CONTROLLER OF ESTATE DUTY, WEST BENGAL versus USHA KUMAR & ORS.

CONTROLLER OF ESTATE DUTY, WEST BENGAL

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-liability to estate duty. '

One 'W' executed deed of trwt, transferred all his properties to the sllid trust and appointed himself as the first managing trustee for 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 whole was void, and held that the properties passed on the death of tho deceased under section 5 of the Act.

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

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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.

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 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 tho-propertie• 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 religious endowment and did not pass on the death of th<:r deceased. (248 CJ

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 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 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 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

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

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 imme-diately 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.

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From the Judgment •and Order dated 21-5-1971 of the Calcutta H.igh Court in Matter No. 95/65.

"-)' [1 ]

T. A. Ramachandran and Miss A. Sub~hini fm the Appellant.

V. S. Drsai, D. N. Mukherjee and N. R. Chaudhary for the Res-pondent.

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 pro-perties which were the subject matter of trust can be treated as pass-ing 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 deed of trust on June 27, 1939 ·;.._ . constituting 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 period of one year. He directed that after he ceased to be the trustee, his son, the deceased should act as the manag-ing trustee o[ the trust. On the death of the deceased, the deed direct-ed, 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

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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 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 sur-plus remaining out of it was to be utilized for acquiring new properties for the trust, the only inference which could be drawn from the read-ing of the entire deed is that in all one-half of the total income was ear-marked 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 I uose for consideration in the estate duty proceedings. The accountable ·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 Con-F troller 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 public or charitable one, the trust as 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 the trust was said to be for certain religious pµrposes, the further direc-I tions 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

CONTROLLER ESTATES DUTY v. USHA KUMAR (Venkataramiah, !.) 245

competent to alienate the trust properties led to the inference that the 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.

On 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 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 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 charge in favour of 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 :-

"As observed by this Court in Menakuru Dasaratharam: Reddi & Anr. v. Duddukuru Subba Rao & Ors. (AIR 1957 S.C. 797) that dedication of property to religious or charitable purposes may be either complete or partial. If the dedication is complete trust in favour of charity iS created. i!f the dedication is partial, trust in favour of charity is not created but charge in favour of the charity is attached to, and follows, the property which retains its original private nnd secular character. Whether or not dedication is com· plete would naturally be question of fact to be determined in each case on the terms of the relevant document if the dedication in question was made under document. In such n case it is always matter of ascertaining the true intention Qf the parties, it is obvious that such an intention must be gathered on fair and reasonable construction of the document considered as whole. If the income of the pro-ierty is substantially intended to be used for the purpose of harity and only an insignificant and minor portion of it is

J) [19731 I S.C.R. 570.

In that case, the document under which it was claimed that complete dedication of certain property had been made for purposes contained recital which read as follows :-·C "If, after conducting the said charities properly, there be any surplus, the same shall be utilised by the said Shanmu-gan- Pillai and his heirs for family expenses. They should also look after the same carefully and properly."

religion~.

On the basis of the evidence available in the case and the recitals in tlie document including the one extracted above, the Court conclud-ed : "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~ --iicomplete and consequently there was 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 pro-perties 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 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 ·G 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 motor car or 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 child widow or without 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

.CONTROLLER ESTATES DUTY l'. USHA KUMAR(Venkatara91iah, J.) 247

family." similar provision' was made with regard to the daughters of 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 fair reading of the deed, we are of opinion that there was only 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 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 -M gifted or settled on persons in contravention of the rule aga.inst 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 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 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-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 conti-nued to be the properties of the author of the trust notwithstanding the execution of the trust deed.

From the facts and in the circumstances of the case, we are of the I view that only one-half of the properties covered by the trust corres-ponding 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 remain-ing 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-ing that the whole of the trust properties constituted religious endow-c ment and did not pass on the death of the deceased.The appeal is, therefore, partly allowed. We hold that only one-half 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.

A.pp(a/ allowed in part.