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TMI Blog1998 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... any interest within the meaning of section 12 was retained by the settlor in the settled property for life or any other period determinable by reference to his death. Hence, section 12(1) is not attracted. In favour of appellant X X X X Extracts X X X X X X X X Extracts X X X X ..... in the estate of the deceased. The present appeal has been preferred before us under a certificate granted by the High Court. Considerable arguments were advanced before the High Court on the question whether a property settled on trust, as in the present case comes within the definition of "settled property" under section 2(19) of the Estate Duty Act, 1953. The High Court has held in the affirmative. There is no dispute before us that the property which is the subject-matter of the trust in the present case can be considered as settled property as defined in section 2(19). The first question is, whether section 10 of the Estate Duty Act, 1953, is attracted in the present case. Section 10 is as follows : "10. Gifts whenever made where donor not entirely excluded.---Property taken under any gift, whenever made shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise : Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him by contract or otherwise, for at least two years before his death : Provided further......... Explanation.---A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in section 27) shall be deemed to reserve an interest for himself within the meaning of this section. (2)..........." In the present case under the settlement the property has been transferred absolutely to the trustees. However, under clause 3 of the settlement, the trustees are directed, during the lifetime of the settlor, to defray the expenses of Haj of the settlor and all such members of his family who may accompany him on pilgrimage to various Mohammaden Shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending money for charitable purposes. The said clause also provides for expending income as well as part of the corpus of the trust fund for religious and charitable purposes as the settlor may direct. Can this be considered as the settlor retaining interest in the settled property for life or any other period determinable by reference to his death? The Explanation to section 12 expressly provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case that the beneficiaries became entitled to the properties settled on them after the death of the deceased. There is no support for the contention of the Revenue that an interest in the properties settled was reserved to the deceased during his lifetime or for any period after the properties were settled; nor is there any provision in the deeds enabling the deceased to reclaim the property or its possession under any circumstances. None of the conditions laid down in section 12(1) are attracted to the provisions contained in the deeds of settlement." On the applicability of section 10, the court considered whether the donor had retained in the property gifted, any benefit to himself by contract or otherwise. The court said that the deceased should be entirely excluded from the property or from any benefit by contract or otherwise. The provisions for annual payments and maintenance made in the deeds were not charged on the properties settled. Hence, the deceased could not be said to have retained any interest in the properties settled. Therefore, section 10 was not applicable. In the present case, the deceased has not retained any benefit to himself. As we have set out already, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different. In that case, no interest passes on the death of a Mahant duly elected, and section 12 is not attracted. But the case of a settlor who himself endows property to an idol and constitutes himself as shebait is obviously different. The court, however, did not finally pronounce on the effect of reservation of shebaitship by a settlor in the context of section 12(1). In the English cases which have been referred to in the said judgment, the settlors had reserved a benefit to themselves, their wives or children in the income of the settled property for their maintenance. The English court observed that this amounted to an interest in the settled property. The Explanation to section 12 expressly takes care of such a situation by providing that a settlor reserving a right to receive maintenance for himself or any of his relatives from the settled property or its income shall be deemed to reserve an interest in the settled property for himself within the meaning of that section. Any other kind of an indirect benefit to the settlor under the trust in certain eventualities will not amount to reservation of an interest in the settled property by the settlor for himself. In the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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