before and after, the nature of benefit, that is to say, the tenant in tail in possession attached on discretionary trust changed, a change which was occasioned by the death. Such a controversy has not arisen or fall for our consideration in the instant case. We must also refer to the decision in the case of Khatizabai Mohomed Ibrahim v. CED [1959] 37 ITR (ED) 53 (Bom). There, the Division Bench of the Bombay High Court dealt with a deed of Wakf-al-aulad. By that deed, the settlor had created a wakf of certain immovable properties and a sum of Rs. 1 lakh under which the ultimate benefit to charity was postponed until the extinction of the descendants of the settlor. The settlor reserved for her maintenance during her lifetime 62 1/2 per cent. of the net income of the immovable properties and directed that 3 1/8 per cent. of the income was to be given to her daughter for her maintenance and the remaining 34 3/8 per cent. for her daughter's children in certain specified shares. After the death of the settlor 121 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residence in one of the properties even then, in law, be would have deemed to have retained some beneficial interest in the property dedicated to the deity and such retention of interest would have the effect that the dedicated property would be deemed to be the properties which passed on his death. It is, however, to be borne in mind that that decision was rendered in the context of the controversy that, on the original settlor dying, as to whether s. 10 of the E.D, Act, which we have set out hereinbefore, was attracted or not, whether while making an original settlement, the original settlor by having a right of residence either by express terms or by necessary implication retained the beneficial interest, it could be said to pass on his death, a question which does not fall for our consideration, because in this case we are not concerned with the controversy of the property passing on the death of the original settlor or original dedicator. This question might or might not have arisen on the death of Raja Shewbux Bagla. But we are concerned with the subsequent shebaits dwelling in the dedicated properties for the performance of the duties of shebaits and that right or privilege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the original settlor, for the purpose of performance, whether such a right or privilege can be termed to be the property passing on the death under s. 5 of the Act read with s. 2(15) of the Act did not fall for consideration before the Division Bench. The next decision to which we must refer is the decision of the Patna High Court in the case of Mahanth Umesh Narain Puri v. CED [1970] 75 ITR 310, where the court held that where the property was not within the disposing capacity of the deceased holder of the estate, no estate duty could be levied on such property in the hands of any one who succeeded to such property. The properties of the Math which were vested in and managed by the Mahant were in the nature of a private trust to which s. 22 of the Indian E.D. Act would be applicable. The Mahant did not have powers of disposal over such properties under s. 6 of the Act on the death of the Mahant which might not be deemed to have passed on to the successor. Such property was, therefore, not liable to estate duty under the Act. Here again, the controversy was a little different and though, for example, Dr. Mukherjee, as we have noticed in the lecture, had treated the Mahant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the muafi grant held by the deceased, N, was a property as it gave a right to a sum of money, but it was held by the deceased, N, for his life only and did not " pass " on his death within the meaning of s. 5(1) of the E.D. Act. Since the jaghir was normally for the lifetime of the holder and lapses on his death, the burden was on the revenue to produce material to show that the grant was heritable. The Division Bench of the Madhya Pradesh High Court further held that the word " passes " as it occurs in s. 5(1) of the Act means " changes hands ". As the muafi lapses on the death of N, it did not pass on his death. In this case, even if the right of dwelling or right of residence be property which a shebait can enjoy and does enjoy even if there is no specific grant in his favour in the deed of endowment and the office of shebaitship is heritable as a property passing on his death, the next incumbent enjoys the right or the privilege of dwelling in the debuttar property not qua the successor of the last holder, but qua shebait for the performance of his temporal duties to the deity. It is the right to be the shebait that is heritable, but the right of residence is given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the puja and worship of the deities in his absence. Clause I of the trust deed provided that one-fourth of the net income, after defraying expenses for taxes, repairs, etc., should be spent for preserving the houses included in the trust estate and for litigation charges. Clause 2 provided that one-half of the surplus income left, less one-fourth, of the said income should be spent for puja and the worship of deities, sradhs, etc., entirely for religious work. Clause 3 provided that the trustees would be competent to spend the remaining one-half in accordance with the procedure laid down by themselves, like payment of remuneration at Rs. 25 per month to the trustees defraying the joint family expenses, payments to servants, maintenance of carriages and car, etc. The remaining directions were for meeting the expenses on account of the marriages of the daughters, provision for maintenance of any daugther-in-law in the settlor's line who might become childless widows, etc. The Dy. Controller held that the provisions of the trust were such as to keep the properties tied up in perpetuity without any power of alienation and that since the purpose for which the trust was created was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shebaits in this case. Therefore, it was only the requirement for the purpose of performance of the duties to the deities. We must, however, observe that this decision went up in appeal and the decision was reversed on appeal by the Supreme Court. In this connection, reference may be made to the decision of the Supreme Court in the case of CED v. Usha Kumar [1980] 121 ITR 735. There, the Supreme Court held that the portion of the income from the trust properties which had been directed to be used for religious purposes could reasonably be taken to be one-half of the total income, and the remaining one-half was permitted to be used by the trustees for the purpose of defraying the joint family expenses, etc. The dominant intention of the author in creating the trust was to benefit the members of the family and to see that the properties were not alienated by them for ever. There was only a partial dedication for religious purposes and, therefore, the properties retained their private and secular character and were only subject to a charge for religious purposes. The provision for the benefit of the trustee and other heirs and relatives failed as it was hit by the rule against pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the will clearly stated that the revenues and rents of stated properties were to be applied in certain manner, with a direction for accumulation of surplus income, and then continued with a provision that out of the income of such fund the shebait should have power to celebrate religious ceremonies, the words cc such fund" included the added accumulations and was not confined to the original debuttar fund. The decisions which assigned a particular meaning to any word in a will only assigned that meaning in connection with the terms of the will and that meaning was always capable of modification and alteration if it be seen that the limited meaning was not intended. At p. 1030 of the report, the judicial Committee reiterated that gift is only a perfectly reasonable arrangement to secure that the man in whose hands the supervision of the whole estate was vested should have " associated with his duties the right to reside in the named dwelling place ". Therefore, the right or the privilege of residing for his family is only associated with the duties to be performed by a shebait, according to the judicial Committee. In the case of Profulla Chorone Requite v. Satya Chorone Requitte, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specified shares, although when one beneficiary died the total income was divided among the survivors or survivor. The income was directed to be paid to A or expressed to be given to him in respect of acting as executor and trustee by way of remuneration for his so doing. At the time of his death, A was receiving 6/99ths of the income of the residuary estate and the estate duty was claimed on 6/99th of the capital of the fund under s. 1 of the Finance Act of 1894. It was not disputed that a proportion of the capital passed on A's death within the meaning of s. 1 of the Act of 1894, but it was contended by the trustee that the claim was precluded by virtue of s. 2(1)(b) of the Act, which is similar to s. 7(4) of our present Act, which excluded certain properties from the properties deemed by s. 2(1)(b) to be included in the property passing on the death of the deceased. It was held that the property passing on the death of A was excluded from charge to estate duty by the words of exception under s. 2(1)(b) of the Finance Act. If we hold, as we are inclined to hold, that in the facts and circumstances of the case the privilege that was given for dwelling in the property was only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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