Controller of Estate Duty, West Bengal v Usha Kumar & Ors.

241 CONTROLLER OF ESTATE DUTY, WEST BENGAL _v._ USHA KUMAR & ORS. _November_ 20, 1979 [V. D. TuLZAPURKAR AND E. S. VENUTARAM!AH, JJ.] _EsloJ• Duty_ _Act_ 1953, _S5-Estat•_ _Duty-Trust_ _deed_ _providing._ _property to_ _**belong to· and**_ _**remain**_ _**with trust-Income from trast property-1ttilization**_ _**for**_ _ r~ligious, _**charitable purposa and benefit of desc.endants**_ _**of sett/or-Whether valid**_ _**·tF<lst-wlrether property devolved**_ _**011**_ _**scttloTs son and passed on**_ _**his**_ _**deat11-**_ TI! _**liability to estate duty.**_ ' **.,j.** One 'W' executed a deed of trwt, transferred all his properties to the sllid ' I trust and appointed himself as the first managing trustee for a period of one year and directed that after be ceased to be the trustee, bis son the deceased should act as the managing trustee of the Trust Mld on his death, the deed directed that his sons, grand-sons etc. should be appointed as trustees. The deed provided that the properties should ·belong to the trusl and continue to remain with the trust and that none of the heirs of the author of the trust could have **the power to deal with** **them** **as** **their own or to alienate them. The** **trust** **deed** , **provided** **that out** **of the** **income** **from** **the** **trust** **properties** **in** **any year,** **one-fourth** **thereof should** **be** **utilized for the payment** **of** **taxes, expenses** **of** **the** **repairs,,** **alterations, reccnstructions etc.** **of** **the** **trust properties.** **Ono-half** **of the balance,** i.e. one-half of three-fourths of the income should be apent for the sevas of the **family** **deities,** **performance** **of** **certain** **specified** **pujas,** **sradhas** **and** **certain** **other** **religious** **purposes.** **The** **remaining** **income** **i.e.** three~eights **of** **the** **total** **income** w .. permitted to be used by the trustees and other members of the family. **After the** **death** **of** **the** **author** **of** **the** **trust,** **his son. the** **deceased,** **became** **tho** **trustee.** **On** **his** **death, the question whether the properties which were the** **subject** **matter** **of** **the** **trust** **should be included** **in** **the** **estate passing** **on his** **death.** **arose for** **consideration in the. estate duty proceedings.** The accountable persons contended before the assessing authority, the Deputy Controller of fatale Duty, that no estate duty was payable in respect of tho properties comprised in the inist, as the said propertiesi didl not pass on the> d::ath of the deceased. The Deputy Controller held that the provisions of tho- ll1l$t were such as to keep the properties tied up in perpetuity without any power of **alienation** **and** **&ince** **the purpose** **for** **which the trust** **was created was not** **a.** **public** or charitable one, the trust _ils_ a whole was void, and held that the properties passed on the death of tho deceased under section _5_ of the Act. A **B** c **D** E **F** G **H** t In appeal, the Central Board of Revenue held that even though the purpo&o of the trust was said to be for cerrain religious purposes, the further directions contained in the deed providing for certain persoual expenses of the author of tho trust, his heirs to succeed him as trustees, and stipulating that the trustees WllfC not competent to alienate the trust properties led to the inference that the inteotion of the author executing the deed of the,trust was "not only to provide for tho worship of deities but also for mooting tho secular expenses _of_ the family -- --- ._,...,, ###### ..... .......... 242 SUPREME COURT REPORTS (1980] 2 S.C.R. **A** **members and future heirs" and since the trust offended the rule against perpetui-** ties it was void in law and all the properties comprised in the said trust shnuk\. be held to pass under section _5_ of the Act. **B** **c** **D** **E** **F** G **H** The High Court in the reference under oection 64(1) of the Act at the· imtance of the accountable persons, held that the properties comprised in the dwl which created a Hindu religions trust could not I><> included in the estate of tile **deceased as properties passing** **on** **his** **death.** In the appeal to this court on the question wheth.,.- all or any part of thopropertie• which were tho •nbjcct ·matter of the trust could be treated ao p...aing on the death of tho deceaoed _tor_ pW1JO'CO of levy of e\lato duty under the Estate Duty Act, 1953. . . ~- _,. HELD : _1._ Only one-halt of the propertieo which were the subject matter o~ . \ the trust deed pas•ed on the death of the deeeaoed under sectio11 _S_ of the Acl .\. and tho remaining one-half did noL (248 DJ 2. The High Court was in error in holding that tlio whole of the trust pro**perties constituted a religious endowment** **and** **did not pass** **on** **the death** **of** _th<:r_ deceased. (248 CJ 5. One-half of the properties covered by the trust corresponding to one-half of the total income which had to be spent on religious purposes considered "'' not passing on the death of the deceased. The religious endowment mac!e in 3. If the term> of the document under which the properties or their income arc gifted or bequeathed or settled amount to their complete dedication for n:ii· 1ious or cbari!Able purposes, the11. any part thereof which is giYen **away** by way of l!ift or bequeol or settlement to any person contrary. to the rule against perpe tuitieo or the rule against the accumulations cnures to the benefit of the endow· ment and becomes a part of the properties endowed. On the other hand, if the dedication is paiual SU<h part which iS hit by the rule against perpetuities **or** **the** **rule** **against** **accum.ulatiou revera** **to** **thfl** **executand of the document** **or** **bis** heirs. [24 7 F-G I **Jn** **the imtant case. under the** **trust** **one.-half** _**ol**_ **tho** **total income from the** properties in question had been directed to be used for religious purposes. The remaining one-half of the income was permitted to be used by the trusteell for the purpose of defraying joint family expenses, to engage oen•ants, maintain a **conveyance, meet the expenses** **of** **the** **marriage** **of** **the** **daughters** **of** **the** **trustUs** **etc. There was** **no** **transfer** **of** **the properties** **to** **any idol or deity,** **the** **title!** **to** the properties remaining only with the trustees, who were allowed to enjoy **one-half** **of the net income not because** **they** **were shebaits but because** **they** **were** members of the family. [246 F-G, 247 BJ _4._ The dominant intention in creating tho **trust** **wu** **to** benefit the member.1 of !he family of the author of the truot and to see that the properties were llOt **alienated** **by** **them for ever. There** **was** **only a** **partial** **dedication under the deed** f~r **religious purposee.** **The provision for** **the** **benefit** **of** **the trustees** **and** **other** heirs and relatives of the author of the trust fails as it is hit by the rule against perpctuiti~. **This** **does not** **however** **affect** **the** **Talidity** **of** **the** **religiOU8** **endow·** mcnt. [24 7 C·D I I _**j**_ _**_N,**_ **-I** v CONTROLLER ESTATES DUTY V.USHA _KUMAR(.l(enkataramiah,_ J.) 243 **this** **regard** **would** **not fail** **despite** **the** **fact** **that** **the** **remaining** **one·half of** **the** **1>roperties** **retained ·their** **private** **and** **secular** **character.** **The** **remaining** **one--half** of the properties remaining undisposed or and being held by 1he deceased immediately before his death, should be deemed. to pass on hi• de~th for purposes of section _S_ of 1he Ac1. - [248 A-Bl _**S.**_ _**Sha111nugan-1.Pillai**_ **&** _**Ors.**_ **v.** _**K.**_ _**Sllanmuga1n**_ _**Pillai**_ **&** _**Ors.**_ **(1973) 1 S.C.R.** 570 ref. 10. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 401 of 1973. ;.--.._,_ From the Judgment •and Order dated 21-5-1971 of the Calcutta _"-)'_ [1 ] H.igh Court in Matter No. 95/65. _T._ _A._ _Ramachandran_ and _Miss_ _A._ Sub~hini fm the Appellant. _V._ _S._ _Drsai,_ _D._ _N._ _Mukherjee_ and _N._ _R._ _Chaudhary_ for the Respondent. The Judgment of the Court was delivered by VENKATARAMIAH, J. In this appeal by certificate, the question which arises for consideration is whether all or any part of the properties which were the subject matter of a trust can be treated as passing on the death of Panchu Gopal Banerjee (hereinafter referred to as 'the deceased') for purposes of levy of estate duty under the Estate Duty Act, 1953 (hereinafter referred to as 'the Act'). The deceased was the son of Woomesh Chandra Banerjee. Woomesh Chandra Banerjee executed a deed of trust on June 27, 1939 ·;.._ . constituting a trust known as 'Sri Sri Iswar Jagadhatri Samparl' and ~- transferred all his properties which were described in the. Schedule attached to the. deed to the said Trust and appointed himself as the first .. managing trustee for a period of one year. He directed that after he ceased to be the trustee, his son, the deceased should act as the managing trustee o[ the trust. On the death of the deceased, the deed directed, that his sons, grand-sons .etc. should be appointed as trustee. The deed provided that the properties should belong to the tnist and continue to remain with the trust and that none of the heirs of •· the author of the trust could have the power to deal with them - **.Ji,.** as their own or to alienate. The trust deed provided that out of the income from the trust properties in any year, one~fourth thereof should be ntilized for payment· of taxes in respect of the trust properties and for the expenses of the repairs, partial constructions, additions, altera tions and re-constructions of the houses referred to in the Schedule attached to the de~d. If there was any surplus remaining in the said one-fourth after paying the taxes and meeting the expenses referred to --~ ##### ------- **B** **c** **D·** **E** **p** G **n** 2H SUPREME COURT REPORTS [1980j 2 S.C.R. A B c D E F G B the trust was said to be for certain religious pµrposes, the further directions contained in the deed providing for certain personal expenses ot the author of the trust, his heirs who would succeed him as trustees and the members of his family and stipulating that the trustees were not above, it was open to the trustees to acquire new properties and the properties so acquired should be deemed to be the trust properties. The deed further directed that one-half of the balance i.e. one-half of three-fourths of the income should be spent for the sevas of the family deities, performance of certain specified pujas and sraJhas and certain other religious purposes. There was a specific direction that the said portion of the income should be spent_ entirely on religious work· and that at no point of time there should be any. departure therefrom. In other words, the trust deed directed that three-eighths of the total income should be spent towards religious and charitable works. T~ _ remaining incom.e i.e. three-eighths of the total income was permit!~ 1 \ to be used by the trustees and other members of the family. Since one-fourth of the total income which was ear-marked for payment of taxes in respect of all the properties and for their repairs etc. and any surplus remaining out of it was to be utilized for acquiring new properties for the trust, the only inference which could be drawn from the reading of the entire deed is that in all one-half of the total income was earmarked for religious purposes and the remaining one-half for the benefit of the trustees and the members of their family. Woomesh Chandra· Banerjee, the author of the trust deed died in or about the year 1941 and his son, the deceased, became the trustee under the deed of trust. The deceased died on April 17, 1955 and on his death, the question whether the properties which were the subjec.t matter of the trust should be included in the estate passing on his death matter of the trust should be included in the estate passing on his death uose for consideration in the estate duty proceedings. The accountable I persons contended before the Deputy Controller of Estate Duty who ## -* · was the assessing authority that no estate duty was payable in respect " of the properties comprised in the trust (valued by the Deputy Controller at Rs. 2,89,000) as the said properties did not pass on the death of the deceased. The Deputy Controller held that the provisions of the trust were such as to keep the properties tied up in perpetuity without any power of alienation and that since the purpose for which the trust was created was not a public or charitable one, the trust as a whole was void. He accordingly held that the said properties passed on the death of the deceased under section 5 of the Act. This part of the order of the Deputy Controller was affirmed in appeal by the Central...__ • Board of Revenue in Estate Duty Appeal No. Cal./134 by its order dated April 3, 1961. The Board held that even though the purpose of I #### I # I CONTROLLER ESTATES DUTY _v._ USHA KUMAR _(Venkataramiah,_ _!.)_ 245 competent to alienate the trust properties led to the inference that the A intention of the author executing the deed of trust was "not only to provide for the worship of deities but also for meeting the secular expenses of. the family .'lembers and future heirs" and that since the trust offended the rule against perpetuities, it was void in law and all the properties comprised in the said trust should be held to pass under •e~tion _5_ of the Act. B On a reference under section 64 ( 1) of the Act at the instance of the accountable persons, the High Court of Calcutta held that the pro· perties comprised in the deed which created a Hindu religious trust "'\c~uld not be included in the estate of the deceased as properties pass. . ~ _l_ ing on his death. Aggrieved by the decision of the High Court, the - Controller of Estate Duty has filed the above appeal. The learned counsel for the parties cited a large number ut decisions before us bearing on the question whether the properties which were the subject matter of trust had been absolutely dedicated for religious purposes or whether they retained their private and secular character but subject only to a charge in favour of a religious trust. It is enough for the purpose of this case to refer to only·one of them i.e. _S._ _Shanmugam Pillai_ _&_ _Ors._ v. _K._ _Shanmugam_ _Pillai_ _&_ Ors.(') in which it is observed by this Court as follows : c D E F G H "As observed by this Court in _Menakuru_ _Dasaratharam:_ _Reddi_ _&_ _Anr._ v. _Duddukuru Subba_ _Rao_ _&_ _Ors._ (AIR 1957 S.C. 797) that dedication of a property to religious or charitable purposes may be either complete or partial. If the dedication is complete a trust in favour of a charity iS created. i!f the dedication is partial, a trust in favour of a charity is not created but a charge in favour of the charity is attached _to,_ and follows, the property which retains its original private nnd secular character. Whether or not a dedication is com· plete would naturally be a question of fact to be determined in each case on the terms of the relevant document if the dedication in question was made under a document. In such n case it is always a matter of ascertaining the true intention Qf the parties, it is obvious that such an intention must be gathered on a fair and reasonable construction of the document considered as a whole. If the income of the pro ' ierty is substantially intended to be used for the purpose of a harity and only an insignificant and minor portion of it is J) [19731 I S.C.R. _570._ 8 ·C D E ·G In that case, the document under which it was claimed that a complete dedication of certain property had been made for religion~. purposes contained a recital which read as follows _:-_ ; ~ "If, after conducting the said charities properly, there be any surplus, the same shall be utilised by the said Shanmugan- Pillai and his heirs for family expenses. They should also look after the same carefully and properly." On the basis of the evidence available in the case and the recitals in tlie document including the one extracted above, the Court concluded : "TI1is shows that the entire income of the properties set apart for charitie; was not thought to be necessary for conducting the charities. It was for the plaintiffs to establish that the dedication w~ --ii complete and consequently there was a resulting trust. As they have failed to establish the same, for the purpose of this case, we have lo proceed on the basis that the dedication was only partial and the properties retained the character of private properties." Jn this case the only question which arises for consideration is ~ whether the trust properties or any part thereof has beu endowed for religious and charitable purposes or not. Even according to the Central Board of Revenue under the trust deed a portion of the income from the properties in question had been directed to be used for religious purposes. 11ie portion of the income so ear-marked in the instant case as observed by us earlier could be reasonably taken to be one-half of the total income. The remaining one-half of the income was permitted to be used by the trustees for the putpose 0f defraying the joint family expenses, to engage servants, to maintain a motor car or a horse and carriage and to meet the expenses of the marriages of the,!_ ' daughters of the trustees. It is also seen that the author of the trust directed that "if any one of the daughters-in-law of my line happens to be a child widow or without a son and if she be adhering to her own faith, observes purdas, and lives in the joint family and house along with the trustees she shall get her maintenance etc. from the joint 246 SUPREME COURT REPORTS [1980] 2 S.C.P. allowed to be used for tbe maintenance of \he worshipper or the manager, it may be possible to take the view that dedication is complete. If, on the other hand, for the maintenance of charity a minor portion of the income is expected or required to be used and a substantial surplus is left in the hands of the manager or worshipper for his own private purposes, it would be difficult to accept the. theory of complete dedication". .CONTROLLER ESTATES DUTY l'. USHA _KUMAR(Venkatara91iah,_ J.) 247 family." A similar provision' was made with regard to the daughters of **A** _-_ ~ the family who happened to be widows in indigent circumstances. There was no transfer of the properties to any idol or deity. The title to the properties was directed to . remairi only with the trustees. The members of the family were also permitted to reside in the joint fwlily house. Moreover the author of the trust disposed of all his properties under the deed and his heirs whom he did not want to disin· herit could utilise one-half of the net income which was by no means insignificant for their maintenance. They were allowed to enjoy such ~income not because they were shebaits but.because they were members .. -of the family. In fact the trustees coul\i draw if they so desired only Rs. 25 per month as their remuneration. The dominant intention in creating the trust was to benefit the members of the family of the author of the trust and to see that the properties were not alienated by them for ever. From a fair reading of the deed, we are of opinion **that** there was only a partial dedication under the deed for religious pur· poses. ft follows that the properties retained their private and secular character and were only subject to a charge for religious purposes. In the circumstances, the provision for the benefit of the trustees and other heirs and relatives of the author of the trust fails as it is hit by the rule against perpetuities. This, however, does not affect the validity of the religious endowment. What should happen to the properties which gifted or settled on persons in contravention of the rule aga.inst _**-M**_ l'::~tuities in cases of this nature where properties are given away partly by way of religious endowments and partly for the benefit of ·.~ certain individuals for their use, may be stated thus_: If the terms of tho / ~ docuinent under which the properties or their income are gifted or - bequeathed or settled amount to their complete dedication for religiouil **B** **c** **D** E **r** G **H** ,, ' lations reverts to the executant of the document or his heirs. Applying the abovo rule, we held that the transfer of one--half of the propcrtiea " -which were dealt with by the deed corresponding to one-half of the income which was directed to be utilized by the members of the family of the author of the trust in contravention of the rule against perpetuities was void and that the said one--half of the properties continued to be the properties of the author of the trust notwithstanding the execution of the trust deed. or charitable purposes, then any part thereof which is given away by way of gift or bequest or settlement to any penon contrary to tho rule against perpetuities ~ the rule against accumulations enures to tho benefit of the endowment and becomes a part of the propcrliu endowed. But on tho other handi if the dedication is partial such part which is hit by the rule against perpetuities or the rule against accumu 248 SUPREME COURT REPORTS (1980] 2 S.C.R. A I B c D From the facts and in the circumstances of the case, we are of the view that only one-half of the properties covered by the trust corresponding to one-half of the total income which had to be spent on religious purposes should be considered as not passing on the death of the deceased since the religious endowment made in that regard would not fail despite the fact that the remaining one-half of the· properties retained their private and secular character. We are also of the view that the remaining one-half of the properties which is held to be remaining undisposed of and which was held by the deceased immediately before bis death should be deemed to pass on bis death for purpo5es . of section 5 of the Act. The High Court was, therefore, in error h1 hold The appeal is, therefore, partly allowed. We hold that only onehalf of the properties which were the subject matter of the tmst deed dated June 27, 1939 (Jagadatri Sampad Tmst) passed on the death of the deceased under section 5 of the Act and the remaining one-half did not. We direct that the parties shall bear their own costs since the appeal has succeeded in part. N.V.K. _A.pp(a/ allowed_ _in_ _part._ ing that the whole of the trust properties constituted a religious endowment and did not pass on the death of the deceased. -~ . ' _)._