Paragraph numbers below are the court’s original numbering, recovered from the source text.
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, 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- 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 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". 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 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 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 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 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 under the second part of Section 2(19) and if, there is reservation of an interest by the settlor in addition. c 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 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. 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 c [1988) Supp. 1 S.C.R. but also secures a beneficial interest in the property. 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: " … 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 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 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 …. " 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 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 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 & 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 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 case of a benefit arising "collaterally" and a case of the benefit being reserved by "implication" would require to be kept clearly distin- guished. c
14. Having regard to the special nature of the office of a shebait 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 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- tion 12(1). r
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 narrow or strictly technical meaning, but to treat it as equi- valent to "successively upon death"; and substantially un- c [ 1988] Supp. 1 S.C.R. der the present will the property out of which the annuities 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 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 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 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 … " 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 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. " … 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 … " 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 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 … " 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 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 c 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 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." 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 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 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. H.S.K.