The term "settlement" in section 12 of the Estate Duty Act includes trusts, and a settlor may reserve an interest for life in the trust property by requiring the trustees to defray expenses incurred by him out of both the income and the corpus of the trust fund.

SEETHARAM REDDY, J.

( 1 ) THE question, which is rather important, referred under s. 64 (1) of the E. D. Act, 1953 (for short "the Act"), for our answer is :"whether, on the facts and in the circumstances of the case, the trust property of the value of Rs. 13,57,205 is liable to be included in the estate duty assessment of the deceased as property deemed to pass (a) either under section 12 of the Estate Duty Act, (b) or under section 10 of the Estate Duty Act ?"

( 2 ) THE relevant facts gathered from the statement of case may now be set out.

( 3 ) NAWAB Sir Mir Osman Ali Khan Bahadur, H. E. H. , the Nizam of the erstwhile Hyderabad State (hereinafter referred to as "the settlor"), wealthiest person on the planet at one time, created a trust on 2/11/1950, called "h. E. H. the Nizams Pilgrimage Money Trust". The settlor died on 24/02/1967. Under the trust, the settlor set apart Government of India Loan Securities of the face value of Rs. 22. 20 lakhs yielding an annual income of Rs. 66,600. The settlor appointed himself as one of the trustees and clause 3 (c) provided in clear terms the purpose and object of the trust (see p. 515 infra) :"during the lifetime of the settlor of defray the expenses of Haj of the settlor and of such of the members of his family as he may take with him and of their visit and pilgrimage to various Mahomedan shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending monies for charitable purposes at such places and for such other religious or charitable purposes as the settlor in his absolute discretion may, from time to time, think fit and require out of the income as well as the corpus of the trust fund in such manner and to such extent as the settlor may from time to time direct and for all or any of such purposes as aforesaid to pay such monies out of the income of the corpus of the trust fund as the settlor may from time to time require. "

( 4 ) THE other clauses are not relevant for the purpose of the case.

( 5 ) THE Assistant Controller of Estate Duty was of the view that according to clause (3) (c) of the trust deed, the settlor was entitled during his family members as he may take with him for pilgrimage, suggesting thereby that the settlor was not completely excluded from enjoying the benefit of the corpus of the trust. Therefore, by invoking the provisions of s. 10 of The E. D. Act, he treated the market value of the corpus of the trust at Rs. 13,57,205 as property passing on the death of the deceased-settlor.

( 6 ) ON appeal, the Appellate Controller of Estate Duty, while agreeing with the view of the Assistant Controller, held that the second limb of s. 10 was clearly attracted because the power of the settlor to get the pilgrimage expenses reimbursed was a benefit which could be enforced in law and also in equity. Though this reservation of benefit could not be considered as a benefit reserved under a contract, but the reservation of the benefit had been covered by the word "otherwise" used in s. 10 of the Act.

( 7 ) IN the second appeal before the Tribunal, two contentions were advanced on behalf of the accountable persons, viz. : (a) the settlement made by the deceased was not a gift within the meaning of s. 10; and (b) even if it were to be gift, the requirements of s. 10 were not satisfied. On behalf of the Revenue, while not jettisoning the claim that s. 10 was applicable, an alternative plea was raised contending that it was s. 12 that was most relevant and applicable to the facts of the case though it was not invoked by the two authorities below. Section 10, if at all applicable would only be secondary. The fresh contention being a question of law, there was no objection, not could there be one, on behalf of the accountable person. So, on the contention as to the applicability of s. 12 raised for the first time before the Tribunal, it came to the conclusion that in the settlement, the settlor reserved an interest to him for life and, consequently, the

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