CONTROLLER OF ESTATE DUTY, GUJARAT versus HUSSAINBHAI MOHMEDBHAI BADRI

Citation: [1974] 1 S.C.R. 122 · Decided: 30-04-1973 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

122 
CONTROLLER OF ESTATE DUTY, GUJARAT 
v. 
HUSSAINBHAI MOHMEDBHAI BADRI 
April 30, 1973 
[K. S. HEC'QE AND H. R. KHANNA, JJ.] 
Estate Duty Act-Sections 5 (l ), 2(15), (16) Se11/ement by trust-Se11/or, 
his 
wife 
and 
eldest 
son 
appointed 
trustees-Sett/or 
entitled 
to 
net 
income of 
trust properties-On 
his 
death, 
and of 
said inconze 
to be 
ltppropriated-- by wife-On lvife's death 1/3 share of trust to be given 
eldtsl 
son-Whether whole of trust to be included in assessment or on/.y a portion 
thereof-"Property passing on dearh"-Scope of-Change in. the beneficial in-
terest and not title, is tlze real test. 
• 
The settler in the instant case, set.lied upon trust certain immovable proper .. 
lies and lease-hold lands by an indenture dated 15-7-1938. 
Under 
that 
deed· 
the settlor, his wife and their eldest !)On (the respondent) were appointed 
trustees. Under the terms of the trust deed. the settlor was entitled to the net 
i_ncome of the trust properties during his lifetime. 
After his death, the income 
of those properties was to be divided into three equal shares; l /3rd of the income 
was to be appropriated by the wife during her lifetime. 
Out of the remaining 
2/3rd, I /3rd was to be paid to the respondent and the remaining I /3rd was to be 
entrusted to the rcs.vondent for being utilised for the maintenance of the two 
wives and the children of the settlor's youngest son. who bad died before the 
trust deed was executed. 
On the death of settlor's wife. the trustees were to 
divide the trust properties into two equal shares of which one share would go 
to the respondent. 
The settlor·s wife died on 6·10-1955. 
The value of the estate left by her 
was determined by the Assistant Controller at Rs. 4,15,000/· on the basis that 
tbe estate consisted of two items. 
(a) her individual properties and (b) l/3rd 
of the trust properties. 
He overruled 
the objection of the 
respondent, the 
accountable person, to the inclusion of the value of the l/3rd share in the trust 
properties in the computation of the value of the estate that "passed" on the· 
death of the wife. 
On appeal, the Appellate Controller considered the entire 
trust property as the property that "passed" on the death of deceased and con~ 
sequently enhanced the 
valuation made by the Assistant 
Controller. The 
Tribunal set aside the order of the Appellate Controller and restored that of 
the Assistant Controller holding that only I /3rd of the trust estate "passed" on 
the death of the deceased. 
At the instance of the appellant, the Tribunal re-
ferred to the High Court fOr its opinion the question as to whether the whole of 
the trust estate was to be included in the assessment or only a pGrtion thereof 
and if so what portion. The High Court answered that question in favour of 
the respondent assessee holding that under s. 5 of the Act only the beneficial 
interest of the deceased in the tru<;t estate "passed" en her death and the passing 
of the legal' title to the estate from the trustees to the 
beneficiaries after the 
death of the deceased was not a material circumstance. 
On appeal by certificate to this Court, the appellant contended that: (i) the 
title to the trust properties vested in the trustees till the death of the deceased; 
(ii) that title "passed" to the beneficiaries immediately the deceased died; (iii) 
the title that "passed on the death of the deceased was the title in respect of the 
entire trust prooerty and therefore it must be held that the entire trust property 
"passed" on thC death of the deceased and (iv) hence, the value of the entire 
trust property should be taken into consideration in computing the value of the. 
estate that na<ised on the death of the deceased. The resoondent contended that : 
(i) the deceased had only 1/3rd interest in the trust property and that alone 
''passed" on her death : and (ii) the deceased's position as truo;tee, which came 
to an end on her death be considered as property passing on her death. 
Dismissing the appeal, 
A 
B 
c 
D 
E 
F 
G 
H 
... 
A 
B 
c 
D 
E 
F 
CONTROLLER ESTATE DUTY v. H. M. BADRI (Hegde, !.) 
123 
HEID : (i) Ever since the death of the settlor, beneficial interest in 2/3rd· 
of the income of the trust property vested in pefsons other than 
th~ deceased. 
The deceased was entitled to only 1 /3rd share in the incon1e of the trust pro
4 
perty. In substance, only 1/3rd interest in the trust property passed on ker 
death. It is true that after the death

Excerpt shown. Read the full judgment & AI analysis in Lexace.