Case: Controller Of Estate Duty, Gujarat Vs. Hussainbhai Mohmedbhai Badri

among the children, and to pay the remaining ninth to certain other persons. The wife died after the Finance Act, 1894, had come into operation. The Court held that the estate duty was only payable on the one-ninth share of the excess of the trust fund over the specified sum and on the benefit which accrued to the children by the cesser of the annuity, since that was the only property passing on the death of the wife. Dealing with the question of law arising for decision Kennedy J. observed:"There is no question that, looking to the substance of the disposition which is in question, as to 96001, the children took an interest on the death of the testator which was qua that sum a definite ascertained profit which vested in them, and as to which each of the eight children got his eighth share. Of course the whole estate was subject to the annuity, but the only uncertainty in case of the residue was as regards the amount of anything beyond 96001. It is not until the death of the widow that the residue over 96001. passes to the children and the grandchildren in the way provided for by the will. Therefore, if it does not pass until then, it cannot be ascertained until then, for it cannot be known until then that there will be any such residue. Otherwise the matter seems quite clear. The property as regards the 96001, was property which passed on the death of the testator, and not on the death of the testators widow, and therefore is not liable to this claim to the extent of the eight-ninths."17. A similar view was expressed by Phillimore J. He observed:"It seems to me obvious that, as regards the legacies and as regards eight-ninths of the residue, or, as the legacies go to the same people, we may say as regards eight-ninths of the property, it passed at once to the children subject to the burden of the annuity; and if Mr. Thomas Townsend had diet in the year of grace 1900 or l90l, and these had been, not children, but nephews or great-nephews liable to pay legacy duty, I do not think the Inland Revenue officials would willingly have accepted the suggestion that legacy duty would not become payable until after the death of his widow."18. The rule laid down in Townsends case is equally applicable to the facts of the present case. In our opinion what is relevant in determining the scope of the expression "property passing on the death of the deceased" is the change in the beneficial interest and not title. This conclusion of ours receives support from the decision of this Court in Mahendra Rambhai Patel v. Controller of Estate Duty Gujarat 63 ITR 645 - (AIR 1967 SC 578 ).There in by a deed of trust dated June 28, 194l one Rambhai settled 160 fully paid up shares in a company in trust for the benefit of his sons Manubhai and Mahendra in equal shares. The trustees were to stand possessed of the shares until each of the beneficiaries completed the age of 25 years and apply in their discretion the whole or part of the profits arising therefrom for the maintenance and advancement of the beneficiaries and to invest the surplus. If and when each of the beneficiaries completed the age of 25 years the trustees were to transfer out of the 160 shares his portion of the shares and the accumulation or any other investment in lieu thereof to him absolutely. If any of the beneficiaries should die before completing the age of 25 years, the shares settled on him (but not the accumulated surplus income) were to devolve on certain persons. The beneficiaries had no right to mortgage or create any incumbrance or sell it until each of them completed the age of 25 years. Manubhai died on June 7, 1954, a minor and unmarried; and the principal value of his interest in the settled property was brought to estate duty in the hands of his brother. The accountable person challenged the validity of the levy. He contended that no property passed on the death of his brother Manubhai. This contention was rejected both by the High Court and this Court, This Court held that though the shares were not to be delivered to Manubhai until he attained the age of 25 years, the shares belonged to him since the execution of the trust deed and he was also beneficially entitled to the income from those shares. In the course of his Judgment Shah J. (as he then was) speaking for the Court observed at p. 649:"The interest of Manubhai in the shares and in the accumulated income was property within the meaning of Section 2 (15). That property did, as we have already pointed out, vest in ownership in Manubhai immediately on the execution of the deed of trust. On Manubhai dying, unmarried, the property as to the shares under clause 7 of the deed and as to the accumulated income under the law of inheritance devolved on his brother Mahender. On Manubhais death, there was under the deed of trust a change in the person who was beneficially interested in the shares."This decision clearly lays down that in determining whether a particular property passed on the death of a deceased what has to be seen is whether that deceased had any beneficial interest in that property and whether that interest passed to someone on his death. The deceased Safiabai had only 1/3rd share in the income of the trust property. That interest undoubtedly passed on her death. In the remaining 2/3rds income, she had no interest and the same did not pass on her death. Her title to the property as a trustee was purely a personal right. It had no value in terms of money. It conferred no right on her. It only imposed some duties. Such a right cannot be considered as property,

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]15. From the facts mentioned earlier, it is seen that ever since the death of the settlor, beneficial interest in 2/3rds of the income of the trust property vested on persons other than the deceased. The deceased was entitled only to a 1/3rd share in the income of the trust property. In substance, only 1/3rd interest in the trust property passed on her death. It is true, that after the death of the deceased, the accountable person as well as the other heirs of the settlor who had only a beneficial interest in the income of the trust property became the legal owners of the trust property. This change in the nature of the rights possessed by some of the beneficiaries under the trust deed does not enlarge either the extent or value of the property that passed on the death of the deceased.The rule laid down in Townsends case is equally applicable to the facts of the present case. In our opinion what is relevant in determining the scope of the expression "property passing on the death of the deceased" is the change in the beneficial interest and not title. This conclusion of ours receives support from the decision of this Court in Mahendra Rambhai Patel v. Controller of Estate Duty Gujarat 63 ITR 645   - (AIR 1967 SC 578  ).There in by a deed of trust dated June 28, 194l one Rambhai settled 160 fully paid up shares in a company in trust for the benefit of his sons Manubhai and Mahendra in equal shares. The trustees were to stand possessed of the shares until each of the beneficiaries completed the age of 25 years and apply in their discretion the whole or part of the profits arising therefrom for the maintenance and advancement of the beneficiaries and to invest the surplus. If and when each of the beneficiaries completed the age of 25 years the trustees were to transfer out of the 160 shares his portion of the shares and the accumulation or any other investment in lieu thereof to him absolutely. If any of the beneficiaries should die before completing the age of 25 years, the shares settled on him (but not the accumulated surplus income) were to devolve on certain persons. The beneficiaries had no right to mortgage or create any incumbrance or sell it until each of them completed the age of 25 years. Manubhai died on June 7, 1954, a minor and unmarried; and the principal value of his interest in the settled property was brought to estate duty in the hands of his brother. The accountable person challenged the validity of the levy. He contended that no property passed on the death of his brother Manubhai. This contention was rejected both by the High Court and this Court, This Court held that though the shares were not to be delivered to Manubhai until he attained the age of 25 years, the shares belonged to him since the execution of the trust deed and he was also beneficially entitled to the income from those shares. In the course of his Judgment Shah J. (as he then was) speaking for the Court observed at p.interest of Manubhai in the shares and in the accumulated income was property within the meaning of Section 2 (15). That property did, as we have already pointed out, vest in ownership in Manubhai immediately on the execution of the deed of trust. On Manubhai dying, unmarried, the property as to the shares under clause 7 of the deed and as to the accumulated income under the law of inheritance devolved on his brother Mahender. On Manubhais death, there was under the deed of trust a change in the person who was beneficially interested in thedecision clearly lays down that in determining whether a particular property passed on the death of a deceased what has to be seen is whether that deceased had any beneficial interest in that property and whether that interest passed to someone on his death. The deceased Safiabai had only 1/3rd share in the income of the trust property. That interest undoubtedly passed on her death. In the remaining 2/3rds income, she had no interest and the same did not pass on her death. Her title to the property as a trustee was purely a personal right. It had no value in terms of money. It conferred no right on her. It only imposed some duties. Such a right cannot be considered as property,