BHAGWATI, J. - (1.) THIS reference raises a question relating to the applicability of S. 5 of the ED Act, 1953, in relation to the settlement made by one Essoofalli Ebrahimji. The settlement was made on 15th July, 1938, and the subject matter of the settlement consisted of several freehold and leasehold immovable properties. The settlor had a wife by the name of Safiabai and two sons, namely, Mohmedbhai and Salebhai. The settlor appointed Bai Safiabai, Mohmedbhai and himself as the trustees of the settlement and settled the immovable properties described in the Schedule on certain trust, which, so far as material for the purpose of the present reference, were as follows : " 6. After my death, whatever income may be realised shall be used and appropriated as follows by the trustees hereby appointed or any of the surviving trustees : The net income of the said trust estate, after paying the interest on debt due by me, shall be divided at the end of every year into three (equal) shares and the said three shares shall be distributed in such manner as to give one share to my eldest son, Mohamedbhai Essoofalli, the second share to my wife Safiabai and the third share should be given for the maintenance of my younger son, Salehbhai, his wives and children and the said share shall be kept by my eldest son, Mohmedbhai, with himself and spent (by him) for the maintenance of the wives and children of Salehbhai but the said arrangement shall be subject to cls. 9 and 10 hereof . . . . . (10) My eldest son, Mohamedbhai, has at present got four sons and one daughter, in all five children alive. Adamji is the youngest son of my eldest son Mohamedbhai. When Adamji completes the age of eighteen years and attains majority and if Safiabai had died before that time then, or, if the said Adamji attained majority during the lifetime of Safiabai then when Safiabai dies then the trustees shall divide the trust properties in such a manner that one half share shall be taken by my eldest son, Mohamedbhai, and if he had died before that, then, that share shall be given to his children and his wife and that shall be divided according to the dictates of my religion and the other half shall be divided between wife and children of Salehbhai in such a manner that the two annas in a rupee share shall be given to each of his two wives and the remaining twelve annas shall be distributed amongst his (Salehbai's) children according to the dictates of my religion and after doing so this trust shall be ended and in making division in this manner if disputes arose then none of the parties should go to Court of law but if such an occasion arises than I appoint my trusted friends and advisers, Mr. Rangildas Ghelabhai, Gandhi, Vakil, and Mr. Vithalbhai Lalbhai Hajari, for making such distribution and they shall intervene and distribute the trust property as arbitrators according to this trust. If, at that time both these arbitrators be not alive then the surviving arbitrator shall make the distribution but if both of them were not alive then each party shall get the distribution made by entrusting the matter to two arbitrators, one to be appointed by each party."
(2.) THE settlor died thereafter leaving his widow, Bai Safiabai, and his two sons, Mohamedbhai and Salebhai, but we are not concerned with his death, for the claim to estate duty in the present reference arises on the death of Safiabai and not on the death of the settlor. Bai Safiabai (hereinafter referred to as the deceased) died on 6th Oct., 1955, and on her death a question arose as to whether estate duty was exigible on the whole of the trust property or on any part of it and if so on what part. The Assistant Controller took the view that one third of the trust property passed on the death of the deceased and was therefore includible in the principal value of the estate of the deceased. The contention of the accountable person was that no part of the trust estate could be said to have passed on the death of the deceased and he therefore preferred an appeal to the Appellate Controller. Subsequently, however, realising that the stand adopted by him was incorrect, he sought permission to withdraw the appeal but the Appellate Controller did not grant such permission as in his view the whole of the trust estate and not merely one third part of it was includible as property passing on the death of the deceased. He accordingly issued a notice of enhancement to the accountable person calling upon him to show cause why the assessment should not be enhanced by including the entire value of the trust estate instead of merely one third part of it. The accountable person raised a preliminary contention that the Appellate Controller had no power to enhance the assessment suo motu but this contention was rejected and the Appellate Controller taking the view that the whole of the trust estate passed on the death of the deceased, included the value of the entire trust estate in the principal value of the estate of the deceased. The accountable person thereupon carried the matter further in appeal to the Tribunal. The Tribunal took the view that the Appellate Controller was within his jurisdiction in issuing the notice for enhancement but on merits the Tribunal came to the conclusion that only one third of the trust estate passed on the death of the deceased and not the whole of the trust estate as held by the Appellate Controller and accordingly modified the assessment. The Controller being aggrieved by the decision of the Tribunal made an application for reference of the questions of law arising out of the order of the Tribunal and, on the application of the Controller, the Tribunal referred the following two questions for the opinion of this Court : "(1) Whether, on the facts and in the circumstances of the case, the whole of the trust estate was to be included in the assessment or only a portion thereof and, if so, what portion ? (2) If the entire value of the trust estate should be deemed to have passed on the death of the deceased, whether the whole of it should be included in the principal value of the estate or only a portion thereof, the balance being treated as forming a separate estate by itself in accordance with s. 34(3) of the ED Act ? and if so what portion should be included in the principal value of the estate ?" These two questions were referred at the instance of the Controller but, at the instance of the accountable person, a third question was also referred to us for our opinion and that was : "(3) Whether, on the facts of the case, the accountable persons in respect of the trust property were the trustees of the deed of trust dt. 15th July, 1938, under S. 53(1)(b) of the ED Act and whether as the trustees were not in appeal before the Appellate Controller the notice of enhancement given by the Appellate Controller to Mohamedbhai Essoofalli Badri, the original accountable person, was bad in law ?"
(3.) WE may mention straightaway the third question was not pressed by Mr. Bhabha on behalf of the accountable person and we need not therefore say anything about it.;