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(c) During the lifetime of the Settlor to defray the expenses of Haj of the Settlor and of such of the members of his family as he may take with him and of their visit and pilgrimage to various Mohmmedan Shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending moneys for charitable purposes at such places and for such other religious or charitable purposes as the Settlor in his absolute discretion may from time to time think fit and require out of the income as well as the corpus of the Trust Fund in such manner and to such extent as the Settlor may from time to time direct and for all or nay of such purposes as aforesaid to pay such moneys out of the income or the corpus of the Trust Fund as the Settlor may from time to time require."
In the present case under the settlement the property has been transferred absolutely to the trustees. However, under Clauses 3 of the settlement, the trustees are directed, during the lifetime of the settlor, to defray the expenses of Haj of the settlor and all such members of his family who may accompany him on pilgrimage to various Mohammaden Shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending money for charitable purposes. The said clause also provides for expending income as well as part of the corpus of the trust fund for religious and charitable purposes as the settlor may direct. Can this be considered as the settlor retaining interest in the settled property for life or any other period determinable by reference to his death? The Explanation to Section 12 expressly provides that where a settlor reserves an interest in the settled property for the maintenance of himself or any of his relatives, he shall be deemed to reserve an interest in the settled property for himself within the meaning of Section 12(1). In the present case, however, the settlor has not reserved any right to receive maintenance either for himself or for any of his relatives. Hence the Explanation is not relevant here. However, the settlor is entitled to have Haj expenses of himself and any accompanying family members paid out of the trust fund. The settlor has also reserved the right to direct the religious and charitable purposes on which the trust fund may be spent. These are not benefits which accrue directly to the settlor himself, as in the case of his own maintenance. The pilgrimage expenses, however, of the deceased and any accompanying family members are to be defrayed out of the trust fund if an when the settlor goes on such a pilgrimage. As a matter of fact the deceased never went on any pilgrimage as specified in Clause 3(c) and did not receive any benefit directly or indirectly under the said trust. In our view, the direction in the trust deed that the expenses of the settlor for pilgrimage performed for religious purposes, be paid out of the trust fund, will not be equivalent to reserving an interest in the property for life. Nor will payment towards religious and charitable purposes at the direction of the settlor constitute a reservation of any interest by the settlor for himself in such property for life.
The application of Section 12 was considered by this court in the case of Dipti Narayan Srimani v. Controller of Estate Duty, West Bengal (172 ITR 477). In this case, the settlor executed two deeds of trust. In the first deed, the settlor transferred to himself four items of property to be held on trust: (1) to set apart 1/4th of the net income for effecting certain additions and alterations to the property; (2) to make over another 1/4th of the net income to the shebait of a deity; (3) to apply 1/4th of the net income to certain charities; and (4) to apply the remaining 1/4th for the personal benefit of the settlor during his lifetime and to his heirs thereafter. In the second deed, the settlor transferred six other items of property to himself and his son as trustees: (1) to pay 1/4th of the net income to the shebait of another deity, (2) to spend 1/4th on charities, and (3) to utilise the balance of one-half for the development of two of the properties and after completion of development, for the benefit of the settlor during his lifetime and his heirs thereafter. The settlor provided one room in one of the properties for his residence free. The settlor also constituted himself as shebait during his lifetime and thereafter his heirs were to be the she baits of the two deities. This Court held that Section 12(1) was attracted. It, inter alia, observed that the reservation of interest so as to attract Section 12(1), had to be in the property comprised in the settlement as such. mere collateral benefits reserved by the settlor emanating from some other property or from other source, independent of the property so settle, would not attract this section. But in the case before the Court, the benefits reserved emanated from the very property constituting the subject matter of settlements and could not be said to be collateral in their nature. The Court observed, (page 487,) that having regard to the special nature of the office of a shebait and the rights and interests that go with it, it is possible to contend that when a settlor endows property to an idol and reserves the right of shebaitship to himself, he would be reserving an interest in the property. distinguishing the earlier judgment of this court in controller of Estate Duty, Bihar V, Mahant Umesh Narain Puri (135 ITR 139), this Court said that the position of an elected Mahant in Math properties was different. In that case, no interest passes on the death of a Mahant duly elected, and Section 12 is not attracted. But the case of a settlor who himself endows property to an idol and constitutes himself as shebait is obviously different. The Court, however, did not finally pronounce on the effect of reservation of shebaitship by a settlor in the context of Section 12(1). In the English cases which have been referred to in the said judgment, the settlors had reserved a benefit to themselves, their wives or children in the income of the settled property for their maintenance. The English court observed that this amounted to an interest in the settled property.

The Explanation to Section 12 expressly takes care of such a situation by providing that a settlor reserving a right to receive maintenance for himself or any of his relatives from the settled property or its income shall be deemed to reserve an interest in the settled property for himself within the meaning of that section. Any other kind of an indirect benefit to the settlor under the trust in certain eventualities will not amount to reservation of an interest in the settled property by the settlor for himself.