Law:

Section:

Section 5 of the Estate duty Act, 1953-Property passing on death-Father settled all his properties on trust as per deed dated 27-6-1939-One-half of total income earmarked for religious purposes and other half for benefit of trustees and family members-father died in 1941-His son, managing trustee, also expired on 17-4-1955-Deputy controller included value of entire trust properties in dutiable estate under section 5-Inclusion upheld by CBDT but deleted by high court-Whether high court erred in law in holding that all trust properties constituted a religious endowment immune from estate duty-Held, yes Facts WC constituted a trust vide trust deed dated 27-6-1939, and transferred to it all his properties and appointed himself as the first managing trustee for one year. The trust deed stipulated, inter alia, as under: 1. After he ceased to be the trustee, his son (deceased) should act as the managing trustee and, on his death, his sons and grandsons, etc., should be appointed as trustees. The properties should continue to belong to the trust and the heirs were divested of the power to deal with them as their own or to alienate. 2. Out of the income from the trust properties in any year, one-fourth thereof should be utilised for payment of taxes in respect of the trust properties and for expenses on repairs/constructions, etc., of the house properties. Out of the surplus, the trustees could acquire new properties which would be deemed to be the trust properties. 3. Three-eighth of the total income should be spent towards religious and charitable works, and the remaining three-eighth was permitted to be used by the trustees and other family members. WC died in 1941 and his son PG (the deceased) became the managing trustee. The deceased also expired on 17-4-1955. In the course of estate duty proceedings, the accountable person contended that no estate duty was payable in respect of the trust properties which did not pass on the death of the deceased. The Deputy Controller, however, included the value of the said properties under section 5, holding that the provisions of the trust were such as to keep the properties tied up in perpetuity without any power of alienation…

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