Income Tax Appellate Tribunal - Pune
Dr. P.V. Joshi vs Assistant Controller Of Estate Duty on 29 January, 1993
Equivalent citations: [1993]45ITD280(PUNE)
ORDER
T.V.K. Natarajachandran, Accountant Member
1. This is an appeal by the accountable person which is directed against the order of the Appellate Controller of Estate Duty, Pune dated 10-9-1990 wherein, inter alia, he upheld the inclusion of Rs. 55,000 under Section 9 of the Estate Duty Act, 1953.
2. The accountable person has taken grounds to urge that the addition sustained is opposed to facts and untenable in law; that the Appellate Controller of Estate Duty erred in holding that the dissolution of the trust and consequent transfer of the trust fund to the grand daughter amounted to gift or disposition within 2 years of death under Section 9 read with Section 22 of the Estate Duty Act and that the Appellate Controller of Estate Duty failed to appreciate that the amount settled on trust in 1974 was subject to gift tax in that year and Section 22 had no application and when the decision to wind up the trust and to hand over the fund to the beneficiary was taken, it was the decision of the trustees and it could not constitute a gift by the deceased once again.
3. The relevant facts are that late Shri Vithal Krishna Joshi died on 23-8-1984. The accountable person Shri Phanindra V. Joshi filed an account of the estate on 1-3-1985. The Assistant Controller of Estate Duty determined the principal value of the estate at Rs. 13,62,571. In determining the principal value of the estate, inter alia, the Asstt. Controller of Estate Duty included a sum of Rs. 55,000 under Section 9 of the Estate Duty Act read with Section 22 thereof being disposition of property which shall not have been made 2 years or more before the death of the deceased and hence it shall be deemed to pass on the death.
4. Late Shri Vithal Krishna Joshi created a trust known as 'Nayana Trust' by a registered instrument dated 21-4-1974 for the sole benefit of his grand daughter Miss Nayana Prabhakar Dhekephalkar whose date of birth is 25-10-1968 by depositing a sum of Rs. 55,000 with Adarsha Shikshana Mandali, Pune. As per Clause 6 of the deed the trustees shall hold the trust fund in trust for the benefit of Nayana until she completes 21 years of age subject to other provisions of the instrument.
5. Clause 9(vi) provides that in the most unfortunate event of Nayana dying before she completes her 21 years the corpus fund shall be paid to the trustees.
6. Clause 9(vii) provides that if after expiry of 5 years, when notice of not less than 30 days is given to the Mandali to return the deposits the Mandali shall return the same to the trustees.
7. Clause 10 provides that the deposits returned shall be paid to the author of the trust or his wife or daughter Savita or Dr. Phanindra in order of preference.
8. Clause 11 provides that interest from the Trust fund shall be paid by the trustees to the author of the 'trust for life and to his wife for life and thereafter to Savita until Nayana completed 18 years of age when interest shall be paid to Nayana directly till the trust is extinguished.
9. Clause 15 provides that as soon as Nayana completes her age of 21 years, the corpus fund will be paid to her for her absolute enjoyment. On such payment, the trust will automatically expire.
10. Clause 22 provides that notwithstanding anything contained in the instrument, the author of the Trust reserves to himself the absolute right to revoke the Trust at any time and on such revocation being made, the Trust shall be null and void and the Trust fund/money/balance shall revert to the author of the Trust as its absolute owner.
11. The corpus fund of the Trust was shown as an asset and assessed in the wealth-tax assessment of the author of the Trust, while the interest income from the said deposits was also shown and assessed in his income-tax assessment. There were 5 trustees of which the author was the Chairman and had the privilege of being trustee till his death or till he resigned. Thereafter, his wife shall exercise such powers till her life. The corpus was held as deposits with Adarsh Shikshana Mandali initially. Later on, these deposits were withdrawn and deposited with the Bank of India all in the names ofVthe trustees. Though the corpus is held for the benefit of beneficiary, the interest income was to be paid to the settlor during his lifetime and if his wife survived him for her lifetime and then to Smt. Savita his daughter and mother of Miss Nayana, if Nayana was not 18 years of age then, but if Nayana attained 18 years of age then interest income was to be paid to her directly instead of Smt. Savita. Thus, Nayana was to be the beneficiary for interest also if she survived the deceased, his wife and was 18 years of age at that time. If Nayana died before attaining the age of 21 years, the corpus was to be paid over to the settlor failing him to his wife Smt. Snehalata and if she was not alive then to Dr. Phanindra, Nayana's uncle, though in normal course Nayana was to be paid corpus on completing 21 years. In case of emergency or in the event of her marriage before the age of 21 years, the trustees were empowered to spend the amount of corpus for that purpose.
12. In deference to the desire and request of the settlor, the trustees passed a Resolution on 13-11-1983 agreeing to extinguish the trust and to hand over the entire corpus to the sole beneficiary Miss Nayana on 1-12-1983. The main reason for accelerating the payment to Miss Nayana was the advanced age of the settlor (84 years) and his wife Smt. Snehalata (78 years), The fixed deposit receipts were then transferred in the name of Miss Nayana who became the absolute owner thereof and was entitled to enjoy the interest also.
13. The Resolution passed on 13-11-1983 reads as under :-
Resolution:
The trustees of the Nayana Trust took note of the statement made by the Chairman of the Trust, who is also the Author of the Trust, expressing his request that the Trustees should agree to transfer all the trust fund at present held in the names of the trustees to the individual name of the only beneficiary under the trust, namely Miss Nayana Prabhakar Dhakephalkar. The author of the trust said that both he and his wife have very much advanced in age (the author of the trust is 84 years old and his wife Mrs. Snehalata Vithal Joshi is 78 years old) and that they both are declining in their health. In view of this situation he expressed his desire to extinguish the trust by paying the whole of the Trust Fund to the Trust beneficiary NAYANA, earlier than stipulated under the Instrument of the Trust and thus fulfil the object of the Trust.
The Trustees agree to accept the request of the Author of the Trust and to pay the whole amount of the Trust Fund (Rs. 55,000 - Rs. Fifty-five thousand only) to NAYANA on 1-12-1983 and thus extinguish the Trust.
Though since the time the NAYANA TRUST was created the beneficial owner NAYANA has been the owner of the Corpus of the Trust Fund (Rs. 55,000), the Author of the Trust and his wife have the right to receive the interest from the Trust fund during their lifetime under the Instrument of the Trust. However, the Author of the Trust informed the trustees that as-from the date of the transfer of the Trust fund, which is covered by two fixed deposit receipts of Rs. 20,000 dated 22-11-1982 (Receipt No M 17/88) and Rs. 35,000 dated 27-11-1982 (Receipt No. M. 17/91) to NAYANA's name the interest on the whole amount would be payable to NAYANA personally and that both he and his wife will have nothing to do with the Trust Fund or any accretions to it.
The Trustees, therefore, decide that the two fixed deposit receipts in the Bank of India, Tilak Road Branch, Pune-411002 should be surrendered to the Bank and the money should be transferred from the names of the Trustees to the name of MISS NAYANA PRABHAKAR DHAKEPHALKAR individually as from 1-12-1983 and that the NAYANA TRUST should be regarded as extinguished from that date. NAYANA has completed 15 years of her age on 25-10-1983.
In respect of the transfer of the trust fund from the names of the trustees to the name of NAYANA the Chairman read to the meeting his letter dated 1-9-1983 to the Manager, Bank of India, Tilak Road Branch, Pune-411002. and the Manager's reply to the said letter No. TLR PKK. 1565 dated 7-9-1983 agreeing to such transfer.
The Trustees have noted that the interest on the Trust fund would be paid to the author of the Trust upto the end of November, 1983.
The Trustees also took note of the fact that the interest on the two new Fixed deposit receipts from 1-12-1983 would be credited to NAYANA's saving bank account No. 15658 which is a joint saving bank account in the names of NAYANA and her mother SAVITA to be operated by "EITHER OR SURVIVOR".
A copy signed by all the trustees of this resolution should be sent to the Manager, Bank of India, Tilak Road Branch, Pune-411002.
14. The Asstt. Controller of Estate Duty inferred from the aforesaid facts and circumstances of the case that the transfer of the corpus fund by premature dissolution of the trust and handing over of the trust fund to Miss Nayana were all done at the dictates of the author of the trust, who is the Chairman of the trustees. Though the transactions were routed through the trust, nonetheless, it is a case of gift to Miss Nayana by the deceased within two years prior to his death so as to attract the mischief of Section 9 of the Estate Duty Act read with Section 22 of the Estate Duty Act so that the corpus amount shall be deemed to pass and included in the principal value of the estate of the deceased. Accordingly, he included Rs. 55,000 as gift made within two years prior to the date of death.
15. The accountable person appealed to the Appellate Controller of Estate Duty. The stand taken by the accountable person was that it is not the author of the trust who has handed over the corpus to the beneficiary, but it was the collective action of the trustees themselves. Therefore, the inference drawn by the Asstt. Controller of Estate Duty that the deceased made the gift on 1-12-1983 so as to attract the mischief of Section 9 of the Estate Duty Act was not correct. The deceased and his wife had only right to receive the interest from the said corpus of the trust, but had no benefit whatsoever in the corpus and they were to get the corpus only if the interest of Miss Nayana failed on account of her death before attaining the age of 21 years. Another plea taken by the accountable person was that at best the Asstt. Controller could have treated the transaction as cesser of life interest of the deceased whose valuation would become negligible as the deceased was well above 80 years and the age of his wife was very near it, which is the statutory life span. A further contention taken by the accountable person was that Section 22 was not applicable to the case because deceased did not hold any property as on date of his death as a trustee so as to attract the aforesaid section. It was also pointed out that the creation of the trust by transferring Rs. 55,000 for the sole benefit of Miss Nayana attracted gift-tax levy in the assessment year 1975-76 itself and therefore, it was too late in the day for Asstt. Controller to hold that gift has taken place on 13-11-1983. For all these reasons, it was vehemently urged that the Asstt. Controller was not justified in including the sum of Rs. 55,000 in the principal value of the estate of the deceased and therefore, the same should be deleted. Alternatively, it was argued, without prejudice to the stand taken earlier, that a rebate of Rs. 2,500 under Section 50A of the Estate Duty Act is to be allowed from the estate duty payable in case the accountable person failed on his main contention.
16. The Appellate Controller of Estate Duty, relying on the relevant portion of the Resolution passed on 13-11-1983 reproduced in his order came to the conclusion that transfer of trust fund to Miss Nayana has to be viewed as gift to Nayana by the settlor because the author of the trust was not keeping good health and he has also anticipated his death 10 months prior to the date of the meeting of the trustees over whom he had complete control. Therefore, he held that the Asstt. Controller of Estate Duty was justified in including the corpus under Section 9 of the Estate Duty Act read with Section 22 thereof.
17. At the time of hearing, the learned counsel for the accountable person filed a paper compilation and reiterated the written submissions dated 27-1-1988 made by the accountable person before the Appellate Controller of Estate Duty which is annexed to the paper compilation filed. These contentions were also reproduced by the Appellate Controller in the impugned order. Hence they need not be stated again. He also reiterated the grounds taken by the accountable person.
18. The learned departmental representative, on the other hand, vehemently supported the reasons and conclusions drawn by the authorities. In particular, he pointed out that the trust could be wound up either on Nayana attaining the age of 21 years on 26-10-1989 or Nayana dying before attaining the age of 21 years or on revocation of the trust by the author of the trust exercising the absolute right reserved in Clause 22 of the trust deed. According to him, when the trustees passed the Resolution on 13-11-1983 the trust was wound up, so to say and if such contention is not accepted the inference would be that the trustees acted illegally in winding up the trust. The trustees merely acted at the dictates of the author of the trust, so to say. Thus he made a pertinent observation that the trust was revoked and the gift was also made by the author of the trust. In this connection, he pointed out that the levy of gift tax for the assessment year 1975-76 was made on the basis of the Gift-Tax return filed by the deceased. The learned departmental representative drew our attention to the resolution passed by the trustees on 13-11-1983 which showed contemplation of death on the part of the author of the trust. As the gift was made within the vulnerable period mentioned in Section 9 of the Estate Duty Act, he strongly supported the inclusion of corpus in the principal value of the estate of the deceased under Section 9 of Estate Duty Act.
19. In reply, the learned counsel for the accountable person did not dispute the power of revocation of trust vested in the author of the trust because such power is already conferred on the author by Clause 22 of the trust deed. However, the pertinent point he made was that the revocation of the trust was done by the trustees themselves and not revoked by the author himself as viewed by the authorities. His further contention was that there was no contemplation of death by the author of the deceased when the Resolution was passed on 13-11-1983 as canvassed by the learned departmental representative.
20. We have bestowed careful consideration to the rival submissions, gone through the impugned orders of the authorities and verified the paper compilation filed containing the trust deed, the Resolution passed on 13-11-1983 and the Minutes of the meeting dated 15-11-1983. The accountable perscn built up the whole edifice of his case upon the resolution passed jointly by all the trustees including the author of the trust who is also the Chairman and thus it was not the author of the trust alone as an individual who has extinguished the trust and made over the corpus to Nayana. According to him, the trust having been created on 21-4-1974 and extinguished on 1-12-1983 there was no gift by the deceased within the vulnerable period of 2 years prior to date of death so as to attract Section 9 of the Estate Duty Act. Equally the revenue has laid great emphasis on the resolution passed by the trustees on 13-11-1983 and the minutes of meeting dated 15-11-1983 to come to the conclusion that it is at the dictates of the author of the trust the trust was wound up and the corpus was made over to the sole beneficiary so as to come to the conclusion that the gift was made by the author of the trust only and not by the trustees as contended by the accountable person so as to bring the transaction within the mischief of Section 9 of the Estate Duty Act as., property deemed to pass on the death of the deceased because the relevant transaction took place within the vulnerable period of 2 years prior to the date of death of the deceased which took place on 23-8-1984.
21. In our considered opinion the revenue must succeed in this appeal as the reasons advanced and the conclusion drawn by the authorities are unexceptional and do not call for any interference. The whole transactions viewed together lead to the irresistible conclusion that there is gift inter vivos made by the deceased himself though under the cloak of trust and backed by consent resolution passed by the trustees. It appears to us that the creation of the trust at the age of 71 years (sic), the premature extinguishment thereof at the age of 84 years at the desire of the author of the trust to extinguish the trust by paying the trust fund to Nayana before the stipulated period and thus fulfilling the object of the trust and the agreement or consent given by other trustees by passing joint resolution on 13-11-1983 all amounted to a well thought out legal design through the instrument of trust and well executed as a tax planning device in order to avoid the estate duty payable by the deceased. Estate duty is payable on the principal value of the estate passing on death of every person. Usually attempts will be made to diminish the value of estate that passes by effecting prior gifts in contemplation of death (section 8), transfers, creation of trusts (section 9) and settlements with reservation (section 12) so as to retain control and enjoyment of the corpus and income (section 10). The law frowns at such attempts and enacted deeming provisions to include such assets transferred in the estate of the deceased.
22. The reasons for resorting to the tax planning device adopted are not far to seek. The testator was an ex-minister of Aden Government, South Arabia. He was already assessed to Income-tax and wealth-tax. The estate duty assessment order shows that he owned immovable property and considerable amount of movable properties such as shares, bank deposits, car, jewellery etc. He has created a trust by a registered instrument on 21-4-1974for the sole benefit of his grand daughter Nayana born on 25-10-1968 by depositing Rs. 55,000 to be handed over to her when she completes the age of 21 years (26-10-1989). Though the corpus is held in trust for the benefit of the beneficiary, the interest income therefrom is reserved for personal enjoyment and benefit of the author and his wife for life. He has also reserved for himself the absolute right to revoke the trust to become absolute owner of the corpus in Clause 22 of the trust deed. Thus, it is a settlement made with reservation and would have attracted Section 12 of the Estate Duty Act and would have been included in the estate of the deceased but for dissolution of the trust prior to his death. Since the trust was extinguished prior to the date 'of death, there is no cesser of interest in terms of Section 7 as contended by the accountable person. At the same time, there is no gift mortis causa as contemplated by Section 8 of the Estate Duty Act, as vehemently contended by the learned departmental representative, because such gift is always conditional in nature and takes effect on death and does not take effect if the donor survives and in that event the thing gifted shall be restored to him. However, there is immediate gift inter vivos as contemplated by Section 9 of the Estate Duty Act atleast with effect from 1-12-1983 when the corpus of the trust has been handed over to Nayana for absolute enjoyment and benefit including the interest income arising therefrom, because there was a gift by delivery on 1-12-1983. In order to attract the deeming provisions of Section 9 of the Estate Duty Act it should be shown that such immediate gift inter vivos shall not have been bona fide made two years or more before the death of the deceased. In the instant case the resolution passed by the trustees on 13-11-1983 clearly shows that the author of the trust is in advanced age (84 years old) and his wife Smt. Snehalata is, 70 years old and both are declining in their health, vide para 1 of the resolution. Further, the author of the trust "expressed his desire to extinguish the trust by paying the whole of the trust fund to the trust beneficiary Nayana earlier than the stipulated under the instrument of trust and thus fulfil the object of the trust", vide para 1 of the resolution. Therefore, it is clear that the spectre of death loomed large over the testator and his wife not only when the instrument of trust was created (21-4-1974) but also on the date when the resolution was passed on 13-11-1983. What the other trustees did was readily "agree to accept the request of the author of the trust and pay the whole amount of the trust fund (Rs. 55,000 - Rs. Fifty five thousands only) to Nayana on 1-12-1983 and thus extinguish the trust". The readiness with which the other trustees agreed to the extinguishment of the trust is not far to seek. The trustees are immediately absolved of their responsibilities and liabilities arising from the trust in the capacity of trustees of the trust. Thus reading the resolution as a whole, it is nothing short of revoking the trust by the author of the trust himself, instead of running the trust till 26-10-1989 when Nayana completes her 21 years of age, by exercising his absolute power vested in him by Clause 22 of the trust deed, though in the guise of resolution passed by the trustees of the trust. In the case of tax planning, the veil should be pierced and one should go to the bottom of the issue. If it is so done, it could be concluded that under the cloak of resolution passed by the trustees, which is mere acquiescence to the desire and request of the author of the trust, revoking of the trust by the author of the trust is exposed as contemplated by Clause 22 of the trust deed. In this view of the matter, therefore, it cannot be said that the gift has been made bona fide by the deceased.
23. In this case, the trustees are, the author of the trust, his wife Smt. Snehalata, Dr. Phanindra V. Joshi, Shri Shantaram Bapuji Sapre and Major Vasudeo Shankar Ambardekar. These trustees are empowered to obtain the corpus fund from the Bank of India, Tilak Road Branch, Pune, in case Nayana died before completion of 21 years of age (clause 9(vi)). to hand over the corpus fund to Nayana on her completing 21 years of age and to withdraw funds from the bank of Rs. 20,000 in the event of marriage of Nayana before she completed 21 years of age (clause 9(vi)), to obtain funds from the corpus fund for meeting extraordinary expenses required for education, maintenance and upbringing, advancement or well-being of Nayana and after expiry of 5 years from the date of instrument of the trust to withdraw deposits (clause 9(vii)) and pay the amount to the author of the trust or his wife if they survived, to Mrs. Savita mother of Nayana, if she survived or his wife and to Dr. Phanindra, the son of the author of the trust in the said order of preference (clause 10). The trustees were also required to pay interest accruing from the trust fund to the author of the trust during his lifetime and his wife Smt. Snehalata during her lifetime, if she survived the author of the trust (clause 11). Certain ancillary powers were also conferred on the trustees to look after the education, maintenance, upbringing, advancement, benefit and well-being of Nayana. Beyond the powers conferred above, the trust deed does not empower the trustees other than the author of the trust to extinguish the trust. On the other hand, Clause 6 of the deed enjoins that the trustees shall hold the trust fund in trust for the benefit of Nayana until she completes her 21 years of age. The trustees are bound to give effect to the object of the trust and they are not empowered to extinguish the trust earlier than the stipulated date 26-10-1989. In view of the powers of the trustees stated above, it is not open to reason how and why the other trustees have merely acquiesced and agreed for extinguishment of the trust earlier than the period stipulated in the trust deed. In this connection, it is relevant to point out that Clause 20 of the trust deed provides that all or any of the trusts and powers vested in or exercisable by the trustees under this instrument shall be capable of being performed or exercised by a majority of the said trustees for the time being and any action or decision of such majority shall be as valid and effective as it would have been if done by all the trustees for the time being. Nothing prevented the other trustees to disagree and adhere to the stipulated object of the trust and extinguishment of the trust at the stipulated time. Therefore, the other trustees were quite helpless to extinguish the trust earlier than the stipulated period and just because the author of the trust himself desired to extinguish the trust earlier than the stipulated period and fulfil the object of the trust by handing over the corpus fund to the beneficiary, they have merely agreed to the proposal. Thus, the resolution passed by the trustees and signed by all the trustees on 13-11-1983 tantamounted to revocation of the trust by the author of the trust by invoking absolute power vested in him under Clause 22 of the trust deed. The legal consequences of such revocation is contained in Clause 22 of the trust deed itself, namely, on such revocation being made, this trust shall be null and void and the trust fund or the trust money or any balance thereof shall revert to the author of the trust as its absolute owner. If on the revocation of the trust, the author of the trust had become the absolute owner, the handing over of the corpus fund to Nayana on 1-12-1983 amounted to gift inter vivos immediate on that date. This date of gift falls within the vulnerable period of 2 years earlier to the date of death of the deceased and therefore, falls within the mischief of Section 9 of the Estate Duty Act.
24. It is also necessary to consider the effect of resolution passed by the trustees on 13-11-1983. Although the resolution was passed on 13-11-1983, it is specifically stated that the fixed deposits sianding in the names of the trustees should be transferred from the names of the trustees to the name of the beneficiary as from 1-12-1983 and Nayana Trust should be regarded as extinguished from that date. This is the catch in the resolution passed by the trustees on which the case turns. By relying on this specific statement in the resolution passed on 13-11-1983, the contention of the accountable person is that the trust was extinguished only on 1-12-1983 after handing over the corpus to the beneficiary Nayana on 1-12-1983 and therefore, the transfer was made by all the trustees taken together and not by the author of the trust individually. It is not known as to why the resolution has come to be passed on 13-11-1983, but the interest from the corpus has been allowed to be enjoyed by the author of the trust upto 30-11-1983 and the corpus has been transferred in the name of the beneficiary on 1-12-1983. Both could have been done simultaneously also. It is also seen from para 5 of the resolution dated 13-11-1983 that prior to the resolution passed by all the trustees on 13-11-1983 the author of the trust by his letter dated 1-9-1983 addressed to the Manager, Bank of India, Tilak Road Branch, Pune, requested the transfer of fixed deposits from the names of the trustees to the name of Nayana and the manager's reply dated 7-9-1983 agreeing to the proposal of such transfer. Thus the author of the trust has directed the bank of India to transfer the deposits in the name of the beneficiary herself which revealed the intention of the author of the trust to make immediate gift inter vivos to the beneficiary of the trust. The correspondence between the author of the trust and the Manager of the Bank were read out in the meeting. Thus, it is abundantly clear that the author of the trust has taken initiative beforehand to ensure the transfer of fixed deposits from the names of the trustees to the name of the beneficiary even before the trustees resolved to extinguish the trust and handing over the corpus to the beneficiary. Thus the terms of the resolution clearly revealed that the trust was extinguished only at the dictates of the author of the trust by virtue of the absolute power reserved to revoke the trust in Clause 22 of the trust deed. Para 5 of the minutes of the 8th and final meeting of the trustees held on 15-11-1983 shows that the author of the trust who is a Chairman of the trustees proposed a detailed resolution authorising the payment of the trust fund to Nayana and to issue two new fixed deposit receipts in her name and the resolution was unanimously passed by the trustees. Thus the author of the trust himself has proposed the detailed resolution to suit his convenience for reasons best known to him. Thus, considering the terms of the resolution passed on 13-11-1983 and the minutes of the meeting recorded on 15-11-1983 it is crystal clear that the spirit behind the extinguishment of the trust is the author of the trust himself and none other.
25. Incidentally, it is to be seen whether the trust has effectively extinguished on 13-11-1983 when the resolution was passed by the trustees or on 1-12-1983 when the corpus was handed over to Nayana. The trust created by the author of the trust on 21-4-1974 ought to have continued till the stipulated period, i.e., upto 25-10-1989 when Nayana completed her 21st year to age for which elaborate provisions have been made in the trust deed, but the trust was extinguished 5 years 11 months and 12 days before its stipulated date. Therefore, the extinguishment of trust by the trustees taken as a whole is beyond the powers of the trustees, but is in accordance with the absolute right vested with the author of the trust to revoke the trust at any time before the stipulated date. The moment the resolution was passed by the trustees agreeing to extinguish the trust, the trust has extinguished from that date only. The fact that the date of 1-12-1983 has been stipulated in the resolution for handing over the corpus to Nayana and extinguishing the trust by fulfilling the object of the trust on that date is not legally valid, because once the trust is extinguished, the corpus of the trust reverted back to the author of the trust absolutely as contemplated by Clause 22 of the trust deed. Even if the corpus has been handed over to the beneficiary on he same date, but it is a subsequent event taking place after the moment of extinguishment of trust and the reversion of the corpus to the author of the trust. When once the trust is extinguished on 13-11-1983, the trustees ceased to exist and they did not have any powers to direct that the trust would be extinguished on 1 -12-1983 by handing over the cropus to the beneficiary. Despite this specific statement contained in the resolution, the legal effect is otherwise and this statement has no binding force. Therefore, in view of these facts, there is no merit in the contention of the accountable person and also the ground taken by the accountable person that it is the trustees who have transferred the corpus to the beneficiary and not the deceased as an individual. The whole edifice of the case built up by the accountable person thus falls to the ground. Thus, it appears that the accountable person escaped from the fire of Section 12 relating to settlement with reservation to fall in the fire of Section 9 of the Estate Duty Act so as to include the corpus as property deemed to pass as a result of gift made by the testator which shall not have been bona fide made two years or more before the death of the deceased on 23-8-1984. Perhaps, all these troubles could have been avoided had the deceased made a gift inter vivos straightaway on 21-4-1974 instead of creating trust and going through the formalities of proposing resolution to extinguish the deed and getting it passed by all the trustees to avoid direct gift on 1-12-1983. It appears as though the deceased has woven such intricate legal web that he got entangled himself. In this view of the matter, therefore, we uphold the order of the Appellate Controller of Estate Duty on this point.
26. The second issue relates to the valuation of the motor car taken by the Asstt. Controller at Rs. 20,000 and confirmed by the Appellate Controller. As seen from the paper compilation filed, the deceased purchased a motor car in Aden in the year 1959 and it was imported into India in 1964.Atthat time, the Customs authorities valued the car at Rs. 7,500 and the car was off the road from 2-3-1979 and lying in garage. For the purpose of estate duty, the accountable person returned the value of the car at Rs. 8,000 after effecting repairs to the tune of Rs. 16,720 for which bills were not produced. Before the Asstt. Controller the accountable person claimed liability of Rs. 9,000 on account of outstanding bill for repairs of car. It would appear from the order of the Asstt. Controller that the actual repair expenses amounted to Rs. 16,720. If repairs bill is insisted upon by the accountable person the repair expenses would amount to Rs. 16,720 and if bill is not insisted upon the claim could be settled for Rs. 9,000. It is for this purpose the accountable person has chosen not to produce the bills but made the claim of outstanding liability of Rs. 9,000. The Asstt. Controller, on the other hand, was of the view that the repairs which might have included re-conditioning of the car also went to add to life to the car and increase the value of the car. In these circumstances, he preferred to adopt valuation of the car at Rs. 20,000. As a consequence of non-production of bills, the claim of outstanding liability of Rs. 9,000 made by the accountable person was rejected by the Asstt. Controller of Estate Duty.
27. On appeal, the Appellate Controller observed even according to accountable person's own admission car repair expenses amounted atleast to Rs. 9,000 and the value could not be less than Rs. 16,500. Therefore, he did not interfere with the valuation of Rs. 20,000 fixed by the Asstt. Controller of Estate Duty. As regards the liabilities, he did not accept the claim of the assessee for want of production of bills to the satisfaction of the Asstt. Controller at the time of assessment proceedings. Therefore, he has confirmed the disallowance of claim of liabilities of Rs. 9,000 also.
28. At the time of hearing, the learned counsel for the accountable person made a fervent plea that while he could not dispute the valuation of the car taken at Rs. 20,000, he urged that the liability regarding unsettled bills of repairs of car should be allowed as a deduction as a liability.
29. The learned departmental representative, on the other hand, supported the order of the Appellate Controller rejecting the claim for want of proof of liability.
30. After due consideration, we have to make a pertinent observation that both the parties have not brought evidence on record to show whether the actual repairs to the motor car have been carried out prior to the date of death of the deceased or thereafter. If repairs have been carried out prior to the date of death, then the value of car would be appreciated to the extent of repairs which would be major repairs considering the fact that the car was lying idle in the garage for so long years. Therefore, it could be inferred that the repairs included major portion of re-conditioning charges also which would go to enhance the value of the car. Since the case proceeded on the basis that the expenses have been incurred prior to the date of death of the deceased and unpaid repair expenses to the extent of Rs. 9,000 was claimed as a liability. Inasmuch as the authorities have enhanced and confirmed the valuation of the car at Rs. 20,000, it would be only logical to allow the claim of liability of Rs. 9,000 for the simple reason that but for the liability the car could not have appreciated in value. The appreciation of car depends upon the expenditure incurred and which is reflected in the unsettled bill of Rs. 9,000. The valuation of the car was conceded by the counsel of the accountable person and hence upheld. However, we are not able to agree with the decision of the Appellate Controller on the point of liability. Accordingly, the claim of Rs. 9,000 as a liability is to be allowed as a deduction from the estate of the deceased as a debt owed by the deceased.
31. The third issue relates to the disallowance of miscellaneous liability of Rs. 1,000. Before the Asstt. Controller the accountable person claimed that petty bills to the extent of Rs. 1000 in respect of newspapers, grocery, household and sundry expenses as a liability. The Asstt. Controller rejected the claim for want of bills to show that they were outstanding on the date of death of the deceased.
32. On appeal, the Appellate Controller confirmed the action of the Asstt. Controller of Estate Duty.
33. At the time of hearing, no specific argument has been advanced by the learned counsel for the accountable person in this regard nor any evidence has been produced. No any further light has been thrown as to the exact nature of the liability claimed. The burden of proving the liability lies on the accountable person and inasmuch as it has not been discharged, we have no other alternative except confirming the decision of the Appellate Controller of Estate Duty on this point. Accordingly, the decision of the Appellate Controller of Estate Duty is confirmed on this point.
34. In the result, the appeal is allowed partly.