MAHENDRA RAMBHAI PATEL versus CONTROLLER OF ESTATE DUTY, GUJARAT

Citation: [1967] 1 S.C.R. 991 · Decided: 28-10-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

B 
• c 
D 
• 
E 
F 
I 
G 
H 
I 
MAHENDRA RAMBHAI PATEL 
v. 
CONTROLLER OF ESTATE DUTY, GUJARAT 
October 28, 1966 
[J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.] 
Estate Duty Act, 1953 (34. of 1953), ss. 2(15), S and 23-Property 
settled by deed of trust-Beneficiaries entitled lo maintenance but not to 
hold the property before attaining age of 25 years-One of the benefi-
ciaries dying before that age-His interest 
whether 'property' 
untfer 
s. 2(15)-Whetlwr passes under s 5.-App/icabi/ity of s. 23 . 
Under a deed of trust 160 shares of a company were settled equally 
upon the appellant and his younger brother. According to the deed the 
trustees were to bold th~ shares of each ooneficiary till he attained the 
age of twenty-five years. Before that the income from the shares was 
to be applied for the benefit and advancement of the beneficiaries. If 
either of them died before attaining ihe age of twenty-five years bis shares 
were to devolve on persons named in els. 6 and 7 of the deed but the 
accumulated income was to devolve on his. heirs. Clause S of ihe deed 
laid down that the beneficiaries could not before attaining the age of 
twenty-five years mortgage or encumber the shares or sell the same. The 
appellant's younger brother died in 1954 while he was still a minor and 
unmarried. The Assistant Controller of Estate 
Duty held 
that 
the 
deceased's interest .Passed to the appellant under s. 5 of the Estate Duty 
Act. 1952 and levied tax accordingly. The Central Board of Revenue 
and the High Court upheld the finding, The appellant contended before 
this Court that before attaining age of twenty-five years neither beneficiary 
had any interest in the property being entitled under the deed only to 
maintenance. 
Reliance was also placed on s. 23 of the Act. 
HELD : Though the shares were not to be delivered to the deceased 
until he attained the age of twenty-five years, the shares belonged. to hil!l 
since the execution of the deed of trust, and he was 
also beneficially 
entitled to the income of the shares. His interest in the shares and the 
income was not an estate in remainder or reversion, ·nor was his interest 
a future interest. 
He was presently entitled to the whole in.come of Ilia 
one-half share in the said 160 shares, and after provision of maintenance, 
if any surplus remained, he was the beneficial owner of the accumulation 
of such surplus income. But for cl. 5 he could dispose it of as be willed, 
and if he died it was heritable by his heirs. [996 G-H] 
In. the circumstances, the interest of the deceased in the shares and in 
the accumulated income was 'property' within the meaning of s. 2( 15) of 
the Act. 
On his death ihe property passed to the appellant who wu 
liable to estate duty. [995 D-EJ 
Since the interest of the deceased did not fail or determine before it 
became an interest in possession s. 23 of the Act had no application to the 
case. 
[995 HJ 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. I 067 of 1965. 
Appeal from the judgment and order dated October 28, 1963 
of the Gujarat High Court in Estate Duty Reference No. 1 of 1963. 
992 
SUPREME COURT llEPOltTS 
(1967) I S.C.R. 
~ . 
A. K. Sen, G. L. Sanghi and B. R. Agarwala, for the appellant. 
n 
S. T. Desai, A. N. Kirpa/ and R. N. Sachthey, for the respon-
dent. 
The Judgment of the Court was delivered by 
Shah, J. Under a deed of trust dated June 26, 1941, one 
Rambhai Patel settled under a deed subject to certain terms and 
conditions 80 shares of the Central Cotton Trading Company 
(Uganda) Ltd. for the advancement and maintenance of his son 
Manubhai, and an equal number of shares for the benefit of his son 
Mahendra. Manubhai died on June 7, 1954, when he was a minor 
and unmarried. 
The Deputy 
Controller of 
Estate Duty, 
by order dated August 26, 1959, brought the interest of Manubhai 
in the settlement to tax in the hands of his brother Mahendra on 
the footing that it was vested in. possession in Manubhai and was 
chargeable to estate duty under s. 5 of the Estate Duty Act 34 of 
1953. The order of the Deputy Controller was confirmed in appeal 
to the Central Board of Revenue. 
The Central Board of Revenue referred the following question 
to the High Court of Gujarat under s. 64 of the Estate Duty Act 34 
of 1953 
B 
c • 
D 
"Whether on the facts and in the circumstances of the 
• 
case, the inclusion, in the estate of the deceased, of the 
amount of Rs. 10,43,050/- being the trust fund, was justified 
£ 
in law ?"

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