OFFICIAL TRUSTEE OF BOMBAY Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) IN this reference made to this Court by the CBDT, under S. 64(1) of the ED Act, 1953, the following question has been referred for our opinion :

(2.) THE estate duty assessment pertains to the estate of Her late Highness Maharani Chimnabai Gaekwar of Baroda, who died on 23rd Aug., 1958. It appears that an account of the property passing on the death of the deceased was furnished to the Dy. CED, Bombay, by Prince Khanderao Raje Gaekwar of Baroda and Her Highness Usha Raje Rani of Jath, who were the administrators of the estate of the deceased and accountable persons under the Act. The Dy. CED found that the deceased had an interest under a trust settlement made by His late Highness Sir Sayaji Rao Gaekwar, Maharaja of Baroda, which had not been accounted for. He called upon the official trustee, Bombay (who was the trustee of the settlement), as the accountable person to furnish the necessary account which he did under protest, denying any liability to pay estate duty in respect of this item.

(3.) IN other words, the deceased under cl. 4 was entitled to receive 1/3rd share of the income of the trust funds daring her lifetime and either upon her death or earlier determination of her interest, the trustees were to hold the same in trust absolutely for the person who at the date of such determination shall occupy the gadi of the Gaekwars of Baroda, The settlor died some time in 1939, and thereafter one of his sons, Fatehsingh, occupied the gadi of the Gaekwars of Baroda. After the merger of the State of Baroda with the Indian Union, some difficulties were experienced in the matter of administration of the trust. The beneficiaries also desired that the corpus of the trust fund should be distributed amongst them and, therefore, they approached the Bombay Government for necessary action. The Bombay Government thereupon passed an enactment "The Royal Family (Baroda) Trust Fund (Repealing) Act, 1956" (hereinafter called the "Bombay Act") which came into force on 30th March, 1957. As a result the trust properties were vested in the official trustee to be held on trust in accordance with the provisions of the Bombay Act. Under S. 9 (1) of the Bombay Act, until 30th March, 1957, the official trustee had to "give effect, as far as possible, to the provisions of the settlement deeds by payment of the income thereof (i.e., of the trust) to the respective beneficiaries. After 31st March, 1957, the official trustee had to transfer absolutely certain specified shares of the trust funds to certain named beneficiaries (the deceased was not one of them) vide ss. 7 and 9(2) of the Act, provided that after 31st March, 1957, and until each part of the trust fund including the proceeds of the trust fund has been transferred in accordance with the provisions of S. 7, the official trustee should hold each such part on trust for the respective beneficiaries and shall give effect as far as possible to the provisions of the settlement deeds as varied by the provisions of the Act by payment of the income thereof to the respective beneficiaries. In other words, under the aforesaid relevant provisions of the Bombay Act, the position became quite clear that it was only up to 30th March, 1957, that the deceased, Her late Highness Maharani Chimnabai Gaekwar, was entitled to receive 1/3rd share in the income of the trust fund, but after 31st March, 1957, onwards her said life interest came to an end and the corpus became liable to be distributed amongst the beneficiaries and till such corpus was so distributed amongst the beneficiaries the income became payable to the said beneficiaries. Notwithstanding the aforesaid position it may be stated that in point of fact, even after 31st March, 1957, 1/3rd share in the income of the corpus was actually paid to the deceased till her death which occurred on 23rd Aug., 1958, but it is obvious that such payment must be regarded as some sort of bounty given to her as she was not entitled to the same under the provisions of the Bombay Act.