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1992 Supreme(Guj) 422
IN THE HIGH COURT OF GUJARAT
G.T. Nanavati, S.D. Dave, JJ.
Aratgauri C. Jhaveri (Decd.)(By Accountable Person Krishnalal C. Jhaveri) - Petitioner
Versus
First Assistant Controller of Estate Duty - Respondent
Estate Duty Reference No. 4 of 1979
Decided On : 12-10-1992
For the Petitioner:J.P. Shah, Advocate
For the Respondent:M.J. Thakore, Advocate
A life interest given to a person under a will is an absolute life interest unless there is a clear indication to the contrary in the will.
Headnote:
ESTATE DUTY - Whether the residuary estate of the deceased testator passed on the death of his widow under section 11 of the Estate Duty Act, 1953 - Whether the deceased had a life interest in the entire estate under the will of the deceased - Whether the deceased had interest in possession in the residuary estate under the will of her deceased husband.
Fact of the Case:
The deceased, Shri C. M. Jhaveri, bequeathed all his properties to his wife, Smt. Aratgauri, for her life, without the power of alienation, except for dire need. Smt. Aratgauri assigned her life interest to her two sons for an amount of Rs. 10,000 within two years of her death. The issue arose whether the disposal of the life interest would be liable to estate duty under section 11 of the Estate Duty Act, 1953.
Finding of the Court:
The Tribunal held that the residuary estate of the deceased testator passed on the death of his widow, Aratgauri, under section 11 of the Estate Duty Act, 1953. The Tribunal also held that, under the will of the deceased, Shri C. M. Jhaveri, the deceased had a life interest in the entire estate and that the deceased, Aratgauri, had interest in possession in the residuary estate under the will of her deceased husband.
Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the residuary estate of late Shri C. M. Jhaveri or any part thereof passed on the death of his widow, Aratgauri C. Jhaveri, under section 11 of the Estate Duty Act, 1953 ? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that under the will of C. M. Jhaveri, the deceased had life interest in the remainder estate, left after discharge of specific legacies without any discretion in the execution regarding disbursement of the income of the estate ? 3. Whether, on the facts and in the circumstances of the case, the deceased Aratgauri had interest in possession in the residuary estate under the will of Shri C. M. Jhaveri ?
Ratio Decidendi: The court held that the will of the deceased, Shri C. M. Jhaveri, clearly indicated that the deceased, Aratgauri, was given an absolute life interest in the estate. The court noted that the deceased was given a specific bequest of Rs. 10,000 and all the remaining properties of the deceased were given to her for her lifetime. The court also noted that the deceased was entitled to alienate the property in case of dire need. The court further held that the provisions made for the two daughters of the deceased, Shri C. M. Jhaveri, did not reduce the life interest of the deceased, Aratgauri, to a mere beneficiary.
Final Decision: The court answered all the questions in the affirmative, against the assessee and in favor of the Revenue.
JUDGMENT :
S.D. Dave, J.
The Income-tax Appellate Tribunal, Ahmedabad Bench 'B', while exercising the jurisdiction under section 64(1) of the Estate Duty Act, 1953, has, at the instance of the accountable person, referred the under mentioned three questions for our answer :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the residuary estate of late Shri C. M. Jhaveri or any part thereof passed on the death of his widow, Aratgauri C. Jhaveri, under section 11 of the Estate Duty Act, 1953 ?
2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that under the will of C. M. Jhaveri, the deceased had life interest in the remainder estate, left after discharge of specific legacies without any discretion in the execution regarding disbursement of the income of the estate ?
3. Whether, on the facts and in the circumstances of the case, the deceased Aratgauri had interest in possession in the residuary estate under the will of Shri C. M. Jhaveri ?"
2. The facts in the background of the present reference do not appear to be much in dispute, as the questions in controversy revolve around the interpretation and construction of the last will and testament of the testator, with a view to gather his correct and real intent behind the testamentary disposition.
3. One Shri C.M. Jhaveri, by his last will and testament dated November 28, 1946, had bequeathed all his properties to his wife, Smt. Aratgauri, for her life, without the power of alienation, except for dire need as per clause 11 of the will. According to clause 12 of the said will, he had appointed his two sons, Vaikunthlal and Krishnalal, as the executors of this estate. The deceased testator had also made provision for his widowed daughter and her son and for the marriage, etc., of his youngest unmarried daughter, Shakuntala, as per clauses Nos. 14 and 15 of the said will. He had also directed under clause No. 17 of the said will that, on his wife's death, his two sons, Vaikunthlal and Krishnalal, would take all his remaining properties in equal shares. The testator, Shri C. M. Jhaveri, had expired on July 14, 1950. The above said will in question was his last will and testament on which there is no dispute before us. It appears that Smt. Aratgauri had by the deed of assignment dated June 8, 1961, assigned her life interest in all the properties given to her under the said will to her two sons, namely, Vaikunthalal and Krishnalal, for an amount of Rs. 10,000. As the deed of assignment had been made within the statutory period of two years of her death which occurred on June 27, 1961, a brief question had arisen for the consideration of the Revenue as to whether the disposal of the life interest would be liable to estate duty under section 11 of the Estate Duty Act, 1953.
4. The assessment orders pronounced by the first Assistant Controller of Estate Duty, Ahmedabad, dated March 23, 1974, would go to show that, on the death of the late Smt. Aratgauri who had expired on June 27, 1961, the estate duty account was filed by the accountable person on October 16, 1965. According to the accountable person, the deceased was having at best only a life interest as per the will and this life interest was disposed of by her during her lifetime before her death and, therefore, according to the accountable person, no part of the estate left by late Shri C. M. Jhaveri, the husband of the deceased, would pass on her death. It was also contended by the accountable person that even if this life interest of the deceased is accepted as a finding of fact, then also the above said was not an absolute life interest of the deceased alone as discretion was given to the executors of the will to spend the income of the estate for the benefit of the deceased at their discretion. In short, therefore, it was the contention raised on behalf of the accountable person that the deceased, Smt. Aratgauri, was merely a beneficiary under t
