Tan Ah Tah J:

This appeal concerns the incidence of estate duty paid on the deaths of income beneficiaries of the estate of Syed Ahmed bin Abdulrahman Alsagoff, who made his will on 30 December 1868 and died on 27 March 1875. The provisions of the testator's will, so far as they are material, may be summarised as follows. The net income from the testator's freehold and leasehold property is to be divided annually amongst his wife and children and their descendants according to the shares prescribed by Mohammedan law. The net income is to be distributed during the lifetime of the last survivor of his children and more remote issue living at his death and for twenty years after the death of such survivor. The share of a male child is to be twice that of a female child. After the death of a child, the share payable to the child is to be paid to his or her children, a male child's share being twice that of a female child, and so on from generation to generation. If a descendant of the testator dies without children, then his or her share is to devolve upon other descendants of the same degree. At the expiration of the period of twenty years the property is to be sold and the proceeds of sale are to be divided amongst the several persons then entitled to receive the net income in proportion to their several rights and interests therein according to Mohammedan law.

It has been established that the date of distribution of the corpus is 28 May 1961. Estate duty has been paid on the death of each of the income beneficiaries who died before 28 May 1961. In the majority of such cases, the trustees raised the estate duty by charging the share of the corpus passing on the death of the respective income beneficiaries by way of mortgage. The interest payable on all such mortgages and on advances of capital monies which were also made by the trustees of the estate for the purpose of paying the estate duty was deducted from the income to which the successors of the respective deceased income beneficiaries became entitled before any distribution of income was made to such successors.

In the circumstances the trustees took out a summons for the determination of certain questions the principal one of which was whether estate duty payable on the death prior to 28 May 1961 of an income beneficiary should be borne by that portion of the corpus of the testator's estate accruing to the successors of the deceased income beneficiary or by the general corpus of the estate. Another question was whether interest charged after 28 May 1961 in respect of unpaid estate duty or interest charged after 28 May 1961 on mortgages raised for the purpose of paying estate duty arising on the death prior to 28 May 1961 of an income beneficiary should be borne by that portion of the corpus of the testator's estate accruing to the successors of the deceased income beneficiary or by the general corpus of the estate. The learned Judge in the Court below decided that both the estate duty and interest should be borne by that portion of the corpus of the testator's estate which passed upon the deaths of the respective income beneficiaries. It is from this decision that this appeal has been lodged.

In his judgment the learned Judge referred to Lord Macnaghten's well-known dictum in Earl Cowley v. Inland Revenue Commissioners [1899] AC 198 at p. 212 to the effect that ss. 1 and 2 of the Finance Act, 1894 are mutually exclusive. Mr. CH Smith, who represents the beneficiaries who are interested in contending that the estate duty and interest should be borne by the general corpus of the estate, has pointed out that Lord Macnaghten's dictum was disapproved by the majority of the House of Lords in Public Trustee v. Inland Revenue Commissioners [1960] AC 398 and that the learned Judge was in error in relying on that dictum. It is perfectly true that the dictum has been disapproved but, in my opinion, that fact has no relevance to the questions which have arisen for determi