BHAGWATI, J. - (1.) THIS reference under the ED Act raises a short question affecting the levy of estate duty on certain property forming the subject matter of a settlement. The settlement we have to consider was made by one Gunvantlal Jivanlal (hereinafter referred to as the deceased) and his wife, Bai Jasud, on 27th Jan., 1951. The deceased settled a sum of Rs. 50,000 and certain policies of insurance on his life of the aggregate value of Rs. 2,00,000 of which the surrender value at the date of the settlement was Rs. 67,413 15 0 and Bai Jasud brought in a sum of Rs. 50,000 belonging to her in the settlement. The deceased and Bai Jasud were appointed trustees and the settlement declared that the trustees shall hold the trust funds upon the trusts and subject to the powers, provisions, declarations and agreements contained in the settlement. Clauses 3 and 4 of the settlement provided for the disposal of the income after meeting the expenses of management and preservation of immovable property, if any, purchased out of the trust funds and of them, cl. 3, which is the material clause for the purpose of the present reference, ran as follows : "3. Subject to the provisions contained in cls. 1 and 2 hereof the trustees shall stand possessed of the settled premises upon trust until the death of the last survivor of the first settlor and the said Ravindra, Bipin, and Yogesh to apply the net income for and towards the maintenance and personal support of all or such one or more exclusively of the other or others of the following persons, namely, the first settlor, the second settlor, the children of the first settlor and the widow and issues if any of the sons if any of the first settlor in such manner and if more than one in such shares and proportions as the trustees may from time to time think proper with power to the trustees in their absolute discretion to pay the whole or any part of the net income of the settled premises to any one or more of them to the exclusion of the other or others of them."
(2.) THE disposition of the corpus was dealt with in cls. 5, 6 and 7 and sub cls. (a) and (c) of cl. 5 provided as under : "5. (a) From and after the date of the death of the last survivor of them the first settlor, the second settlor and the said Ravindra, Bipin and Yogesh or the re marriage of the second settlor if she shall survive the first settlor and the said Ravindra, Bipin and Yogesh which date is hereinafter referred to as 'the date of distribution', the trustees shall hold the settled premises upon trust to divide the same among the issue of the sons of the first settlor, including the said Ravindra, Bipin and Yogesh per stirpes capita so that each male shall receive twice the share of each female in the same degree of propinquity . . . . (c) If there shall be no issue of any sons or daughters of the first settlor living at the date of distribution then the trustees shall hold the settled premises or if any share has to be paid to any widows under cl. (b)(i) hereof the balance of the settled premises upon trust to dispose of the same as part of the residue of the estate of the first settlor." Clause 8 is an important provision and it gives rise to considerable controversy between the parties in regard to its interpretation. We shall therefore set it out in extenso : "8. The trustees may at any time or times at the request of the first settlor and after his death of the second settlor and after the death of the first and second settlors at their discretion raise any part or parts not exceeding one moiety of the vested or expectant share of any child or remoter issue of the first settlor under the trusts or powers of these presents and may either pay the moneys to be so raised as aforesaid to such child or remoter issue or otherwise apply the same for his or her advancement, preferment or benefit as the trustees shall think fit. The trustees shall at the request of the first settlor and after his death of the second settlor and after the death of the first and second settlors the trustees may at their discretion pay out of the income or if necessary out of the corpus of the settled premises such sums as the first or the second settlor as the case may be from time to time direct or the trustees after the death of the first and second settlor may from time to time think fit for meeting expenses of illness, medical treatment, education and other heavy expenses which cannot be met from any other source for the benefit of the first settlor the second settlor or any child or remoter issue of the first settlor."
(3.) CLAUSE 9 was relied upon before the CBDT on behalf of the Revenue but no reliance was placed upon it before us and it is therefore not necessary to make any reference to it. Some reference was made in the course of the arguments to cl. 10 which conferred power on the deceased to give directions to the trustees in certain matters but in our view it is not a material clause and nothing turns upon it. Clause 11 was the next clause on which the strongest reliance was placed on behalf of the Revenue and it made the following provision : "11. The first settlor shall have power in addition to the general power contained in the last preceding clause from time to time to direct the trustees in the management of the trust hereby created : (a) to allow him and/or the second settlor to live from time to time in any part or parts of any immovable property comprised in the settled premises free of rent; (b) to direct any part or parts of the settled premises to be let or given in the occupation of any person free of rent or upon such rent and upon such condition as the first settlor may in his absolute discretion think fit; . . ." ;