JUDGMENT Chandurkar, J.
1. One Jetha Virji died leaving behind his widow, Ramavahu, and sons and daughters whose exact number at the date of death of the said Virji is not known. However, the material point of time for the purposes of this reference if July 9, 1959, which is the date of death of the widow, Ramavahu. It is not in dispute that at that time the children of Virji living were two sons and two daughter. This disposition of the property made by the deceased, Virji, was made by a deed of trust dated February 13, 1922, and a will dated April 25, 1927. We are not concerned in this reference with the deed of trust dated February 13, 1922. We are only concerned with that part of the will of the deceased, Virji, which deals with his residuary property with regard to which directions were given by the deceased, Virji, in paragraph 9 of the will which reads as follows :
“I direct my Trustees to deal with the residue of my property as mentioned below. The residuary property shall be divided between and given to those of my sons who may be alive at the time of my wife’s death in equal to those of my sons who may be alive at the time of my wife’s death in equal shares; but if at that time, any son may have died leaving (behind him) male issue, then his share shall be divided among and given to his sons in equal shares; but if there be only his daughters alive, then a moiety of his share, and the other moniety shall be given to my son who may be alive : but till that event takes place, (the expenses of) maintaining my family (of) educating the boys and other household expenses shall be defrayed out of the income in respect of the residue of my property; and if it seems necessary to give special held up in connection with the education of any son or in connection with (putting him in) business, the (pecuniary) held shall be given to him out of the principal sum after debiting the same to his account.” We have underlined the relevant portion of the will because the main question which has been debated at the bar is the effect of the underlined portion. Admittedly, two of the sons of Virji were alive at the time of the death of Ramavahu. The effect of clause 9 is that the two sons would be entitled to their separate shares in the residuary property only after the death of the widow Ramavahu. During the lifetime of Ramavahu, that is, up to the death of Ramavahu, which is the event referred to in the will when it is stated “till that event takes place”, the trustees were obliged to apply the residuary estate for the purposes of the maintenance of the family, education of the boys and other household expenses. There is no provision for accumulation of the income of the property. Clause 9 of the will also does not refer to any particular extent of the income being utilised for the benefit of either the widow or any of the sons or daughters of the deceased, Virji. We are not concerned with the concluding part of clause 9 which permits the trustees to give any special help in the matter of education of any son or for the purposes of putting him in business and which provides that such help shall be given out of the principal out of the principal sum but that the amount so advanced shall be debited to his account.
2. Now, after the death of Ramavahu, the accountable person, Govindji, who is the son of the deceased, Virji, filed return in respect of the property which, according to him, was assessable to estate duty. As already stated, we are not concerned with the other trust properties. With regard to the residuary property in respect of which clause 9 of the will operated, the value of that property was found by the Assistant Controller of Estate Duty to be Rs. 69,221. This property consisted of house property, securiets, shares and debts due. The Assistant Controller took the view that on the death of Ramavahu, the remainderman, that is, the sons became entitled to receive the whole income of the estate which before the death was primarily applicable for the estate of the objects of a discretionary trust, namely, for the maintenance of the testator’s family. The Assistant Controller, therefore, took the view that there was thus a clear change of hands of the beneficial titled or possession of the property as a whole occurring on the death of the deceased and this constituted a passing of the property within the meaning of s. 5 of the Act. The Assistant Controller further took the view that since deceased, Ramavahu, was a member of the family of Virji Jetha and was herself interested in the income during her lifetime, this estate was also aggregable with the rest of the estate.
3. In appeal before the Appellate Contr. of ED, an alternative contention was raised on behalf of the accountable person that at best, the deceased had only a right to 1/7th share of the income and that the passing of the property should, therefore, be restricted to only 1/7th of the value of the property. The Appellate Controller, however, confirmed the order of the Assistant Controller.
4. When the matter was taken in appeal before the ITA Tribunal, the Tribunal took the view that the deceased, Ramavahu, had no interest in the corpus at all and the only interest which she had in the estate of the testator was the enjoyment of the income therefrom as a member of the family of the testator. The Tribunal found that since the deceased had no interest in the corpus at any time, the benefit that accrued or arose by the censer of her interest which was confined to her right to enjoy the income from the corpus could not extend beyond that limited interest and, therefore, at the most the proportionate share which the deceased had in the enjoyment of the corpus could be said to be her interest in the said property and that interest alone could be deemed to have passed on her death. The Tribunal treated the case as one under s. 7 of the ED Act and held that only a proportionate interest was liable to be included in the principal value of the property, the proportionate interest being found to be 1/5th Share value of the residuary estate as computed by the Asst. Contr. of ED. The contention of the revenue that the entire property passed and the case was one to which s. 5 of the ED Act had been attracted having been negatived, the following question was referred at the instance of the revenue to this court :
“Whether having regard to the provisions of clause 9 of the will of Jetha Virji dated April 25, 1927, the interest of the deceased extended to the whole of such residuary estate or only to a part of it ?”
5. At the outset, it will be proper to refer to s. 5 of the ED Act, 1953, which alone, according to the revenue, is attracted in the instant case. The relevant provision in s. 5(1) reads as follows :
“In the case of every person dying after the commencement of this Act, there shall, save as hereinafter expressly provided, be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled, including agricultural, land situate in the territories which immediately before the November 1, 1956, were comprised in the States specified in the First Schedule to this Act, which passes on the death of such person, a duty called ‘estate duty’ at the rates fixed in accordance with s. 35.”
6. It is contended on behalf of the revenue by Joshi that when s. 5(1) uses the word “passes”, it means “changes hands” and what was relevant for the purpose of s. 5 was a change in beneficial interest and not title. It is contended that for finding out whether there is a change in the beneficial interest, a comparison must be made between the persons beneficially interested the moment before the death and the persons so interested the moment after the death of the deceased and if after such comparison it appears that beneficial possession and enjoyment of the property or defined part thereof is in substance and effect unaffected by death, the property or that part of it cannot be said to pass on death. It is, however, urged that so far as the present case is concerned, no member of the family consisting of deceased, Ramavahu, her two sons and two daughters, which was, according to the learned counsel, a collective class, can claim to be beneficially interested in any defined share or to any definite extent in the property, but all the members of the group, that is, the family which was a collective class together, were constituted the only people who would while Ramavahu was alive, obtain any benefit of the property or have beneficial enjoyment of the property. According to the learned counsel, on the death of Ramavahu, the right of this collective class, that is, the family ceased and the right which then arose in favour of the two sons was a new and a different right and, therefore, on the death of Ramavahu, the entire residuary estate passed under s. 5 as also under s. 7. It is contended that the two sons before the death of Ramavahu had only a contingent interest and not a vested interest, and, therefore, the case must be decided on the footing that neither of the two sons had any vested interest in the property of which they were ultimately to become owners by virtue of clause 9 of the will.
7. On the other hand, it is contended by Dastur appearing on behalf of the accountable person that the interest of the two sons prior to the death of Ramavahu was a vested interest which alone had got enlarged into an absolute interest. It is not disputed by Mr. Dastur that what has to be seen for the purposes of s. 5 of the E.D. Act is whether the deceased had any beneficial interest in the property and whether that interest had passed to someone on his death and since the interest in the residuary property had already vested in the two sons by the will, there was no passing of property.
8. Heavy reliance is placed by Dastur on the decision of the Supreme Court in Controller of Estate Duty v. Hussainbhai Mohamedbhai Badri [1973] 90 ITR 148, and especially the observations made therein at page 155 of the report which read as follows :
“This decision clearly lays down that in determining whether a particular property ‘assed’ on the death of a deceased had any beneficial interest in that property and whether that interest ‘passed’ to someone on his death.” Relying on these observation, it is contended by Dastur that Ramavahu had no beneficial interest, and that since Ramavahu had no beneficial interest in the residuary property, no property passed on her death. It is urged that all that Ramavahu had was a mere right of maintenance because the trust created by clause 9 of the will was a mere maintence trust and that such a right of maintenance was not a beneficial interest in view of the decisions in Attorney-General v. Power [1906] 2 IR 272 and Gartside v. IRC [1968] 70 ITR 663 (HL). It is argued that in the instant case the persons who could be treated as beneficially interested before and after the death of Ramavahu would be the same, namely, the two sons and that since the corpus of the residuary estate had already vested in the two sons by virtue of the will, the ratio of the decision of the Supreme Court in Hussainbhai’s case [1973] 90 ITR 148 cited supra and the decision in In re Thomas Townsend [1901] 2 KB 331; 1 EDC 336 (KB), squarely governed the instant case.
9. The question which is required to be decided is whether on the death of Ramavahu any property passed to the two sons in terms of the provisions in clause 9 of the will, as contemplated by the provisions of the E.D. Act. The provisions of the E.D. Act of 1953 are modeled on the provisions relating to estate duty in England which are to be found in the Finance Act of 1894 and the meaning of the words “passes on death” given by Lord Parker as far back as in 1914 in Attorney-General v. Milen [1914] AC 765; 2 EDC 8 (HL) has now accepted almost as a maxim. In Milne’s case, while setting out the meaning of the words “passing on the death” which are used in s. 1 of the English Act, which is a provision analogous to s. 5 of the E.D. Act, Lord Parker observed at page 779; 2 EDC 8, 21 :
“The expression ‘passing on the death’ is not further defined, but is evidently used to denote some actual change in the titled or possession of the property as a whole which takes place at the death.” This meaning has further been elaborated and adopted by the courts in England. In Nevill v. IRC [1924] AC 385; 2 EDC 219 (HL) Viscount Haldane dealing with the scheme of levy of estate duty, observed at page 389, 2 EDC 219, 223, 224 :
“That scheme is that a new duty, called estate duty, is to be levied on the principal value of the property, settled or not settled, which ‘passes’ on death. ‘Passes’ may be taken as meaning ‘changes hands’.” Then dealing with s. 1 it was observed at page 389; 2 EDC 219, 224 :
“That section is concerned with all property changing hands, whether under the provisions of an instrument settling by conferring successive rights to the same property, or by virtue of the general law prescribing the succession to property. It is a change of the hand into which the property comes that is the occasion of the tax, whether the property is settled or not.” Referring to the observation of Lord Parker in Attorney-General v. Milne [1914] AC 765; 2 EDC 9 (HL) referred to above, Lord Russell of Killowen in Adamson v. Attorney-General [1933] AC 257 (HL) at page 284; 2 EDC 419, 445, observed thus :
“As I read his statement he means than that when property passes there must be some change in the title to or possession of the property as a whole which takes places on the death.” Thus, according to Lord Russell, if there is any change in the title to or possession of the property as a whole which takes place on the death of the deceased for the purposes of s. 1 of the England Act, property must be taken to have passed on the death of the deceased.
10. The test laid down by these decisions has been further adopted by the House of Lords firstly in the case of Scott and Coutts & Co. v. IRC [1937] AC 174; 2 EDC 579 (HL) (referred to hereafter as “Scott’s case”), and then in Burrell and Kinnaird v. Attorney-General [1937] AC 257; 2 EDC 419 (HL) and explaining it further, Lord Russell at page 183 of the report in Scott’s case [1937] AC 174; 2 EDC 579, 589, observed that the question to be answered in that case was : Had the fund passes on the death of the settlor ?, and then formulating the test which had to be satisfied, it was observed :
“To answer that question a comparison must be made between the persons beneficially interested in that fund the moment before the death, and the persons so interested the moment after the death.”
11. In Scott’s case [1937] AC 174; 2 EDC 579 (HL), by a deed of settlement made in July, 1889, the Fifth Earl of Cadogan and his eldest son settled the Cadogan Estates to the use of his sons successively in tail male and in default of such issue to the use of his sons successively in tail male and in default of such issue to the use of the second son of the Fifth Earl for life with reminder to the use of his sons successively in tail male with remainders over. In 1893, the Fifth Earl bought the life estate of his said second son, and this interest was conveyed to trustees, their heirs and assigns for the life of the said second son upon discretionary trusts in favour of the said second son, his wife, and his children or remoter issue and, subject to this trust, upon trust to accumulate the surplus of the rents and profits, invest it, and apply the proceeds in discharging debts or encumbrances upon the estates, with a proviso limiting the duration of this trust. The eldest son of the Fifth Earl died in 1908 and the only son of that eldest son died in 1910. In 1915 the Fifth Earl died and was succeeded by his said second Son as Sixth Earl and the life estate of the Sixth Earl became an estate in possession. The Sixth Earl died in 1933 and was succeeded by his only son as the Seventh Earl and tenant in tail male in possession of the estates. On these facts the argument on behalf of the appellants as noticed in that case that the “dealing with the Sixth Earl’s life interest was equally of such a nature as to prevent the property from passing on his death”, and “that no beneficial interest existed in a person whose only interest was his chance of participating as an object of the discretionary trust; that the only person who could be said to be beneficially interested in the property during the period which elapsed between the deaths of the Fifth and Sixth Earls was the Seventh Earl in respect of his estate in tail male in remainder, and in respect of the trusts for accumulation, and payment off of encumbrances; and that accordingly there could not on the Sixth Earl’s death have been any passing beneficially from some person or persons to another person or persons.” (See 2 EDC pages 587, 588). It was held that on the Sixth Earl the Seventh Earl’s estate in tail male became, instead of an estate in remainder, an estate in tail mail in possession and he became entitled to receive the whole income of the estate which immediately before the death of the Sixth Earl, was primarily applicable for the benefit of the objects of the discretionary trust. This, according to the view of the Lord Russell, who delivered the judgment of the primary council, “was a change of hands in the beneficial title or possession of the property as a whole occurring on the death of the Sixth Earl, which constituted a passing of the property on that death within the meaning of s. 1 of the Finance Act, 1894″. (See 2 EDC page 588). Thus when an estate in tail made in possession came to the Seventh Earl, the estate was held to have passed on the death of the Sixth Earl.
12. The test laid down in Scott’s case [1937] AC 174; 2 EDC 579 was reiterated by Lord Russell of Killowen in Burrell’s case [1937] AC 286; 2 EDC 590, 601 (HL) where it was observed :
“In order to test whether it can be said that the property passed on his death, one must compare the position as regard the persons beneficially interested in the property immediately before the death with the position immediately afterwards.”
13. It was further observed in that case – and these observations are relevant for the purposes of the present case – that “The mere fact that a person who becomes entitled to the beneficial enjoyment of property enjoyment of property on a death, has already before that death been beneficially interest in the property does not prevent the property passing under s. 1.” (See 2 EDC pages 602, 603). Giving an illustration, the learned Law Lord further observed thus (2 EDC page 603) :
“If there is a trust during A’s life of the income of a property for a group of persons fulfilling certain qualifications, the persons who are to share from time to time and the amounts which they respectively take being in the discretion of the trustees, followed on A; s death by a similar discretionary trust during B’s life of the income of the property for a group of persons fulfilling different qualification, I would say that the title to the beneficial interest in the property as a whole changes hands on the death that one or more persons fulfilled both sets or qualifications.” Thus, though it is necessary to compare the persons who were beneficially interested and entitled to beneficial enjoyment of property immediately before the death of the deceased and the persons so beneficially interested after the death, the mere fact that the same persons are entitled to beneficial enjoyment will not in a given case prevent the property from passing under s. 5 of the E.D. Act, if the beneficial interest arises after the death under a different right.
14. In In re Hodson’s Settlement : Brookes v. Attorney-General [1939] 1 Ch 343; 2 EDC 658, 679 (CA), it was observed that thought the beneficiaries may be the same, before as after the death, but the death brings one set of trusts of income to an end and shifts the beneficial interest in the income to the possession of one who (though no doubt previously a contingent beneficiary) has no beneficial interest in possession before the death, there is a “passing” within s. 1 of the English Act.
15. The test laid down by these authorities has been summarised and the summary thereof given in a passage in Green’s Death has now been approved by the Supreme Court. In Chapter III in Green’s Death Duties 6th Ed., the following passage occurs :
“In general, ‘assasses’ may be taken as meaning ‘changes hands’. To ascertain whether property has passed, a comparison must be made between the persons beneficially interested the moment before the death and the persons so interested the moment before the death. If, after such a comparison, it appears that the beneficial enjoyment of the property (or a definable part thereof) was, in substance and in events, unaffected by the death, the property (or thereof) did not pass on the death merely because, as a matter of terminology, one set of limitations then ceased to have effect and another became operative. It may be deduced from Re Townsend [1901] 2 KB 331; 1 EDC (KB), that, to the extent that there is no change or beneficial enjoyment de facto, property does not pass merely because the exact nature or extent of the beneficial interests after the death was not ascertainable until that event occurred; or because the beneficiary was entitled to income only before the death and to capital thereafter.”
16. The Supreme Court while approving the tests referred to above observed in Hussainbhai’s case [1973] 90 ITR 148, at page 154 :
“In our opinion what is relevant in determining the scope of the expression ‘property passing on the death of the deceased’ is the change in the beneficial interest and not title.” Earlier the Supreme Court had also observed (page 152) :
“To ascertain whether property has passed, a comparison must be made between the persons beneficially interested the moment before the death and the persons so interested the moment after the death.”
17. It is in the light of these tests that we have to consider the arguments that are advanced on both sides. We must, therefore, first ascertain the position as it existed before the death of Ramavahu and then the position immediately after her death.
18. It is, therefore, necessary to go back to the provisions of clause 9 of the will, a bare perusal of which will show that it was made obligatory on the trustees to utilize the income of the residuary property for the purposes of the maintenance of the family, the education of the boys and other household expenses. This is not a case where, assuming for the moment that there are five members in the family, the interest of each of the members of the family was an ascertainable or quantifiable interest. On the terms of lc. 9 it is not possible to hold that each one of the five members of the family for whose maintenance the income was to be spent could require the trustees to spend exactly 1/5th share of the total income in respect of each of the members of the family. There was thus no individual interest in the total income in the sense that no individual member of the family could call upon the trustees to apply any definite quantified part of the income of the property for his or her own purposes. Their individual right extended only in so far as each one of members of the family could required that the trustees applied the entire part of the income of the trust properties for the purposes of their maintenance, the education of the sons and the other household expenditure. The is, therefore, much substance in the argument advanced by Dastur on the basis of the decision in Gartside’s case [1968] 70 ITR 663 (HL), that there was no individual interest of any member of the family. The interest possessed by the members of the family was the interest of a collective group inasmuch as the income of the residuary estate was to be utilised by the trustees for the expenses of the family. Distinction must, therefore, be made between the interest of a group of persons as such and interest of an individual. Such a collective interest does not by itself create any particular which can be said to be capable of beneficial enjoyment in respect of each member of the group, but the beneficial enjoyment will be by the group as a whole.
19. We may at this stage refer to the earlier decision in Power’s case [1906] IR 272, relied upon by Dastur. In Power’s case the deceased, H, took a vested legal estate under a settlement with a limitation over on his dying under 21 subject to a proviso that during his minority the trustees were to enter into the receipt of the rents providing thereout for H’s maintenance and to accumulate the surplus. If H attained the age of 21 years the accumulations were to go to him but if H were to die before the age of 21, the same were to go to the persons who would ultimately become entitled to the property. The deceased, H, died before he reached the age of 21. There was no evidence whether anything had in fact been paid for his maintenance. Dealing with the questions as to whether estate duty was payable on the death of H, Palls C. B. observed as follows :
“Had Hubert here been entitled to the entire surplus of the rents and profits of his share, I should have held his estate was one in possession; but being, as I hold him to be, entitled to part only of that surplus, and that fluctuating, uncertain, and incapable of being defined or ascertained irrespective of its application, I must hold that his estate is not in possession, and that such sums as he might receive for maintenance were payable to him, not by reason of his vested estate, which must be taken to be subject to the estate or interest of the trustees, but as maintenance, eo nominee, out of the express trust for its payment to him out of the interim income of an estate, the present income of which was not his, but the trustees’.” Apart from the fact that it was held that s. 5(3) of the Finance Act, 1894, which correspond to s. 23 of the Indian Act, applied, it was held that there was no property which can be said to pass or to be deemed to pass within the words of ss. 1 and 2 of the Finance Act, 1894. Thus it was held in that case that the possibility of receiving fluctuating sums as maintenance could not be interest ceasing under s. 2(1)(b) of the Finance Act, 1894.
20. What is contemplated by s. 2(1)(b) of the English Act was considered in Gartside’s case [1968] 70 ITR 663 by the House of Lords and it was observed at page 706 of the report as follows :
“The word ‘interest’, as an ordinary word of the English language, is capable of having many meanings, and it is equally clear that in these provisions its meaning cannot be limited by any technicality of English law……..
21. But that does not mean that everything which the man in the street might call an interest is covered by the word ‘interest’ in these sections. A man might say that a son and heir has an interest in his father’s property to which he might reasonably expect to succeed. But one can discard that meaning : the son not only has no right in or over his father’s property but he has no right to prevent his father from dissipating it. The respondents admit that, to be an interest under these provision, it must give to the holder of it some right.” In Gartside’s case [1968] 70 ITR 663 (HL), there was a discretionary trust and dealing with the right of the object of a discretionary trust has an interest individually, it was further observed at page 719 :
“No doubt in a certain sense a beneficiary under a discretionary trust has an ‘interest’ : the nature or it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. Certainly that is so, and when it is said that he has a right to have the trustees exercise their discretion ‘fairly’ or ‘reasonably’ or ‘properly’ that indicates clearly enough that some objective consideration (not stated explicity in declaring the discretionary trust, but latent in it) must be applied by the trustees and that the right is more than a mere spes. But that does not mean that he has an interest which is capable of being taxed by reference o its extent in the trusts fund’s income : it may be a right, with some degree of concretness or solidity, one which attracts the protection of a court of equity, yet it may still lack the necessary quality of definable extent which mist exist before it can be taxed.” These observations made in the context of the right of an object of a discretionary trust will, in our view, also apply in a case where the right to be maintained out of trust income is not an individual right given to any particular individual as such under a deed of trust but can be enjoyed by him only as a member of a group. Where income from the trust properties is to be applied for the maintenance of the members of the family as a group, the beneficial enjoyment of the income of the trust properties by a individual member, therefore, is not by virtue of any individual right or individual interest in the income of the trust properties, but it is by virtue of his being a member of the group in whose favour the settlement has been made.
22. Therefore, though it may appear to a layman that a member of a family for whose maintenance the trust income is being applied is a person who has an interest in the trust income, in law his right merely extends to requiring the trustees to apply the income for the purpose of maintenance of the family of which he is a member and in his own individual right, he cannot be said to be entitled to a beneficial enjoyment of any particular part of the income of the trust properties. Such a right lacks the quality of definable extent which must exist before it can be taxed under the provision of the Estate Duty Act.
23. The concept of a group interest or a class right has further been considered by the House of Lords in a later part of the judgment in Gartside’s case [1968] 70 ITR 663, where at page 709 of the report, it was observed by Lord Reid :
“There are in some of the cases indications of a view that, while each of the objects of a discretionary trust has an interest in the trust fund, this interest does not extend to the whole or any part of the interest accruing from the fund. But, on the other hand, all the objects together have a single class or group interest which does extend to the whole interest of the fund….
24. I think that this idea of a group or class right must have arisen in this way. Where the trustees are bound to distribute the whole income among the discretionary beneficiaries and have no power to retain any part of it or use any part of it for any other purposes, you cannot tell what any one of the beneficiaries will receive until the trustees have exercised have exercised their discretion. But you can say with absolute certainly that the individual rights of the beneficiaries when added up or taken together will extend to the whole income. You can have an equation x + y + z = 100 although you do not yet know the value of x or y or z. And that may lead to important results where the trust is of that character.”
25. It is no doubt true that these observation were made in the context of a discretionary trust, in our opinion, they will also be applicable even in the case of group interest like the one in the instant case. Where the income from the trust properties is to be applied for the maintenance of the family as such and the trustees do not have an absolute discretion as in the case of a discretionary trust, that is to say, they do not have the discretion to apply its income either for the benefit of one member of the other at their discretion, the position, in our view, will not be in any way different because you cannot say whether each member of the family had a right to receive any particular amount individually for his maintenance.
26. The effect of clause 9 read and construed in the light of the decision in Gartside’s case [1968] 70 ITR 663 (HL), therefore, is that during the lifetime of Ramamvahu the beneficial enjoyment of the trust properties vested in a group of persons, namely, the members of the family consisting of Ramavahu, her daughter and her sons. Having regard to the nature of the trust, no member of the family could be said to have had any quantifiable interest in any of the trust properties. Their right merely extended to requiring the trustees to use the trust properties for the benefit of the family for the purpose set down in clause 9. Such a right does not amount to a beneficial interest or enjoyment of the properties. Such was the position prior to the death of Tamavahu. Immediately after her death, the family, i.e., the group of persons who were beneficially entitled to enjoy the property, ceased to have that beneficial interest. The property thereafter vested in the two sons alone in ownership rights. The result, therefore, was that there was clearly a change not only in the persons who beneficially enjoyed the property, but even the right in which they came to enjoy the beneficial interest in the property was entirely different and a new one. It is immaterial, in our view, whether the interest of the two sons could be called contingent interest or vested interest though it appears to us that having regard to the provisions in the will that only those ones “who may be alive” were to be given the property in equal shares, it would make the interest of the two sons a contingent interest and not a vested interest.
27. As pointed out by Lord Reid in Gartside’s case [1968] 70 ITR 663 (HL) at page 721 of the report, the application of the word “interest” is not confined to a vested or a necessarily contingent interest and, in our view, nothing really turned on whether the two sons had a vested interest or a contingent interest because the test which had to be applied for the purpose of determining whether any property passed on the death of Ramavahu was whether there was a change in the beneficial enjoyment of the property. The mere fact that the two sons of Ramavahu were, as members of the family, entitled to beneficial enjoyment does not prevent the property from passing because now the nature of the right has undergone a change and as compared with the group, namely, the family, the two sons were not entitled to beneficial enjoyment in their own right. Just as when as a result of the death of the deceased, beneficial enjoyment of a group a persons who are the objects of a beneficiary trust ceases and the property passes from the beneficial enjoyment of one group of beneficiaries to another and notwithstanding the fact that some of the members of the second group are common to the first, the property that has passed becomes liable to estate duty as in Burrell’s case [1937] AC 286; 2 EDC 590 (HL). So also where the beneficial enjoyment of a group of persons consisting of members of the family has ceased and property has passed for beneficial enjoyment to only two members of a family but under a different right, under s. 5 of the E.D. Act, the property will pass and become liable to estate duty. In Burrell’s case [1937] 2 AC 286; 2 EDC 590; [1936] 3 All ER 758 (HL) during the lifetime of one Harry, the persons beneficially interested in the discretionary trust were Harry himself, his wife, his sons, William and Michael and his daughter Gillian. It was found that after the death of Harry, the persons beneficially interested in the trust are William, his wife and his brother, Miachael, and the question was whether on the death of Harry, the property passes. The trust provided that after Harry’s death, the property was to be subject to a trust to pay out of the net income during William’s life an allowance to William, with power to the trustees, instead of playing it to William, to apply it for his benefit or for the benefit of all or any of his wife, child or remoter issue of his, or any person, who, if William were dead, would be entitled to the net rents and profits or an allowance thereout, and the question was whether in such circumstances the property passes or must be deemed to pass on the death of Harry. It was found that immediately before Harry’s Death, persons beneficially interested in the property in the property were primarily Harry’s and secondarily, by way of substitution in respect of Harry allowance, a group consisting of Harry, his wife, his three children, William, Michael and Gillian and Gillian’s child. It was held that none of them could claim to be beneficially interested in any defined share or to any defined extent in the property; but the six together constituted the only defined extent in the property; but the six together constituted the only people who could, while Harry was alive, obtain any benefit from the property or have any beneficial enjoyment of the property. The position after Harrys’s death was that primarily William was the only person then entitled to an allowance and secondarily, by way of substitution in respect of that allowance, a group consisting of William, his wife, and his brother, Michael, so long as no son was born to William. This group of three persons constituted the only people who immediately after Harry’s death could obtain any benefit from the property or have to any beneficial enjoyment thereof and it was found that the persons who were beneficially interested immediately after the death of Harry were a new group becoming interested under the new trust and fulfilling a new qualification as a condition of membership, and it was observed that the mere fact that the a person who becomes entitled to the beneficial enjoyment of the property on a death, has already before that death been beneficially interested in the property does not prevent the property passing under s. 1.
28. Thus, in the instant case, the beneficial enjoyment of the residuary estate having now passed from a group of five persons who constituted the family to the two sons in their own individual rights as owners, the legal effect was that the property passes in the instant case.
29. It is at this stage that we must consider the argument very vehemently advanced by Dastur that if Ramavahu did not have any beneficial interest in the property, having regard to the observations quoted above from Hussainbhai’s case , there cannot be any passing of property in the instant case. As already pointed out, at page 155 of the report in Hussainbhai’s case, the Supreme Court has observed that what had to be seen was whether that interest passed to someone on his death. It is, therefore, contended that on the finding that Ramavahu had no beneficial interest, no property could pass on her death. It was vehemently urged that these observations made by the Supreme Court at page 155 of the report must be treated as exaustive of the test for the applicability of s. 5 of the E.D. Act notwithstanding some decisions in which it had been held that it is not necessary in each case where s. 5 is attracted that the deceased should have an interest in the property which passes on his death. According to Dastur, every case must be decided with reference to the test laid down by the Supreme Court. Courts in India have held that in order to constitute passing of property, it is not necessary that the deceased should have an interest in the property at the time of his death and that property would pass on his death if it changed hands by reason of his death, although he himself had no interest therein.
30. In K. C. Manavedan v. Dy. CED [1965] 55 ITR (ED) 36, the Madras High Court has observed that even if the deceased possessed no interest in the property at the time of his death, if that property at the time of his death, if that property should change hands by reason of his death, it becomes liable to estate duty under s. 5 of the E.D. Act, 1953.
31. In CED v. Trustees of H.E.H. The Nizam’s Family Pocket Money Trust [1973] 87 ITR 33, the Andhra Pradesh High Court has taken the view that the passing of property is not limited to devolution on the death of a person to whom the property belongs and it may also pass on the death of a party to whom the property does no belong as is indicated in s. 34(3) of the E.D. Act, 1953.
32. Having gone carefully through the entire decision of the Supreme Court in Hussainbhai’s case [1973] 90 ITR 148, we are not inclined to accept the argument of Dastur that the observations at page 155 of the report must be read as generally laying down a test applicable in all cases where the revenue wants to invoke the provision of s. 5 of the E. D Act. Having regard to the vehemence with which the argument was advanced, it is necessary to refer to the facts in that case. The decision of the Supreme Court was in an appeal from the decision of the Gujarat High Court in CED v. Hussainbhai Mohadmedbhai Badri [1970] 76 ITR 14. The facts of that case were that one Eusufalli had settled upon trust immovable property and leaseholds lands by a trust deed dated July 15, 1938. Three trustees were appointed under the trust deed, being Eusufalli, the settlor was entitled, his wife, Safiabai, and the eldest son, Mohamedbhai. The settlor was entitled to the net income of the trust properties during his lifetime. After the death of Eusufallie, the income was to be divided into three equal shares. One-third of the income to be appropriated by Safiabai during her lifetime, one-thrid was to be paid to Mohamedbhai and the remaining one-third was to be entrusted to Mohamedbhai for being utilised for the maintenance of the two wives and the children of the settler’s youngest son, Salebhai, who had died before the trust deed was executed. Under the terms of the trust deed, after the death of Safiabhai, the trustees were to divide the trust properties in such a manner that 2 annas share was to be given to each of his two wives and the remaining 12 annas share was to be distributed amongst Salebhai’s children and thereafter the trust was to come to an end. There was a provision that if Mohmedbhai was not alive, then his share was to be given to his children and wife. With this part of the directions we are not concerned. The question was, on what part of the estate, estate duty was payable after the death of Safiabhai. The dispute was restricted to the one-third share of Safiabhai in the trust property. The accountable person objected to the inclusion of the value of the one-third share in the trust properties in the computation of the value of the estate which passed on the death of Safiabai. This objection was rejection by the Assistant Controller. That order was challenged by the accountable person in appeal, who later on wanted to withdraw the appeal, but not only was no permission granted, but a notice was issued as to why the entire value of the trust estate, that is, including the share of the two sons should not be treated as property which passed on the death of Safiabhai. Consequently, the Appellate Controller enhanced the valuation by treating the entire trust property as having passed on the death of Safiabhai. The Appellate Tribunal restored the order of the Assistant Controller whereupon the matter was taken to the High Court by way of reference and the Gujarat High COurt held that the circumstance that legal title to the estate passed from the trustees to the beneficiaries after the death of the deceased was not a material circumstance. The Gujarat High Court held that the change in beneficial possession and enjoyment of the trust estate took place only in relation to the one-third previously enjoyed deceased as Mohmedbhai and the wives and children of Salebhai were already entitled to beneficial enjoyment of income to the extent of one-third each prior to the death of the deceased. It was, therefore, held that only one-third and not the whole of the trust estate was liable to be included in the assessment. Before the Supreme Court, when the matter was taken up in appeal by the revenue, it was contended that the title to the trust propertied vested in the trustees till the death of the deceased and that the title that passed on the death of the deceased was the titled in respect of the entire trust property and, therefore, the value of the entire trust property should be taken into consideration for the purpose of estate duty. Thus the question before the Supreme Court was whether only one-third interest in the trust properties, in the income of which the deceased Safiabai had one-third interest, which had to be treated as having passed or whether the entire trust estate consisting of the trust properties should be treated as having passed under s. 5(1). It was in that context that a after referring to the test laid down in Scott’s case [1937] AC 174; 2 EDC 579 (HL) the Supreme Court held that the beneficial interest in two-thirds of the income of the trust property vested in the persons other than the deceased and the deceased was entitled only to one-third share in the income of the trust property and in substance only one-third interest in the property assessed on her death. It was then observed that though after the death of the deceased, the accountable person as well as the other heirs of the settlor, became the legal owners of the trust property, this change in the nature of the rights possessed by some of the beneficiaries under the trust deed did not enlarge either the extent or value of the property that passed on the death of the deceased. It is, therefore, important to bear in mind that the Supreme Court was dealing with the passing of property in which the deceased had admittedly a beneficial interest. It was that kind of case with which the Supreme Court was dealing and the Supreme Court had not before it is a case where the deceased did not have a beneficial interest in any property, the passing of which was in question.
33. The Supreme Court thereafter to the facts in the case of Townsend [1901] 2 KB 331; 1 EDC 336 (KB) cited supra. On the facts in Townsend’s case it was found that in respect of the particular amount of Steling Pound 9,600, the children of the settlor had already taken interest on the death of the testator and, therefore, the property as regards Steling Pound $ 9,600 had passed on the death of the testator himself and not on the death of the testator’s widow because in that case what was in question was : What was the extent of the property which would pass on the death of the widow of the testator ? It may be noticed that in Townsend’s case [1901] 2 KB 331; 1 EDC 336 (KB), the testator, who had died before the commencement of Finance Act of 1894 had by a will bequeathed his real and personal estate to trustees for sale and investment, and for payment out for the annual income thereof of an annuity to his wife, and, subject to the annuity, to his eight children equally, and after the death of his wife to divide the trust fund among the children equally, and after the death of his wife to divide the trust fund among the children in equal shares; but if the fund exceeded a certain specified sum, then to divide eight-ninths of such excess among the children, and to pay the remaining one-ninth to certain other persons. The wife died after the Finance Act, 1894, had come into operation. On the death of the wife it was held that the estate duty was only payable on the one-ninth share of the excess of the trust fund over the specified sum and on the benefit which accrued to the children by the cesser of the annuity, since that was the only property passing on the death of the wife.
34. The Supreme Court in Hussainbhai’s case [1973] 90 ITR 148 no doubt observed that the rule laid down in Townsend’s case [1901] 2 KB 331; 1 EDC 336 (KB) is equally applicable to the facts before the Supreme Court. The rule to which th reference was being made was the rule set out in the next sentence of the judgment at page 154 where it is observed :
“In our opinion what is relevant in determining the scope of the expression ‘property passing on the death of the deceased’ is the change in the beneficial interest and not title.” With this test there cannot be any quarrel and the only question is whether the observation made at page 155 must be read as superseding the test which is laid down at page 154 of the report. The Supreme Court having earlier clearly observed that the test laid down in Townsend’s case [1901] 2 KB 331; 1 EDC 336 (KB) and which, as we have earlier pointed out, is now almost a universally accepted test, is applicable in Hussainbhai’s case , it would be difficult for us to read a later part of that judgment in such a way as to render that test nugatory. If the observations at page 155 of the judgment of the Supreme Court are read in the manner in which Mr. Dastur wants us to read, it will have to be held that the test laid down by relying on the facts and the ratio in Townsend’s case [1901] 2 KB 331; 1 EDC 336 (KB) has been departed from in the same decision, which, in our view, could never be intended by the Supreme Court.
35. “This decision clearly lays down that in determining whether a particular property ‘passed’ on the death of a deceased what has to be seen in whether that deceased had any beneficial interest in that property and whether that interest ‘passed’ to someone on his death.” Now, if we go to the decision in Mahendra Rambhai Patel’s case [1976] 63 ITR 645 (SC), the facts of that case will again show that what was relevant in that case was whether th interest of the deceased can be treat an property which had passed. The decision in Mahendra Rambhai Patel’s case , turned on the question as to whether certain shares which not to be delivered to the minor son of the settlor till he attained the age of 25 years can be said to have belonged to the minor son since the execution of the trust deed or whether he can be held to be beneficially interested in those shares even during his minority for the purposes of s. 23 of the E.D. Act. After out in the trust deed that the trustees were to stand possessed of the shares until each of the beneficiaries completed the age of 25 years and the trustees were to apply in their discretion the whole or part of the profits arising therefrom for the maintenance and advancement of the beneficiaries and to invest the surplus, the trust deed provided that if and when each of the beneficiaries completed the age of 25 years, the trustees were to transfer out of 160 shares of his portion of the shares and the accumulation or any other investment in lieu thereof to him absolutely. A clause in the trust deed provided that if any of the beneficiaries should die before completing the age of 25 years the shares settled on him (but not the accumulated surplus income) were to devolve on certain persons. The beneficiaries died a minor and unmarried and the principal value of his interest in the settled property was brought to estate duty in the hands of his brother and the question was whether his interest was rightly included in the estate for the purpose of estate duty. The deceased minor’s name was Manubhai. It was held in that case by the Supreme Court (page 649) :
“On Manubhais’s death, there was under the deed of trust a change in the person who was beneficially interested in the shares.” Therefore, here again the Supreme Court was dealing with a case where the deceased had a beneficial interest and the question was whether the beneficial interest of the deceased passed to somebody else.
36. When the Supreme Court referred to the decision spelt out at page 155 of the report in Hussainbhai’s case [1973] 90 ITR (SC), that must be read in the light of the facts of Mahendra Rambhai Patel’s case where, as already pointed out, the question was whether the beneficial interest of the deceased had passed on to his brother.
37. Dastur has contended that even this court has accepted the observations at page 155 of the report in Hussainbhai’s case , as laying down a proposition of law in Mrs. Monie Ardeshir Baria v. CED [1977] 106 ITR 203 (Bom) at page 228. It is no doubt true that in Mrs. Baria Case a reference was made to the decision in Hussainbhai’s case . But what is important to note is that the question as to whether the observations of the Supreme Court in Hussainbhai’s case were exhaustive of the cases contemplated by s. 5 of the ED Act, was not considered. Indeed, those observations appeared to have been made clearly in the context of consideration of a claim under s. 22 where the argument which appeared to have been advanced on behalf of the revenue was that s. 22 empowered the charge of levy of estate duty on any property.
38. We are, therefore, of the considered view that the observations in Hussainbhai’s case of the report must be read as clearly restricted to the facts of that case where the question was whether the beneficial interest of the deceased had passed to another for the purpose of being treated as property which had passed on the death of the deceased and those observation cannot be read as exhaustive of the application of the provisions of s. 5 of the ED Act.
39. It. therefore, appears to us that the beneficial interest in the entire residuary property having been changed inasmuch as the persons who were entitled to beneficial enjoyment of property have now changed and that the two sons were entitled to hold the property absolutely in their own right as owners and since the deceased, Ramavahu, did not have any beneficial interest which could be quantified or the extent of which could be positively determined, the entire residuary property must be held to have passed under s. 5 on the death of Ramavahu.
40. An alternative argument was advanced by Joshi appearing on behalf of the revenue that the trust created under clause 9 of the will was a discretionary trust and having regard to the decisions in Scott’s case [1937] AC 174; 2 EDC 579 (HL) and Burrell’s case [1937] AC 286; 2 EDC 590 (HL), the discretionary trust came to an end with the death of Ramavahu and, therefore, also the estate must be held to have passed under s. 5.
41. Now, we are reluctant to hold having regard to the nature of the provision made in clause 9 that the trust created by clause 9 of the will was a discretionary trust as in Scott’s case [1937] AC 174; 2 EDC 579 (HL) or in Burrell’s case [1937] AC 286; 2 EDC 590 (HL). A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property but vest in the trustees a discretionary power to pay him or apply for his benefit such part of the income as they think fit. (See Snell’s Principles of Equity, 26th edition, page 148). In a discretionary trust the discretion lies entirely with the trustees to utilise the trust properties or the income thereof for the benefit of all the beneficiaries or one or more of them. In the instant case, there is no such discretion given to the trustees at all. It would not have been open to the trustees to provide for the maintenance of any of the members of the family to the exclusion of others or not to apply the trust funds for the purpose of maintenance and to accumulate them. The area of discretion to the trustees is extremely narrow inasmuch as it may be open to them to determine as to what amounts they would spend either on maintenance or on education or on other household expenditure. This is not, therefore, a case where there is absolute discretion vested in the trustees to utilise at such time and in such manner as they decide the income from the trust properties. It is not, therefore, possible to accept the argument that the trust created by clause 9 of the will was a discretionary trust.
42. Having held that the entire residuary property will pass on the death of Ramavahu, the next question which would clearly be incidental to the question which has now been referred and in respect of which both parties have advanced arguments is whether the residuary estate could be aggregated with the other estate after the death of Ramavahu. The only relevant provision is in s. 34(3) of the E.D. Act, which provides as follows :
“Notwithstanding anything contained sub-section (1) or sub-section (2), any property passing in which the deceased never had an interest, not being a right or debt or benefit that is treated as property by virtue of the Explanations to clause (15) of section 2, shall not be aggregated with any property, but shall be an estate by itself, and the estate duty shall be levied at the rate of rates applicable in respect of the principal value thereof.”
43. Joshi appearing on behalf of the revenue contends that of the purposes of s. 34(3) of the E.D. Act even the right to be maintained as a member of the family must be treated as interest as contemplated by s. 34(3) and that the residuary property was, therefore, liable to be aggregated with the other property. Our attention has been invited to certain observations in Dymond’s Death Duties, 15th Edn., 1973, at page 698, which read as follows :
“The possibility of receiving income as an object of a discretionary trust for a class of persons is considered to be a sufficient interest to involve aggregation : of A.G. v. Heywood [1887] 19 QBD 326; 1 EDC 13 (QB), A.G. v. Farrell [1931] 1 KB 81; 2 EDC 400 (CA), Drummond v. Collins [1915] AC 1011 (HL) (see remarks of Lord Parker at page 1018 and of Lord Wrenbury at pages 1020-1021); Re Vestey’s Settlement [1950] 2 All ER 891, 902 (CA).”
44. The observations made by the learned author no doubt refer to the interest of an object of a discretionary trust, but it appears to us that the effect of the decision in Gartside’s case [1968] 70 ITR 663 (HL) has not been considered by the author in those observations. In Gartside’s case [1968] 70 ITR 663 (HL), Lord Reid has positively pointed out the extent of the right of a discretionary trust and the House of Lords has in terms held that such a right cannot be termed as a beneficial interest. It will be difficult for us to give the word “interest” in s. 34(3) a meaning different from the one which we have given while determining the rights of the member of the group or the family in whom the right of beneficial enjoyment has vested by the terms of the will.
45. If the only right which Ramavahu had was in her capacity as a member of the group and all that she could do individually was to see that the trustees applied the trust funds for the purposes of the trust, the extent of that right was immeasurable, its value could not be determined and, such a case, it is difficult for us to hold that such a right could be treated as interest for the purpose of s. 34(3). On the finding that Ramavahue had no beneficial interest during her lifetime, in our view, s. 34(3) of the E.D. Act would clearly be attracted and the value of the estate of Rs. 69,221 could not, in our view, be aggregated with the other estate in respect of which proceedings for estate duty were taken.
46. In this view of the matter, the question referred to us must be answered by observing that the entire residuary estate passed on the death of Ramavahu subject to it not being aggregable with the other estate. Parties to bear this own costs.
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