Holding

A settlement that includes any reservation of interest to the settlor, however small, brings the entire settled property within the ambit of Section 12(1) of the Estate Duty Act, even if the property does not satisfy the technical definition of ‘settled property’ under Section 2(19).

Summary

Satya Charan Srimani executed two trust deeds (1953 and 1959) transferring immovable property to himself and his son as trustees while reserving portions of the income for himself, his heirs and deities. After his death, the Estate Duty authorities questioned whether the properties were liable to tax under Section 12(1) of the Estate Duty Act. The Calcutta High Court held that the 1953 deed properties were dutiable but the 1959 deed properties were not, leading to cross‑appeals by the accountable person and the Deputy Controller. The Supreme Court examined the statutory definitions of "settlement" and "settled property" and ruled that any settlement that includes a reservation of interest to the settlor, however small, brings the entire property within Section 12(1), regardless of whether it meets the technical definition of settled property. Accordingly, both the 1953 and 1959 deed properties are dutiable, the revenue’s appeal is allowed and the accountable person’s appeal dismissed.

Issues considered

Whether the properties covered by the trust deeds of 21‑Sept‑1953 and 4‑Oct‑1959 constitute "settled property" within the meaning of Section 2(19) of the Estate Duty Act, 1953.
Whether Section 12(1) requires the property to be "settled property" as defined, or merely a settlement with a reservation of interest to the settlor suffices to attract the provision.
Whether only the share of the property corresponding to the reserved interest is subject to estate duty, or the whole property is deemed to pass on the settlor’s death.

Legislation cited

Estate Duty Act, 1953s. 12(1), s. 2(19), s. 64(1)

Subjects

Estate DutySection 12(1)Settled propertyTrust deedReservation of interestShebaitTaxationSuccessionStatutory interpretation

Judgment

DIPTI NARAYAN SRIMANI
A
v.
CONTROLLER OF ESTATE DUTY, WEST BENGAL

MAY 9, 1988

[R.S. PATHAK, CJ·AND M.N. VENKATACHALIAH, J.] B

Esta.le Duty Act, 1953-Section 12(1) Requirements of-Section
· 12(1) does not draw-upon the incidents and implications of "settled
property" for satisfaction of its requirements-Section 12(1)-Property
covered by settlement need not he "settled property" as defined in sec-
tion 2(19)-The incidents of "settled property" defined by sec. 2(19)
need not be incorporated into· the ingredients 'of sec. 12(1)-Require-
c
ments of Section 12(1) will be satisfied if there is settlement as defined
under 2nd Part of Sec. 2(19) rind if, there is reservation of an int~rest by
the sett/or in addition. -

Estate Duty Act, 1953-Section 2( 19)-Definition of Settled pro- D
- perties ·a7zd Settlement-What amounts to settlement is a
matter of
construction of the Deed-All settled property is subject matter of settle-
ment but all subject matter of settlement need not become settled
property-Settled property must be by way of succession. .

A person dnring his lifetime execnted trnst deeds, dated 21.9.53 E
and 4.10.1959 respectively. Under the Deed dated 21.9.1953 that
person as settlor, transferred upon trnst to himself as trustees four
items of immovable property. The objects and purposes of the trust
broadly stated were the conduct of the daily worship of the deity, ca.ry-
ing out of certain charitable acts and making of provisions for the mainte-
nance of the settlor and some other persons. The trustee was required F
after defraying taxes etc. to accumulate 1/4th of the net income to be
set-apart for purposes of effecting certain additions and alterations to the
properties; to make over another v.th of the net income to the shebait for
the conduct of the daily pooja; another I/4th for the charities and the
remaining I/4th for the personal benefit of the settlor during his lifetime
and to his heirs thereafter. Later on the share of the settlor was 'changed G
to 5/I6. Under the deed dated 4.IO.I959 the settlor transferred upon
trust to himself and his son, the appellant in Civil Appeal No. 946 of
I975, as trustees six other properties, almost for the same purposes and
kept a fixed share for the benefit of the settlor during his lifetime and
thereafter to his-heirs. In the proceedings of assessment to Estate Duty
the question arose whether the trust-deeds attracted and fell within- H
269
270 SUPREME COURT REPORTS [19881 Supp. 1 S.C.R.

A section 12( I) of the Estate Duty Act. The Deputy Controller of Estate
Duty, the Appellate Controller of Estate Duty· in.the first appeal and the
Income-tax Appellate Tribunal, Calcutta, in the set'ond appeal held that
the entire subject matter of the deeds must be held, or deemed, to pass on
death and the value of the properties should be included in the principal
B value of the Estate passing on death. At the instance of the accountable--
person, a reference was made to the High Court for opinion as to whether
the properties comprised in both the trust-deeds were dutiable under
section 12(1) of the Act. The High Court held that properties comprised
in the deed dated 21.9.1953 were settled property within the meaning of
section 2(19) and that section 12(1) was attracted. In relation to the
properties covered by the deed dated 4.10.1959, the High Court held that
c Section 12(1) was not applicable to them as they were not settled proper-
ties. Feeling aggrieved, both the accountable person and the Deputy
Controller of Estate Duty filed these cross appeals. Dismissing the appeal
of the accountable person, allowing that of the Revenue, and answering
the question referred to by the High Court for opinion in the affirmative
D and against the assesee, this Court,

HELD: The first contention of the accountable persons that the .
interest in the property corresponding to the benefit retained by the
settlor was not a subject matter of the disposition at all is essentially a
matter of construction of the deeds. There is, no doubt, a discernible
E difference between a case of settlement of property with reservation of a
benefit to the settlor on the one hand and the case where what is settled
is only a share or interest or part of the property, excluding the part or
the share corresponding to the benefit that the settlor has chosen to
retain. There is, indeed, no transfer at all in the latter case. The account-
able person contends that there is really no transfer of the share cor-
F responding to the benefit reserved in both the cases. [278F-G]

In the present case, any possibilities of such an argument are
ruled out by the explicit terms of the deeds. The subject matter of the
deeds are not 11/16 share and 1/2 share in the properties respectively.
The whole of the properties are conveyed upon trust. There is, there-
fore, no scope for this submission. [280C-D]
G
St. Aubyn v. Attorney General, [1951] 2 All England Reports 496;
Controller of Estate Duty, A.P. Hyderabad v. Smt. Godavari Bai,
A.LR. 1986 SC 631 at 635 and Controller of Estate Duty, Kera/a v.
M/s. R. V. Vishwanathan and Ors., [1977] 1 SCC 90 at 97 and 99,
H referred to.
D.N. SRIMANI v. CONTRL. OF ESTATE DUTY 271

The second contention of the acconntahle person that provisions
A
of section 12(1) are not attracted as the properties did not rill the bill as
"Settled Properties" within the meaning of Section 2(19) has no subst-
ance. Section 12(1) refers to and deals with a case of property passing
nuder a "settlement" in which the settlor had reserved to himself an
interest in snch property either expressly or by implication.
Apparently, on its language, the section does not draw upon the inci- B
dents and implications of "Settled Property" for the satisfaction of its
requirements. The passing of property under a "settlement" which
means "any disposition including a dedication or endowment whereby
property is settled" coupled with a reservation of an interest in the
property would suffice. The further incident that the properties covered
by the settlement must in addition partake of the character of "Settled C
property" and accordingly, should stand "limited in trust for any
person, natural or juridical, by way of succession" etc. are not to be
held as part of the requirements of section 12(1). Those incidents of
"Se,ttled Property" need not be imported to the ingredients of section
12(1) which would be satisfied if there is a "Settlement" as defined
under the second part of section 2(19) and if, there is reservation of an D
interest by the settlor in addition. [280D; 28IC-El

In the instant case, the two deeds clearly answer the description of
• "Settlement" as defined under Section 2(19) viz. that there is a
"disposition including a dedication, whereby property Is settled".
Indeed nuder both the deeds, the reservations of the benefit of the E
income from the trust-properties were made in favour of the settlor.
These reservations by themselves, in our opinion, bring the properties
within the net of section 12(1). In addition, the settlor in this case
constituted himself during his life-time and thereafter constituted his
heirs as the shebaits of the two deities. Indeed where while endowing
properties to a deity, the settlor stipulates that he shall during his F
left-time and thereafter his heirs be theshebaits of the deity, the settlor
can possibly be said to provide not only for certain duties to be vested in
connection with the endowment but also secures a beneficial interest in
the property. [281F-H; 282A]

Angurbala Mullick v. Debabrata Mullick, [1951] SCR 1125 at G
1132 and Kalipada Chakraborti & Anr. v. Palani Bala Devi & Ors.,
[1953] SCR 503 at 516 & 517; referred to.

The reservation "interest", so as to attract Section 12(1), must be
in the property as such and that mere collateral benefits reserved by the
settlor emanating from some other property or some other source, inde- H
272 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

pendent of the property so settled, will not attract the section. The
A
distinction between a cru;e of a benefit arising "collaterally" alid a case
of the benefit being reserved by "implication" would require to be kept
clearly distinguished. [282H; 283A, C]

Controller of Estate Duty v. R. Kanakasabai & Ors., 89 ITR 251
B (SC) at 257, referred to.

The terms of the two documents satisfy even the extended require- '
ment that for purposes of section 12(1) the settled property must be by
way of succession. [284E]

Attorney General v. Owen, [1899] 2 Queen's Bench Division 253
c at 266 and Hamid Hussain v. Controller of Estate Duty, 83 ITR 309 at
315, referred to.

There is no substance in the 3rd contention also of the accountable
person that all the properties covered by the two settlements cannot be
D held to pass under section 12(1) but only the value of the share of the
properties corresponding to the benefit reserved must be held to pass.
There are certain fallacies in some of the assumptions basic to this
contention. The quantum of the interest reserved does not determine
the extent of the property passing under Section 12(1). This is oot a case
where several distinct properties or parcels are settled and a beneficial
E interest is reserved out of one alone when it might be possible to predi-
cate that all properties comprised in such settlement, which must be
held to be a composite deed dealing with several items do not attract
section 12(1) but only the parcel 11ut of which an Interest Is carved out
and reserved for the settlor's benefit. Under Section 12(1) if the
deceased makes a settlement and reserves for himself an interest therein
l' for life or for any period determinable with reference to death, the
whole of the property so settled would be deemed to pass. The interest
reserved might be very small indeed; but however small the interest, when
by virtue of such a reservation a settlement falls within the purview of
section 12, the whole property would be deemed to pass. [284F-H; 285A-B]

G Attorney General v. Earl. Grey,· [1898] 1 Q.B.D. 318 at 325,
referred to.

The expression 'interest' in section 12(1) is also not used in a
restrictive sense. [285D]

H Attorney General v. Heywood, [1887] 19 QBD 326 and Attorney
,.
'-~·

D.N. SRIMANI v. CONTRL. OF ESTATE DU1Y (VENKATACHALIAH, J.] 273

General v. Farrel, [1931] l K.B •.81, referred to.
A
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 946
of 1975 & 1251of1975.
From the Judgment and order dated 11. 10.1974 of the Calcutta
High Court in Estate Duty Reference No. 117 of 1971.
B
Dr. Shankar Ghosh, D.P. Mukharji and G.S. Chatterjee for the
Appellant in C.A. No. 946/75 and for Respondent in C.A. No. 1251
of 1975.

C.M. Lodha, Ms. A. Subhashini and K.C. Dua for the Respondent
in C.A. No. 946/75 and for the Appellant in C.A. No. 1251of1975.
c
The Judgment of the Court was delivered by
ii) VENKATACHALIAH, J. These appealS, by certificate, under
Section 65 of the Estate Duty Act of 1953 ('Act' for Short)--one by the
accountable-person and the other by the Deputy Controller of the D
Estate Duty-arise out of and are directed against the iudgment,
dated 11. 10.1974 of the High Court of Calcutta, answering, in a refer-
encr- under Section 64(1) of the 'Act'; the question of law referred for
its opinion.
II'.'
The matter pertained to the determination of the principal value E
of the Estate passing on the death,, which occurred on 24.3.1960, of a
certain Satya Charan Srimani. Dipti Narayan Srimani, appellant in CA
946/1975 is the son of the deceased and is the accountable-person.
ltl
2. The said Satya Charan Srimani during his life-time -had
executed three trust deeds, dated, 8.12.1947, 21.9.1953 and 4. 10.1959 F
respectively.. In the proceedings, the nature and effect of the disposi-
lions made urider the deeds of the trust, dated, 21.9 .1953 and 4.10.1959
fell for consideration.
r Under the deed, dated, 21.9.1953, Satya Charan Srimani as
set.tlor, transferred upon trust to himself as trustee 4 items of immov- G
able property, viz. 130 and 133, upper circular Road; and 32/5 and 32/5
Beadon Street, Calcutta. The objects and purposes of the trust,
broadly stated, were:
.. (i) the conduct of the daily worship and sevas of the Deity Sree
Sridhar Jiu; H
274 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

(ii) the carrying out of certain charitable acts, deeds and things
A
mentioned in schedule B of the deed;

(iii) the making of provision for the maintenance of himself and
the persons mentioned in the said deed.

B The trustee was required, after defraying taxes and other out-
goings, to accumulate 1/4th of the net-income to be set-apart for
purposes of effecting certain additions and alterations to the proper-
ties; to make over another 1/4th of the net-income to the shebait for
the conduct of the daily and periodical pujas, worship and rituals of
the said deity; another I/4th for the charities mentioned in the deed and
the remaining l/4th for the personal benefit of the settlor during his
c life-time and to his heirs thereafter. After the developmental-works
were completed, the proportions of the shares allotted to various
objects were suitably modified in that 7/16th share was to be made ,.
over to the shebait; 4/16th share to be spent for charitable purposes
and 5/16th for the benefit of the settlor and his heirs.
D
3. Under the deed dated, 4.10.1959, the settlor transferred upon
trust to himself and his son Dipti Narayan Srimani as Trustees, six
other properties, one of them situate in Varanasi, for the conduct of
daily-worship and periodical festivals, rituals and ceremonies of the
·deity, Shri Ishwar Gobinda Jiu; for certain charitable purposes and
E also for the benefit of himself and his heirs. The settlor provided for
his residence, free of rent, in one room on the ground floor in the
Varanasi property. A l/4th of the net-income of the trust-properties,
after defraying expenses and taxes, was to be paid to the shebait for
the conduct of the worship, rituals and services of the deity Shri Ishwar
Gobinda Jiu; another l/4th to be spent on the charitable purposes
F mentioned in the deed and the balance of 'hfor the development,
additions and alterations of two of the trust-properties viz. No. 41 &
42 Macleod Street Calcutta. After completion of the ·developments
and alterations, the said 1h share was stipulated to go for the benefit of
the settlor during his life-time and thereafter to his heirs. Under both
the dispensations, the settlor constituted himself the shebait.
G
4. In the proceedings of assessment to estate duty, the question
arose whether the trust-deeds attracted-and fell within-Section
12(1) of the 'Act'. The accountable-person contended that the four
trust-properties under deed dated 21. 9 .1953 could not be said to be
"Settled-Property" within the definition in Section 2(19) and that at
H all events what must be held to pass would only be a l/4th share,
D.N. SRIMANI v. CONTRL. OF ESTATE DUfY IVENKATACHALIAH, J.] 275

corresponding to the benefit reserved for the settlor and his heirs.
A
Similarly, in respect of the six-trust properties covered by the deed,
dated 4.10.1959, it was urged that the properties were not "Settled-
Properties" and that at all 11vents only 'hof the property so passed.

The Deputy Controller of Estate Duty; the Appellate Comptrol-
le.r of Estate Duty in the first-appeal and the Income-Tax Appellate B
Tribunal, Calcutta, in the second-appeal, held that the entire subject-
matter of the two deeds must be held, or deemed, to pass on death.
The value of the properties constituting the subject-matter of deed
dated, 21.9.1953 estimated at Rs.4,69,287 and those constituting the
subject-matter of the deed, dated, 5.l_0.1953 at Rs.1,27,400 were
accordingly, included in the principal-value of the estate passing on
death.
c
,_."!

5. On 20.2.1971, the Tribunal at the iiistanc{of the accotiniable
-person stated a case and referred under Section'64 of the 'Act' the
following question oflaw for the opinion of the High Court:
D
"Whether ·01.1 the facts and in the circumstances of the case
and on a ·proper interpretation of the trust-deeds dated,
21.9.1953 and 4.10.1959, the properties comprised therein
are· dutiable under.Section 12(1) of the Act."
I
6. A Division Bench of the High Court by its judgment, dated E
11.10.1974 held that so far as the four properties comprised in the
deed, dated 21.9.1953 were concemed;·they.were "Settled-Property"
within the meaning of Section 2(19) and that Section 12(1)-was
attracted. The High Court observed:

" ..... So far as the deed dated 21.9.1953 is concerned, by F
the said deed the property has been made debutter and
there is, therefore, a dedication in favour ofthe deity; and
as the settlement- by the said deed creates or results in a
dedication or endowment, the properties settled by the said
deed should, therefore, be considered to be·settled proper-
ties, in view of the specific provision contained in sec. 2( 19) G
relating to dedication or endowment ... "

" ... The provisions contained in the deed dated 21.9.1953
which we have earlier considered, clearly indicate that the
settlor has reserved to himself an interest in the properties
within the meaning of section 12( 1) of the Act. He has H
276 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

A expressly reserved for himself for life one fourth share of
the income of the properties before development and seven
sixteenth share of the income of the properties after
development. Section 12(1) is therefore clearly attracted
to the properties mentioned in the said deed dated
B 21.9.1953 ..... "

However, the High Court took a different view in relation to the
properties covered by the deed, dated 4.10.1959 and held that they
were not hit by Section 12(1). The High Court said:·

" , ... As in our opinion the properties covered by the deed
c dated 4.10.59 are not sattled properties, section 12(1) can-
not apply to the said properties ..... "
' Concluding the High Court held:
" ..... We must therefore, ·bola that section 12(1) of the
D Act applies to the trust deed dated 2 L 9 .1953 and the said
.section has no· application to the trust deed dated
4.10 ..1959. Accordingly we answer the question by saying
that the properties comprised in the trust deed dated
21.9.1953 are dutiable under section 12(1) of the Estate
Duty Act and the properties comprised in the trust deed
E dated 4 .10 .1959 are not dutiable under section 12( 1) of the
Estate Duty Act ..... "

The Divisi<5n Bench, however, left open the question, whether the
properties, constituting the subject-matter of the trust deed, dated
4.10.1959, would attract any other provision of the Act, to be. decided
F by the appropriate authority.

From this opinion expressed by the High Court, both the
accountable-person and Deputy Controller of the Estate Duty have
come up in appeal--,ihe former aggrieved by the inclusion of the whole
of the properties, comprised in the trust dated 21.9.1953 in the
principal-value of the estate; and the latter by the exdusion of the
G
properties constituting the subject-matter of the trust dated 4.10.1959
from the principal-value of the estate.

7. We have heard Dr. S. Ghosh, learned Senior Advocate for
the accountable-person and Shri C.M. Lodha, learned Sr. Advocate
H for the Revenue.
D.N. SRIMANI v. CONTRL. OF ESTATE DlJfY [VENKATACHALIAH, J.J , 277

Having regard to the career of this litigation and the varying
shades of the legal thought attracted by it both in the statutory appeals A
and before the High Court, one is tempted to recall the reflections of
Diplock L.J. in Re: Kilpatrick's [1966} 2 WLR 1346 at 1370.

"As in nearly all appeals about estate duty, I reach my
decision ,without confidence. Were I a betting man I should . B
lay the odds on its being right at 6 to 4 (i.e., 3 to 2) on-or
against. If ever a branch of law called for reform in 1966, it
Is the law relating to estate duty. It ought to be certain: it
ought to.be sensible-it is neither ..... "

In Re Weir's Settlement [1968] 2All E.R. 1241, Cross J had said:
c
"Tue facts are simple enough, but it will not surprise any-
one acquainted with this branch of the law to learn that the
argument lasted over four days-during which counsel at
all events wasted no words-and that some "thirty autho-
rities, many of them in the House of Lords, were referred D
to. The law of estate duty has indeed now attained a degree
of refinement which would have gladdened the heart of
Lort Sd. Leonards."

The legislative expediencies in the development of the law of
· Death-Duties in England reflect an on-going, and no less interesting, E
interaction between the resourceful ingenuity of the conveyancing
lawyer on the one hand and the legislative vigilance to plug the
susceptibilities of the law that sustain tax-planning, on the other. The
handy-tool of the conveyancing lawyer was the notion in the law of
Real-property that ownership was detached from 'land' and was
attached to something called the 'estate' in land. F

8. The submissions of the learned counsel in the appeals are pat-
terned substantially on the ground covered before the High Court.

In support of. the accountable-person's appeal Dr. Ghosh
submitted: G

a) First, that, on a proper construction of the two deeds,
what must be held to constitute their subject-matter are
, only the shares in the properties corresponding to the
interests intended for the benefit of the deities and the
charities; and that the interest in the property correspond- H
278 SUPREME COURT REPORTS [1988) Supp. 1 S.C.R.

A ing to the benefit retained by the settlor was not the sub-
ject-matter of the disposition at all;

b) Secondly, that, even if both the documents might admit
of being called "settlements" in a wider-sense the proper-
B ties dealt with thereunder were not "Settled-Property"
within the meaning of Section 2( 19) as there was no in-
tervening limited-interest before a final vestiture of the
ownership; and

c) Thirdly, that, at all events, what must be held to attract
and fall within the mischief of Section 12(1) and be deemed
c to pass on death would only be the value of such share as
corresponds or referable, to the quantum of interest so
reserved by the settlor-namely 5/16th share in the propler·
ties covered by the first-document and 'h share in the
properties comprised in the second-document and not the
D entire wilue of all the properties.

Shri C.M. Lodha learned Senior Counsel for the Revenue sub-
mitted that this case was frank case of what, by definition, attracted
the wider net of Section 12(1) and that resort to the implications of
"Settled Properly" under Section 2( 19) was unnecessary once it is
E clear that there is a "settlement" within the meaning of Section 12(1)
coupled with the reservation of an interest however small. Learned
Counsel submitted that the distinction made by the High Court bet-
ween the properties covered by deed, dated, 21.9 .1953 on the one
hand and those covered under deed, dated, 4.10. 1959 on the other, is,
in the ultimate analysis, a distinction without a difference.
F
9.The first contention of Dr. Ghosh pertaining to what, accord-
ing to him, should be held to be the subject-matter of the trust-deeds,
is essentially a matter of construction of the deeds. There is, no doubt,
a discernible difference between a case of settlement of property with
reservation of a benefit to the settlor on the one hand and the case
G where what is settled is only a share or interest or part of the property,
excluding the part or the share corresponding to the benefit that the
settlor has chosen to retain. There is, indeed, no transfer at all in the
latter case. Dr. Ghosh says that there is really no transfer of the share
corresponding to the benefit reserved in both the cases. This is the
construction learned counsel wants the court to place on the two
H deeds. '
D.N. SRIMANI v. CONTRL. OFESTAIBDUTY IVENKATACHALIAH, J.] 279

In St. Aubyn v. Attorney General (See 1951 (2) All England
A
Reports 496), Lord Radcliffe brought out this distinction between
what was transferred and what was retained:

.... it is the possession and enjoyment of tlie actual pro-
perty given thaf has to be taken account of, and that if that
property is, as it may be, a limit~d equitable interest or an B
equitable interest distinct from another such interest which
is not given or an interest in property subject to an interest
that is retained, it is of no consequence for this purpose
that the retained interest remains in the beneficial enjoy-
ment of the person who'provides the gift .... "

The distinction between the two types of dispositions is brought c
out in the context of Section 10, in Controller of Estate Duty, A. P.
Hyderabad v. Smt. Godavari Bai, AIR 1986 SC 631at635:

" .. .In other words if the deceased donor limits the interest
he is parting with and possesses or enjoys some benefit in D
the property not on account of the interest parted with but
because of the interest still retained by him, the interest
parted with will not be deemed to be a part of the estate of
the deceased-donor passing on his death for the purpose of
S. 10 of the Act. It is these aspects which mark the distinc-
tion between the two leading cases, namely Chick's case E
1959 3 ITR (ED) 89 and Munro's case 1934 AC 61 (supra).
As we shall indicate presently Chick's case falls within the
first category while Munro's case falls within the ~ther
category ..... "

Again, in the Controller of Estate Duty, Kera/a v. Mis. R. V. Vish- F
wanathan & Ors., [1977] 1 SCC 90 at 97 & 99 it was observed:

"14. The question as to whether gifted property should be
held to be a part of the estate of the deceased donor passing
on his death for the purpose of Section 10 of the Act is not
always free from difficulty. It would depend upon the fact G
as to what precisely was the subject-matter of the gift and
whether the gift was of an absolute nature or whether it was
subject to certain rights. There is a fine but real distinction
between the two types of cases ..... "

" ..... To put it in other words, if the deceased owner H
280 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

A delimits the interest he is parting with and possesses and
enjoys some benefil in the property not on account of the
interest parted with but because of the interest still retained
by him, the interest parted with shall not be deemed to be
part of the estate of the deceased donor passing on his
B death for the purpose of Section 10 of the Act. The princi-
ple is that by retaining something which he has never given,
a donor does not bring himself within the mischief of that
section, nor would the provisions of the section be attrac-
ted because of some benefit accruing to the donor on
account of what was retained by him ..... "

C 10. In the present case, any possibilities of such an argument are
ruled out by the explicit terms of the deeds. The subject-matter of the
deeds are not, respectively, 11/16 share and 'h share in the properties.
The whole of the properties are conveyed upon trust. There is, there-
fore, no scope for this submission. The first contention of Dr. Ghosh,
0
therefore, fails.

11. The second contention of Dr. Ghosh is that provisions of
section 12(1) are not attracted as the properties do not fill the bill as
"Settled-Properties" within the meaning of Section 2(19) of the Act.

Section 2( 19) which defines "Settled-Properties" and 'settle-
E
ment', respectively provides:

" "Settled property" means property which stands
limited to, or in trust for, any persons, natural or juridical,
by way of succession, whether the settlement took effect
F before or after the commencement of this Act; and "settle-
ment" means any disposition, including a dedication or
endowment, whereby property is settled;"

The statutory-definition of "Settled-Property" and "settlement"
is such that while it is possible to say that all "Settled-Property" is the
G subject-matter of "settlement", conversely, however, all subject-
matter of 'settlement', need not necessarily and proprio-vigore,
become "Setttled-Property". The latter concept requires for its
satisfaction certain specific incidents and consequences of a settle-
ment".

H Section 12(1) provides:
D.N. SRIMANI v. CONTRL. OF ESTATE DUTY [VENKATACHALIAH, J.) 281

12(1). Property passing under any settlement made by the
A
deceased by deed or any other instrument not taking effect
as a will whereby an interest in such property.for life or any
·other period determinable by reference to death is reserved
either expressly or by implication to the settlor or whereby
the settlor may have reserved to himself the right by the
exercise of any power, to restore to himself or to reclaim B
the absolute interest in such property shall be deemed to
pass on the settlor'$ death .... "

Section 12(1) refers to and deals with a case of property passing
under a "settlement" in which the settlor had reserved to. himself an
foterest in such property either expressly or by implication. Apparen-
tly, on its language, the section does not draw-upon the incidents and c
implications of "Settled-Property" for the satisfaction of its require-
ments. The passing of property under a "set\lement" which means
· "any disposition including a dedication or endowment whereby
property is settled" coupled with a reservation of an interest in the
property would suffice. The further incident that the properties D
covered by the settlement must in addition partake of the character of
"Settled-Property" and accordingly, should stand "limited in trust for
any person, natural or juridical, by way of succession" etc. are not to
be held as part of the requirements of Section 12(1). Those incidents of
"Settled-Property" need not be imported into the ingredients of Sec-
tion 12(1) which would be satisfied if there is a "settlement" as defined E
under the second part of Section 2(19) and if, there is reservation of an
interest by the settlor in addition.

The two deeds clearly answer the description of 'Settlement'
as-defined under Section 2(19), viz. that there is a "disposition in-
cluding a dedication, whereby property is settled." Indeed under botb F
the deeds, the reservations of the benefit of the income from the
trust-properties were made in favour of the settlor·. These reservations
by themselves, in our opinion, bring the properties within the net of
Section 12(1).

12. This should dispose of the second contention of Dr. Ghosh. G
In addition, the settlor in this case constituted himself during his life- .
time and thereafter constituted his heirs as the .shebaits of the two
'deities. Indeed where while endowing properties to a deity, the settlor
stipulates that he shall during his life-time and thereafter his heirs be
the she baits of the deity, the settlor can possibly be said to provide not
only for certain duties to be vested in connection with the endowment H
282 SUPREME COURT REPORTS [1988) Supp. 1 S.C.R.

but also secures a beneficial interest in the property.
A
The following observations of Mukherjea, J. in Angurbala
Mullick v. Debabrata Mullick, ll951J SCR 1125 at 1132 as to the
nature of the office of a shebait may be recalled:

B " ... The exact legal position of a she bait may not be
capable of precise definition but its implications are fairly
well established. It is settled by the pronouncement of the
Judicial Committee in Vidya Varuti v. Balusami that the
relation of a shebait in regard to debutter property is not
that of a trustee to trust property under the English Law. In
English Law the legal estate in the trust property vests in
c the trustee who holds it for the benefit of cestui gue trust.
In a Hindu religious endowment on the other 'land the
entire ownership of the dedicated property is transferred to
the deity or the institution itself as a juristic person and the
shebait or mahant is a mere manager. But though a shebait
D is a manager and not a trustee in the technical sense, it
would not be correct to describe the shebaitship as a mere
office. The shebait has not only duties to discharge in con-
nection with the endowment, but he has a beneficial interest
in the debutter property .... "

E Again, in Kalipada Chakraborti & Anr. v. Palani Bala Devi &
Ors., 11953) SCR 503 at 516 & 517 it was held:

" ... Whatever might be said about the office of a trustee,
which carries no beneficial interest with it, a shebaitship, as
is now well settled, combines in it both the elements of
F officer and property ... "

" ... There could be no doubt that there is an element in
the shebaiti right which has the legal characteristics of
property; but shebaitship is property of a peculiar and
anomalous character, and it is difficult to say that it .comes
G under the category of immovable property as it is known in
law ... "

13. It is true that the reservation of "interest", so as to attract
Section 12(1), must be in the property as such and that mere collateral
benefits reserved by the settlor emanating from some other property
H or some other source, independent of the property so settled, will not
/

D.N. SRIMANI v. CONTRL. OF ESTATE DlITY [VENKATACHALJAH, J.] 283

attract the section. In Controller of Estate Duty v. R. Kanakasabai &
A
Ors., 89 ITR 251 (SC) at 257 this Court, in the context of Section 10,
observed:

" ... The provisions for annual payments and maintenance
made in the deeds as seen earlier are .not charged on the
properties settled. Hence the deceased cannot be said to B
have retained any interest in the properties settled. There-
fore, it cannot be said that he retained any benefit either in
the properties settled or in respect of their possession ... "

But in the present case, benefits reserved emanate from the very
properties constituting the subject-matter of the settlements and can-
n<f\ be said to be collateral in their nature . .The distinction between a
c
case of a benefit arising "collaterally" and a case of the benefit being
reserved by "implication" would require to be kept clearly distin-
guished.

14. Having regard to the special nature of the office of a shebait D
and the rights and interests that go with it, it is possible to contend that
when a settlor endows the property to an idol and reserves the right of
shebaitship to himself, he would be reserving an interest in the pro-
perty. It is, no doubt, true that while dealing with a case of cessor of
- interest, under section 7 of the Act, of an elected Mahan! in Math
properties, it was held by this court that no interest" passes on the death E
of Mahant duly elected, and that the provisions of the Act are not
attracted (See: Controller of Estate Duty, Bihar v. Mahant Umesh
Narain Puri, [1982] 2 SCC 303. But the case of a settlor who himself
endows property to an idol and constitutes himself a shebait is obvi-
ously different. But we need not, in this case, finally pronounce on the
effect of reservation of shebaitship by a settlor in the context of Sec- F
tion 12(1).

15. But even Jo the extent, the argument that for purpose of
Section 12(1) the property must answer the description of "settled
property" goes the expression "by way of succession" import of the
words were stated in Attorney General v. Owen, (See 1899 2 Queen's· G
Bench Division 253 at 266) by Kennedy, J:

" ... "By way of succession" seems to me to be a phrase to.
which one ought, in dealing with this Act, not to assign a
r
narrow or strictly technical meaning, but to treat it as equi-
valent to "successively upon death"; and substantially un- H
284 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

der the present will the property out of which the annuities
A
are paid is property to which, so far as benefit is concerned,
the annuitants are entitled during life, and which, so far as
benefit is concerned, passes to the residuary devisees upon
the deaths of the annuitants. There is a succession, in a
popular but correct sense, in the enjoyment of this portion
B of the fostatrix's residuary estate which comes to them
upon the decease of the annuitants ... "

Following this view, the Allahabad High Court in Hamid
Hussain v. Controller of Estate Duty, held (See 83 ITR 309 at 315):

" . . . The settlor clearly contemplated that successive
c generations would enjoy the benefit of the wakf and there-
after it would pass· to the persons covered by the charitable
purposes.

It seems to us that upon these considerations the
D property must be considered to be "settled property" and
the wakf, being a dedication of endowment, must be con-
sidered to be a settlement within the meaning of section
2(19). Inasmuch as the property comprised in the wakf
passes under a settlement, it is property which falls within
the scope of section 12 ... "
E
The terrns of the two documents in our opinion satisfy even this ex-
tended requirement of the case.

16. What remains to be considered is the third contention of Dr.
Ghosh. Learned Counsel says that, at all events, all the properties
F covered by the two settlements cannot be held to pass under Section
12(1) but only the value of the share of the properties corresponding to
the benefit reserved must be held to pass. There are again certain
fallacies in some of the assumptions basic to this contention. The
quantum of the interest reserved does not deterrnine the extent of the '
property passing under Section 12(1). This is not a case where several
G distinct properties or parcels are settled and a beneficial interest is
reserved out of one alone when it might be possible to predicate that
all properties comprised in sucQ settlement, which must be held to be a
composite deed dealing with several items do not attract Section 12(1)
but only the parcel out of which an interest is carved out and reserved
for the settlor's benefit. Under Section 12(1) if the deceased makes a
H settlement and reserves for himself an interest therein for life or for
D.N. SRIMAN!y. CONTRL. OF ESTATE DUTY [vENKATACHALIAH, J.] 285

any period determinable with ·reference to death, the whok· of the
A.
property so settled. would be deem.ed _.to pass .. The interest' re~e;ved
might be very small indeed; but however small the interest, when by
virtue of such a reservation a -settlement falls within the purview of
Section 12, the whole property would be deemed to pass. This is what
was cfarified in Attorney General v. Earl Grey, [1898] 1 Q.B ..D. 318 at
325. ·, B

" ... But it is to be observed that the words are "an interest
in such property." Any interest however small will do, pro-
vided it issues out of such property-that is, out of the
property sought to be taxed. I agree that if several parcels
of land be given by one and the same deed of gift, and an
interest be reserved to the donor out of one of those parcels C
only, estate duty would not be payable upon the whole
subject-matter of the gift, but only out of that specific por-
tion in which the interest is expressed to be reserved. But
that is not the case here ... "
D
The expression 'interest' in Section 12(1) is also not used in a restric-
tive sense. Wills, J. in Attorney General v. Heywood, [1887] 19 QBD
326 said:

" ... This application of the word 'interest' is not confined
to a vested or a necessarily contingent interest. The Act was E
me'ant to cast a wider net than such a construction would
imply ............. The Act of Parliament was meant to
meet cases in which an interest of some sort was conferred
and which were not already provided for, and-I think the
language used is sufficiently comprehensive to include the
present case ... " F

This cOlloquial and somewhat liberal Connoti~n of 'interest' was
adopted and followed in Attorney General v. Farrel, [1931] 1 K.B. 81
Greer, L.J. said:

"In that case the only interest which the settlor retained in G
the sum of money settled by him was the expectation, wel.l
founded or ill founded, that the trustees would exercise
their discretion in his favour; but the trustees might quite
lawfully have refused to give him anything, and have dis-
tributed the income among his wife and children. He had a
mere expectation that the discretion which was vested in H

'\
:{\ •
286 ' SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.

A the trustees might be exercised in his favour, either partly
or entirely, and that in my judgment is exactly the position
that Major Alfred Stourton was in this case. He had no
legal right to force the trustees to give him anything; at the
same time he· had in a colloquial sense an interest in the
estate, because it was an estate out of which something
B
might be allotted to him in the discretion of the trustees.
Whether that is an interest within the meaning of the Act of
1881 has, I think, been determined by .Attorney-General v.
Heywood, and the decision has stood since the year 1887, a
period of forty-three years."

c There is, thus, no substance in the third contention either.

17. In the result, for the foregoing reasons, Civil Appeal 1251 of
1975 of the Deputy Controller of the Estate Duty is allowed and the
question referred for the opinion is answered in the affirmative and
D against the assessee. We hold that while the High Court was right in its
view that the properties covered by the deed dated 21.9.1953 were
required to be brought to charge under Section 12(J), we are unable to
agree with the reasoning of, and the conclusion reached by, the High
Court in regard to the properties covered by.the deed dated 4.10.1953.
Accordingly while CA No. 946 (NT) of 1975 brought by the account-
able-person is dismissed; CA 1251 of 1975 by the revenue succeeds
E and is allowed and the judgment of the High Court, to the extent it
pertains to the properties covered by deed, dated 4.10.1959, is set-
aside.
'·
In the circumstances, there will be no order as to costs in these
appeals.
F
H.S.K.