COLLECTOR OF ESTATE DUTY v. MIS R. KANAKASABAI AND ORS.

A B #### c D E **F** _G_ **H** 747 COLLECTOR OF ESTATE DUTY _v._ _MIS_ R. KANAKASABAI AND ORS. _March_ 16, 1973 (K. S. HEGDE, P. )AGANMOHAN Rl!DDY AND H. R, KHANNA, JJ.) _Estaie_ _Duty Act,_ 1953 _ss._ 10 _and 12-Applicability of._ R dies in 1959 leaving behind him four sops, some grandsons, wife and daughter. These accountable persons furnished an account of the properties passing on the death _di_ R to the Deputy Controller of Estate Duty. The Deputy Controller added to the return made the value of certain properties settled by the deoeased on his wife, sons, grandsons and daughter on the ground that the deceased had reserved to himself an interest for life in the properties comprised in the above settlements, within the meaning of s. 12 of the Estate Duty Act 1953. The deed in favour **of** **the** **sons** **and** **the** **minor** **grandsons** **contained** **a** **R'rovision** **to** **the** **effect** that these would have to pay to the deceased during his lifetime a sum **of** **Rs.** **1,000/. a** **year** **for** **his** **domestic** **expenses;** **the** **deed** **in** **favour** **of** **the** **daughter** **contained** **a** **Provision** **that** **she** **would** **have** **to** **maintain** **him** and bi.s wife for their lifetime; the deed in favour of the wife expressed a hope that she would support him in his lifetime. In al'peal the Central ·Board of Direct Taxes held that the settlements fell within the scope of s. 12 or at any rate ~t s. JO of the Act. The High Court in reference held (I) thats. 12 was wholly inapplicable to the facts of the cue; (ii) that even ·under s. IQ, !IOI the entir~_yalue of the property settled on the various beneficiaries but only the value of the interest reserved by the deceased to himself during his life time could he taken into consideration : (iii) that the deed in favour of the wife did not reserve any benefit in favour of the dtoceased as it expressed only a hope. The Revenue as well as the asmsees appealed to thIS Court. Allowing the appeal of the assessees, HELD : (i) So far as the stipulation contained in the deed in favour **of the wife of** **the** **deceased** **was** **concerned** **it** **was** **merely a hope** **and** **ex-** pectation and no enforceable liability as such was created. The High Court was therefore right in holding that no part of the property ~tied on the **wife** **of** **the deceased could** **be** **taken** **into consideration in computing the** value of the property that passed on the death of the dOC<Oased. [751A-Bl (ii) The High Court was further right in holding that s. 12 was wholly inapplicable to the facts of the case. It wls n(!body's oase that the bene**ficiaries became entitled to the properties settled on them after the** **death** **of the** **deceased.** **There** **was** **no support for** **the** **contention** **of** **the** **Revenue** **that** **an** **interest** **in** **the** **propei-ties** **settled** **was** **reserved** **to** **the** **deceased** during his lifetime or fur any period after the properties were settled; nor **was. there** **any** **provision** **in** **the** **deeds** **enabling** **the** **deceased** _**to**_ **reclaim** **the** **property** **or** **its** **possession** **under** **any circumstances.** **None** **of** **the condi-** **tions** **laid** **down** **in** **s.** **12(1)** **were** **attracted** **to** **the** **provisions** **contained** **in** the deeds of settlement. (7510-FJ (iii) lhe facts of the case also did not come within the scope of s. IO, The provisions for ..,niml payments and maintenance made in the deed• were not cha;ged on the prol'°rties settled. Hence the deceased could . not he said to have retained any mterest in tne pro,P;rties settled. Therefore it could not be said that he retained any benefit either in the properties settled or in respect of their possession. !7S4 A-BJ 748 SUPREME COURT REPORTS [1973] 3 S.C.R. If, as contended by the Revenue, the expression "of any benefit _to_ him by contract or otherwise" in s. 10 mean any benefit under the gift, the legislature should have said so. There was no difficulty in saying so. It **is a well accepted rule** **of** **construction that** **if** **a taxing prgvision** **i&** **ambi-** **guous and** **is** **reasonably capable** **of** **more than one interpretation, that** **in-** terpretation which ·is beneficial to . the subjecl must be adopted. It is **impermissible** **for** **the** **court** **to** **read** **into** **a** **taxing** **provision** **any** **words** **which** **are** **not there or exclude words which** **are** **there.** **The·.** **words found** in the provisiop must be given their natural meaning. [753F-Gl _George De Costa_ v. _Controller_ _of_ _Estate Duty Mysore,_ 51 I.T.R. 497, considered and applied. _Mohammad_ _Bhai_ _and Anr._ v. _Controller_ _of_ _Estate Duty, Andhra_ _Pra-_ _desh,_ 69 I.T.R. 770, held inapplicable. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1770 of 1970 and 474 1973. Appeals by special leave from the judgment and order dated April 9, 1969 of the Madras High Court in Tax Case No. 2 of 1966 (Referenee No. 1 of 1966). _N._ D. _Karkh;,is,_ _S._ _P. 'Nayar_ and _R._ _N. Sachthey,_ for the appellant (in C.A. No. 1770170) and for respondents (in No. 474173). _M._ C. _Setalvad,_ _K._ _Srinivasan_ and _T._ _A._ _Ramachandran,_ for respondents (in C.A. No. 1770170 and for appeals (in C.A. No. 474/73). The Judgement of the Court was delivered by HEGDE, J. Both these appeals, by special leave arise from the judgment of the High Court of Madras in a Reference under s. 64(1) of the Estate Duty Act, 1953 (to be hereinafter referred to as the Act). The question of law referred in that case is : "Wllether, on the facts and in the circumstances of ###### the case, the properties settled It' the deceased by the six deeds of settlement (two of them dated 26th June, 1951 and four of them dated 30th June 1951) valued at Rs. 7,38,656/- or any part thereof was not liable for inclusion in the estate of the deceased as property· deemed to pass on his death." The High Court answered that question partly in favour of the Revenue and partly in favour of the assessee. It opined that the value of the property gifted in favour of the wife _ol_ the deceas ed is not to be taken into consideration in computing the value of the property that passed on the death of the deceased. In respect of the properties gifted to the sons, grandsons and the daughter of the deceased only the annual payments that had to be made to ·the deceased as well as his right to maintenance should be valued for the purpose of determining the extent of the right that passed .on his death. A B #### c D E F G **H** _A_ _B_ **D** **11** **F** G **H** COLLECTOR _v._ KANAKASABAI _(Hegde, J.)_ 749 The facts _oi_ the case material for the purpose of deciding the question of law formulated above as could be gathered from the case stated are as follows : One Ratnasabapathy Pillai was the owner of the properties with which we are concemed in this case. He died on February 5, 1959 leaving btehind him his four sons, some grandsons, wife and daughter who· are the accountable persons. They furnished an account _oi_ the properties passing on the death of the deceased to the Deputy Controller of Estate Duty, Madras who was the assessing authority. The Deputy Controller did 1110! accept the correctness of the· return made by them. He added to the return made, the value of the following properties settled by the deceased on his wife, sons, grandsons and daughter. **Total** ~~7,38,656~~ By the deeds in question the deceased settled the properties in favour of the beneficiaries absolutely and with full power of aliena. tion. The deeds in favour of his sons and the minor grandsons contained a provision as under : "You have to pay me during my life time a sum of Rs. 1000/ • per year for my domestic expenses." The deed in favour of the daughter contained a provision : "You have to maintain myself and my wife during our life time." The deed in favour of the wife contained the followil!g words: "In the hope that you will support me during my life-time, I do hereby settle .... " **Value of property settled** Rs. I. Deed dated the 26th June, 1951 settling 67.60! **acres ()f agricultura1** **lands on Shri D.** **Na tar-** **aja** **Pillai,** **son** 1,10,408 2. Deed dated the 25th June, 1951 settling 74.91 **acres of agricultural lands on Shri R.** **Ramali-** **ngarn Pillai, son** **1,12,365** 3. Deed dated the 30th June. 1951 settling 80.72 **acres of agricultural lands on Shri** **R.** **Subram-** **ania Pillai, son** 1,21,080 4. Deed dated the 30 June, 1951 settling 67.95 **acres of agricultural 1ands on** **Ganapathi PiUai** **and** **Sivakumar Pillai, minor grandsons** **of** **the deceased** **1,01,925** _5._ J»ed dated the 30th June, 19SI settling 133.55 **acres of agricultural** **lands of Snit.** **T.** **Sivakumu** **AmmaJ,.daughter** l,99,623 6. Deed dated the 26th June, 1951 settling 68.17 **acres of** **agricultural lands on the wife, Smt.** **Rajambal** 1,02,255 750 SUPREME COURT REPORTS [1973] 3 s.c,R. 1he Deputy Controller held that the deceased had reserved to himself an interest for life in the properties comprised in the above settlements, within the meaning of s. 12 of the Act. He accordingly included the value of 'those properties for the purpose of determining the value of the properties that passed on the death of the deceased. The accountable persons appealed to the Central Board of Direct Taxes, New Delhi. They contended before the Board that the conditions or stipulations contained in the deeds of settlement in faVO!Jr of the sons, minor grandsons and daughter merely amounted to an expression oJ' a desire and hence could not be interpreted as a reservation within ';l;ie meaning of s. 12 as those conditions or stipulations did not detract from the. absolute character of the settlements. With regard to the settlement made in favour of the wife, it was argued before the Board that the deceased had expressed only a hope that his wife would support him and maintain him ducing his lifo time, and the words used in the deed were vague and unenforce_able in law as a stipulation. The Board rejected these contentions. It opined tha_t the main point in issue in the case was whether an interest in the property was reserved by the deceased. It held that all the settlements fell within the scope of s. 12 or at any rate it came withins. 10 of the Act. Thereafter at the instance of the accountable persons, the question set out earlier was referred to the High Court. We have earlier set out the answer given by the High Co)lrt. The High Court .held that s. 12 was wholly inapplicable to the facts of the case and the case has to be considered only under, s. 10. Even under that section, the High Court opined, the entire value of the property settled on the various beneficiaries cannot be taken into consideration. All that can be taken into considera" tion is the value of the interest reserved by the deceased to himself during his life time. Further it held that the value of the properties settled on the wife of the deceased should be wholly excluded from consideration as the expression of a wish that his wife should suppon him during his life time did not amount to a retention of any benefit in the property settled. On behalf of the Revenue, the conclusion reached by the High Coun was challenged. It is contended that the value of the entire property settled by the deceased should have been taken into consideration. But, on the · other hand it was contended on behalf of the accountable persons that neither s. 12 nor s. I 0 is applicable to the facts of the present case. Before considering whether ss. 10 and 12 or either of them is applicable to the facts of the case, it is necessary to mention that in respect o.f the amount made payable by the sons and grandsons to the deceased, no charge on the property settled was created. Similarly no charge was created on the property settled on the daughter in respect of her liability to maintain her father and mother. So far as the stipulation contained in the deed in favour E F G H COLLECTOR _v._ KANAKASABAI _(Hegde,_ /.) 75 I _**A**_ ## • ... **E** **F** **_G** _**H**_ _**A**_ of the wife of the deceased, it was merely a hope and expectatioa and no enforceable liabi!fty as· such _wis_ created. Hence we are· in agreement with the High Court that no part of the property set'lJej on the wife of the deceased can be taken into consideration in computing the· value _iJf._ the property that passed on the· death of the deceased. We are also in agreement with the High **B** Court that s. 12 is wholly inapplicable to the facts of the. case. That section to the extent material for our present ·purpose: reads: "12 ( 1) Property passing under any sett!erii'ent made by the aeceased by deed or. any other instrument not taking effect as a will whereby an interest in such property #### c for life or an'y other period determinable by reference to death is reserved either expressly or !ly implication to the settler 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 settler's death." **D** [The provisos to the Section, the explanation as well as sub-s **B** #### c (2) of s. 12 are not relevant for our present purpose.] So far as the applicability of s. **12(1)** is concerned, it is no." body's case that the beneficiaries became entitled to the properties settled on them after the death of the deceased. There is no sup##### port for the contention ct the Revenue that an interest in the properties settled was reserved to the deceased during his. life time 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 circumstance. None of the·. conditions laid down in s. **12 ( 1)** are attracted to the provisions contained in the deeds _ct_ settlement. Now turning to s. 10,' the portion that is material for our pre,ent purpose is found in the main section. . The provisos to that section are not relevant. The material part of the section reads : · · - - ''.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 !he donee and thenceforward re<ained to the entire exclusion of the donor or of any benefit to him by c·ontract or otherwise." This section provides that unless a _bona fide_ possession aiid enjoyment of the property gifted is assumed immediately after the gitt by the donee and thenceforward retained to the entire exclusion of the donor' or of any benefit to him by contract or otherwise,. the said property wil! be deemed to have passed on the death of 752 SUPREME COURT REPORTS [1973] 3 S.C.R. the donor. In other words the section has two parts _viz._ ( 1) the donee must _bona-fide_ liave assumed possession and enjoyment of the property which is the subject matter of the gift to the exclu sion of the donor immediately upon the gift and (2) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benfit to him by contract or otherwise. Both these conditions are cumulative. Unless each _ol._ these conditions is satisfied the property would be liable to estate duty under section 10 of the Act-see the decision of this Court in _George Da Costa_ v. _Controller_ _of_ _Estate Duty_ _Mysore(1)._ Therein the scope of s. fO came up for consideration. Speaking for the Court this is what Ramaswami J. observed in that case : A B #### c D E F G H "A gift of itnmova~e property under s. 10 will. however, be dutiable unless the donee assumes imme-. -diately exclusive and bona fide possession and enjoyment 1lf the subject-matter of the gift and there is no benefi cial interest reserved to the donor by contract or otherwise. The section must be grammatically construed as follows: "Property taken under any gift, whenever made, of which property _bona_ _fide_ possession and enjoyment shall not have been assumed by the doriee im mediately upon the gift, and of which property _bona-_ _fide_ possession and enjoymei:it shaU not have been thenceforward retained by the :lonee to the entire ·exclusion of the donor from such possession and enjoyment, or of any benefit to him, by contract or otherwise". The crux of the section lies in two parts: (1) the donee must _bona fide_ have assumed possession and enjoyment of the, property, which is the subject matter of the .~ift, to the exclusion o.f the donor, immediately upon the gift, ·and (2) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him, by contract or otherwise As a matter of construction we are of opinion that both these conditions are cumulative. Unless each of these conditions is satisfied. the property would be liable to estate duty under s. 10 of the Act". Proceeding further the learned judge observed : "The second part of the section has two limbs: the ·deceased must be entirely excluded, (i) from the pro·perty, and (ii) from any benefit by contract or other wise. It was argued for the appellant that the expression "by contract or otherwise" should lie construed (I) SJ T.T.R. 497. A B #### c D E F G COLLECTOR _v._ KANAKASABAI _(Hegde,_ _I.)_ 75:J. _ejusdem_ _generis_ and reference was made to the decision of Hamilton J. in _Attorney_ _General_ v. _Seccombe_ (1911 )2, K. B. 688. On this aspect of the case, we think that the argument of the appellant is justified. In the context of the section, the word "otherwise" should in our opinion, be construed _ejusdem_ _ _generis_ and it must be interpreted to mean some kind of le.gal obligation or some transaction enforceable at Jaw or in equity which, though not in the form of a contract, may confer a benefit on the donor. It was contended on behalf of the assessee that the expression "of any benefit to him by contract or otherwise" in s. 10 must be in the property settled and not a benefit arising from the ttansac- tion resuHing in the gift. To put it differently 'the assessee's contention was that the benefit biy contraot or otherwise must be re-ferrable to the property gifted because all the earlier conditions stipulated in the section refer to the_ property gifted. If it was otherwise, the Counsel for die assessee urged, s. 10 cannot be considered to have two parts as held in _Da_ _Costa's_ case (supra); but it must be held to have three pans _viz._ (1) that the donee must _bona_ _fide_ have assumed possession and enjoyment of the property which is the subject matter of the gift to the exclusion of the donor immediately upon the gift; (2) the donee must have retained such possession and enjoyment of the property to the en1ire exclusion of the donor and ( 3) the donor should not have retained any benefit to him by contract or otherwise under the gift. It was further urged that it is impermissible for the court to add the words "under the gift" after the words "of any benefit to him by contract or otherwise". On the other hand it was contended on behalf of the Revenue that if the donor is entitled to any benefit under the gift, whether the same is charged on the properties settled or not, the properties gifted must be deemed to have passed on his death. The main part of s. 10 is not happily worded. It is difficult to find out the true effect of the expression "of any benefit to him by contract or otherwise". Do these words mean any benefit under the gift ? If that was so, the legislature ###### should have said so. There was no difficulty in saying so. If a taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the sut~ect must be adopted. This is a well accepted rule of construction. It is impermissible for the. court to read into a taxing provision any words which are not there or exclude words which are there. The words found in the provision must be given their natural meaning. In _Da_ _Costa's_ case, this Court opined that there are only two parts to the section. We have set out those parts earlier. The contention of the Revenue runs counter to the reasoning adopted in _Da_ _Costa's_ case. The contention advanced on be H _754_ ';UPREME COURT REPORTS [J 973] 3 S.C.R. ·half of the assessee finds support from some of the observatbns found in _Da Costd s_ case. The provisions for annual payments and maintenance made in the deeds as seen earlier are not charged on the properties se'ttled. Hence the deceased cannot be said to have retained· any interest in the properties settled. Therefore it cannot be said that he re'tained any benefit either jn the properties settled or in respect of their possession. Hence in our opinion the facts of case (',J not come within the scope of s. 10. We, accordingly, allow the appeal of the assessee and hold that the value _oi_ the properties gifted or any part thereof is not liable to be included in computing the value of the estate that passed on the death of the deceased. In this :view, it is not necessary for us to consider the meaning of the word ~extent" found in s. 10. The decision of the Andhra Pradesh High Court in _Mohammad Bhai and_ _Anr._ v. _Controller_ _of_ _Estate_ _Duty, Andhra Pradesh(_ _[1]_ _)_ rendered by one of us (Reddy J.) does not bear on the question of law that we have decided. In the result we allow the appeal of the assessee (Civil Appeal No. 474 of 1973), vacate the answer given by the High Court and answer the question referred by the Tribunal in the affirmative and - in favour of the assessee. The appeal of the Revenue (Civil Appeal No. 1770 of 1970) is dismissed. The Revenue shall pay the costs of the assessee-one hj:arlng fee. G.C _C._ _A._ _No._ 474 _of_ 1973 _allowed._ _C.A._ _No._ 1770 _of_ 1970 _dismissed._ A B ### c D E