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TMI Blog1976 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... uty Controller found that the deceased had an interest under a trust settlement made by His late Highness Sir Sayaji Rao Gaekwar, Maharaja of Baroda, which had not been accounted for. He called upon the official trustee, Bombay (who was the trustee of the settlement), as the accountable person to furnish the necessary account which he did under protest, denying any liability to pay estate duty in respect of this item. The material facts relating to this trust settlement which gave rise to an order made by the Deputy Controller under s. 11 and, alternatively under s. 7. of the E. D. Act, may be stated. By a deed of settlement dated 1st April, 1905, H.H. Sir Sayaji Rao Gaekwar, the then Maharaja of Baroda, created a trust called " Royal Family Trust ". The provisions of this deed were varied from time to time. By a deed of variation dated 13th April, 1928, the settlor directed the trustees to hold in trust absolutely 1/4th part of the trust funds for the person " who shall, on the death of the settlor, succeed to the gadi of the Gaekwars " and to hold the balance (3/4ths) for the other specified purposes and trusts. Accordingly, 1/4th of the trust funds (which in aggregate amounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the foregoing trusts concerning any share of the said trust funds (and subject to the provisions regarding the vesting absolutely in the descendants so as not to offend against the law of perpetuity (as provided in the trust settlement of 1905) the trustees shall hold the same share in trust absolutely for the person who at the date of such failure or determination shall occupy the gadi of the Gaekwars of Baroda. " In other words, the deceased under cl. 4 was entitled to receive 1/3rd share of the income of the trust funds daring her lifetime and either upon her death or earlier determination of her interest, the trustees were to hold the same in trust absolutely for the person who at the date of such determination shall occupy the gadi of the Gaekwars of Baroda, The settlor died some time in 1939, and thereafter one of his sons, Fatehsingh, occupied the gadi of the Gaekwars of Baroda. After the merger of the State of Baroda with the Indian Union, some difficulties were experienced in the matter of administration of the trust. The beneficiaries also desired that the corpus of the trust fund should be distributed amongst them and, therefore, they approached the Bombay Goverment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Her late Higness Maharani Chimnabai Gaekwar) within the meaning of s. 11 of the Estate Duty Act and since the case was not covered by the exception provided in sub-s. (2), 1/3rd share of the trust property should be deemed to pass on the death of the deceased and he accordingly included the value thereof, viz., Rs. 20,85,649, in the principal value of the estate which he determined at Rs. 30,59,025. Alternatively, he took the view that there was a cesser of life interest within the meaning of s. 7 of the E.D. Act on the death of the deceased and even on that basis 1/3rd share of the trust property was includible in the principal value of the estate on which the estate duty was charged. Against this order passed by the Deputy Controller on November 28, 1959, the administrators as well as the official trustee, Bombay, preferred appeals to the Board objecting, inter alia, to the inclusion in the assessment of the said sum of Rs. 20,85,649 representing the value of the share of the deceased in the trust settlement created by his late Highness Sir Sayaji Rao Gaekwar. A three-fold contention was urged on behalf of the administrators before the Board. In the first place, it was urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust funds up to March 30, 1957, and after March 31, 1957, she ceased to have any interest in the income of the trust funds as under s. 7 of the Act the official trustee had to transfer absolutely certain specified shares in the corpus to certain named beneficiaries, the deceased not being one of them and under s. 9(2) till such distribution of the corpus took place the official trustee was to hand over the income to such beneficiaries. It was also not disputed before us that though the aforesaid position obtained as per the provisions of the Bombay Act, in point of fact even after March 31, 1957, the deceased continued to enjoy 1/3rd share in the income of the trust funds till her death which occurred on August 23, 1958. But the position cannot be disputed that under the provisions of the Bombay Act her life interest came to an end on and after March 31, 1957. The question is whether, in such circumstances, the provisions of s. 11 of the E. D. Act, 1953, are attracted or not. Section 11(1), which is the material part of the said provision, runs as follows ; 11. Limited interests disposed of within a certain period before death. --(1) Subject to the provisions of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een disposed of or determined by any voluntary act on the part of the deceased but her life interest got determined by reason of passing of the Bombay Act, viz., " The Royal Family (Baroda) Trust Fund (Repealing) Act, 1956. " In support of his said contention he placed strong reliance upon the words " whether by surrender, assurance, divesting, forfeiture or in any other manner " occurring in s. 11(1) of the Act and he urged that the expression " in any other manner " should be construed ejusdem generis with the specific words that pre cede that expression and, according to him, the preceding specific words, viz., surrender, assurance, divesting and forfeiture clearly suggest that disposition or determination of life interest must be as a result of some voluntary act on the part of a life tenant. According to him, these specific words constitute one genus, the common denominator being the transaction brought about by the voluntary act of the person concerned. He urged that even the word " divesting " or the word " forfeiture " would only refer to something done by the person concerned as a result of which either divesting or forfeiture took place. He, therefore, urged that the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. In fact, by using four different words, each one having a different connotation, the legislature could be said to have clearly intended that s. 11(1) would apply to a cage where the life interest has been disposed of or has determined in any one of the methods specifically indicated by these words, viz., by surrender, assurance, divesting or forfeiture or " in any other manner ", such as the manner in which it has got determined in the instant case, namely, by reason of the passing of an enactment like the Bombay Act. Secondly, it is true that the object of putting s. 11 (1) on the statute book was undoubtedly to plug loopholes of the nature pointed out by Mr. Dastur in his argument, namely, that the estate duty chargeable on the passing of property upon cesser of the life interest of a life tenant should not be allowed to escape by the life tenant resorting to a simple device of voluntarily cutting short his life interest by means of a deed of surrender but that is no reason for holding that the legislature did not want to ensure the charge in cases where such life interest has been either disposed of or has determined otherwise than by voluntary act on the part of the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the deeds as well as under the provisions of the Baroda enactment such interest was unquestionably to cease upon the death of the deceased. That it was liable to be revoked by the settlor exercising his powers under the deeds or under s. 3 of the Baroda enactment would not make it any the less " an interest limited to cease on her death ". It is, therefore, not possible to accept this contention of Mr. Dastur. Reliance was placed by Mr. Dastur in support of his aforesaid contention upon the provisions of the U.K. Finance Act, 1940, where by an interpretation clause specific inclusive provision has been made. Section 11 of our enactment is completely based on s. 43 of the U.K. Finance Act, 1940, and the wording of both the provisions is identical and s. 58 of the U.K. ,Finance Act, 1940, is by way of interpretation clause and sets out various definitions and sub-s. (6) of s. 58 runs thus : " References in the enactments relating to estate duty (including this Part of this Act) to an interest's being limited to cease on a death shall be construed as including references to its being subject to a limitation, in whatsoever form, having the effect of providing in the alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature when it enacted s. 11 of the Act. Having regard to the above discussion, we are clearly of the view that s.11 (1) is attracted to the facts of the case and the value of 1/3rd share of the trust property has been correctly brought to charge to estate duty under the said provision. The alternative submission of Mr. Dastur was that even if s. 11 were held to apply to the facts of the case, the exemption provided for in s. 24(1) would come into operation and as such estate duty would not be chargeable. Section 24(1) deals with the subject of property reverting to disponer and it runs as follows : " 24. Property reverting to disponer. --(1) Where by a disposition of any property an interest is conferred on any person, other than the disponer, for the life of such person or determinable on his death, the remainder being conferred upon the disponer absolutely, and such person enters into possession of the interest, and thenceforward retains possession of it, then, on the death of such person, the property shall not be deemed to pass by reason only of its reverter to the disponer in his lifetime. " It is difficult to appreciate how the provisions of s. 24(1) are at all attr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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