T.D. Sugla, J.
1. These are cross-references, two at the instance of the Department and one at the instance of the accountable person. The Tribunal has referred to this court the following questions of law for opinion under Section 64(1) of the Estate Duty Act, 1953 :
R. A. No. 1246/(Bom) of 1975-76. At the instance of the Controller :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the trust properties consisting of the movable assets of the value of Rs. 22,29,444 and the immovable property known as 'Readymoney house' at Veer Nariman Road, Bombay, of the value of Rs. 4,64,000 did not pass on the death of the deceased under Section 5 or Section 7 or Section 11 of the Estate Duty Act, 1953 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the property known as 'Garden Reach' situated at Poona is not to be included in the principal value of the estate of the deceased under Section 10 of the Estate Duty Act, 1953 ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that furniture of the value of Rs. 52,000 lying in the 'Readymoney house' at Napean Sea Road, Bombay, is not to be included in the principal value of the estate of the deceased under Section 10 of the Estate Duty Act, 1953 ?'
R. A. No. 1247/(Bom) of 1975-76. At the instance of the Controller :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the property known as 'Readymoney house' at Napean Sea Road, Bombay, did not pass on the death of the deceased under Section 5 or Section 7 of the Estate Duty Act, 1953 ?' R. A. No. 1092/(Bom) of 1975-76. At the instance of the accountable person :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the immovable property known as 'Readymoney house' was deemed to pass on the death of the deceased under Section 11 of the Estate Duty Act ?'
(2) Whether, on the facts and in the circumstances of the case, it should have been held that the provisions of Section 11 of the Estate Duty Act were not applicable to the case and that no part of the 'Readymoney house' was deemed to pass on the death of the deceased ?
(3) In the alternative, and if it is held that Section 11 of the Estate Duty Act did apply to the case, whether, on the facts and circumstances, the whole of 'Readymoney house' could be included in the estate under that section or only a part thereof and if so, what part ?'
2. Question No. 1 in R. A. No. 1246/(Bom) of 1975-76, the only question in R. A. No. 1247/(Bom) of 1975-76 and all the three questions in R. A. No. 1092/(Bom) of 1975-76 involve a common issue, viz., whether the value of the baronetcy fund in which the deceased had a life interest as a baronet under the Cowasjee Jehangir Baronetcy Act, 1911, on the facts and in the circumstances of the case, is wholly or partly includible in the principal value of the estate of the deceased under Section 5, 7 or 11 of the Estate Duty Act, 1953. For the sake of convenience, we propose to dispose of the aforesaid five questions together and first.
3. The deceased, Sir Cawasji Jehangir, the second baronet in succession, died on October 18, 1962. hP was possessed of free estate. In terms of the will executed by the deceased, his wife, Lady Hirabai Cawasji Jehangir, was appointed as executor and trustee of the will. She filed the estate duty account showing the principal value of the deceased's estate at about Rs. 22 lakhs. There was one settlement known as Sir Cawasji Jehangir Baronetcy Trust created under the Act No. XIX of 1911 by the Governor-General of India in Council. The preamble of that Act stated in so many words that the purpose of the Act was to settle various properties 'to accompany and support the title and dignity of a baronet'. Under Section 4 of the Act, the trustees held the baronetcy fund up to and for the benefit of the said Sir Cawasji Jehangir or the person who, as heir male of his body, shall, for the time being, have succeeded to, and be in the enjoyment of the title of baronet. Under Section 6 of the Act, the mansion houses called the 'Readymoney house' and 'Fort Mansion' were to be held upon trust for the said Sir Cawasji Jehangir for and during the term of his natural life and from and immediately after his death upon trust for the heirs male of the body of the said Sir Cawasji Jehangir who may succeed to the title of the baronet.
4. The Assistant Controller was of the view that, in addition to the free estate, the properties comprised in the baronetcy trust were also liable to duty on the death of the deceased. Accordingly, he issued notices under Section 55 to the trustees who took the stand that no charge to duty was attracted in respect of the trust properties. The trustees also informed the Assistant Controller by their letter dated April 19, 1966, that, pursuant to Sir Cawasji Jehangir Baronetcy Repealing Act, 1964, which came into force from June 2, 1965, Sir Cawasji Jehangir Baronetcy Act, 1911, was revoked and extinguished and the corporation dissolved and all the properties were vested with the present baronet, Sir Hirji Cawasji Jehangir, and requested that the present baronet be considered to be the accountable person for the trust properties. The Assistant Controller did not accept the contentions of the present baronet, the accountable person, that no charge to duty was attracted in respect of the trust properties on the death of the deceased. He computed the value of the various properties comprised in the trust at Rs. 83,93,444, while the net value of the free estate was determined by him at Rs. 42,29,556. Accordingly, the Assistant Controller imposed charge of estate duty on the principal value of the estate at Rs. 1,26,23,000.
5. It is not necessary, at this stage, to refer to the contentions raised on behalf of the Revenue or the accountable person before the Appellate Controller or the Tribunal. Suffice it to say that, as regards the deceased's interest in the funds comprised under the Baronetcy Act, the respective contentions and the Tribunal's findings were as under :
6. The case of the accountable person was that the deceased had disposed of his entire life interest in the properties comprised in the Baronetcy Trust long before his death. To be precise, half of it was conveyed by a deed in the year 1947 for Rs. 2,00,000 to Cawasji Jehangir & Co. (P) Ltd. and the remaining half along with the half earlier conveyed to the aforesaid company was jointly conveyed in favour of the son, Sir Hirji, for Rs. 2,22,578 in the year 1954. The deceased, thus, possessed or could be said to possess no interest whatsoever in the trust properties at the time of his death. Fairly admitting that the deceased continued to stay in a portion of one of the houses belonging to the Baronetcy Trust, it was stated that he was doing so as a protected or a statutory tenant and the provisions of Section 11 were not attracted.
7. The Department's case, on the other hand, was that the value of all the properties comprised in the baronetcy trust was includible. The life interest under the Baronetcy Act, according to the Department, was one whole. It was indivisible and not capable of bifurcation. The deceased could not be a tenant of a portion of the property comprised in the Baronetcy Trust which he was entitled to enjoy as a free residence under the Act by merely disposing of that interest and claiming to become a tenant. Sections 5 and 7 read with Section 11 were clearly applicable.
8. The Tribunal, inter alia, accepted that the deceased had transferred his life interest in the properties comprised in the Baronetcy Trust long before his death and, therefore, his life interest as such did not, or rather could not, pass on death or cease on death within the meaning of Section 5 or 7 of the Estate Duty Act. As regards the deceased's continuing to reside till death in the 'Readymoney house' at Napean Sea Road, Bombay, one of the properties comprised in the Baronetcy Trust, the Tribunal did not accept the accountable person's contention that the deceased was a statutory tenant and was staying in that house as a statutory or protected tenant. According to the Tribunal, the deceased was staying in that house, rather could not have stayed in that house, in any capacity other than the capacity as a baronet. Taking the view that the life interest was capable of bifurcation, the Tribunal concluded that the value of the property known as 'Readymoney house' alone was includible in the principal value of the deceased's estate.
9. It is for this reason that all the three questions of law referred to this court at the instance of the accountable person pertain to the inclusion of the value of 'Readymoney house' property in the principal value of the deceased's estate and all other questions of law are at the instance of the Revenue.
10. Dr. Balasubramanian, learned counsel for the Revenue, strongly contended that the deceased had a life interest in the properties comprised in the Baronetcy Trust under the Baronetcy Act of 1911. The purpose of the Act was clear. The life interest was so created only to ensure and support the title and dignity of 'baronet' conferred on him by the late His Majesty King Edward VII. He referred to the provisions of Section 11 of the Act to show that the deceased could not have transferred his aforesaid life interest as such a transfer will be contrary to the intention' of the Act. Assuming that the deceased could have transferred his life interest, the life interest was in the Baronetcy Trust under the Act. It was one and indivisible and was not capable of bifurcation. Thus, if the life interest as such was transferred and if one of the properties comprised in the life interest was hit by the provisions of Section 11(2)(a) of the Estate Duty Act, as the Tribunal has held that it was hit, the value of the entire life interest would have to be included in the principal value of the estate of the deceased. As regards the contention that the deceased resided in that house as a statutory tenant since he was paying rent at the rate of Rs. 1,250 per month since 1947, and not as a baronet, Dr. Balasubramanian strongly relied on the Tribunal's finding at page 110 of the paper-book as under :
'In our view, this contention of the accountable person is not at all acceptable as the deceased could not be considered to be a statutory tenant of the trustees as he was not staying in 'Readymoney house' in his capacity as a tenant. The deceased, on his becoming a baronet, acquired life interest in 'Readymoney house' which, under Section 6 of the Baronetcy Act, was to be held upon trust for the said Sir Cawasji Jehangir for and during the term of his entire life and, from and after his demise, upon trust for heirs male of the body of Sir Cawasji Jehangir who may succeed to the title of the baronet.'
11. Dr. Balasubramanian, it may be stated, relied on our court's decision in Khatizabai Mohomed Ibrahim v. CED : [1959]37ITR53(Bom) in support of his contention that the entire life interest of the deceased constituted one property and that it was indivisible and incapable of bifurcation. He placed reliance on the Privy Council decision in the case of Clifford John Chick v. Commissioner of Stamp Duties [1959] 37 ITR 89 and the Supreme Court decision in the case of George Da Costa v. CED : [1967]63ITR497(SC) in support of the contention that, since the life interest, that is, the property, conveyed in this case was not enjoyed by the assignee to the entire exclusion of the deceased or of any benefit to him, its value was includible in the principal value of the estate. He stated that the Supreme Court decision in the case of CED v. Smt. Parvati Ammal : [1974]97ITR621(SC) was applicable in this case and not the Supreme Court decision in the case of CED v. C.R. Ramachandra Gounder : [1973]88ITR448(SC) , He also referred to and relied upon some other decisions, viz., in the case of CED v. J.N. Elias : [1986]157ITR352(Cal) ; in the case of Dipti Narayan Srimani v. CED : [1988]172ITR476(SC) ; in the case of CED v. Estate of Late W.S. Seshachala Gramani : [1989]180ITR431(Mad) and in the case of CED v. Kamlavati : [1979]120ITR456(SC) in support of his various contentions. However, for reasons to be stated hereinafter, we have not found it necessary to refer to and/or deal with all these cases in detail in the present case.
12. Shri Dastur, learned counsel for the assessee, on the other hand, contended that, in view of our court's judgment in the case of CED v. Official Trustee, Maharashtra State : [1990]186ITR463(Bom) , in which a similar Act, i.e., Sir Jamshetjee Jejeebhoy Baronetcy Fund, was the subject-matter of consideration, it was held that a baronet enjoyed a life interest in the baronetcy fund as a holder of office within the meaning of Section 7(4) of the Estate Duty Act. As a result, the provisions of Section 7(1) of the Act are not applicable. Anticipating the Department's argument that a life interest is not only includible as interest in property ceasing on death and as such to be deemed to have passed under Section 7 but also as property passing on death under Section 5 of the Estate Duty Act, Shri Dastur stated that, for a property to pass on death, the beneficial interest in the property must change hands on death. In the present case, the deceased's son enjoyed the deceased's life interest in the baronetcy fund as 'assignee' in full at least from 1954. After the death of the deceased in 1962 also, he continued to enjoy the same life interest. The only difference was that, prior to the deceased's death, he was enjoying the life interest as assignee of the deceased and, after the death, he enjoyed the life interest as a baronet in his own right. Placing reliance on the Supreme Court decision in the case of CED v. Hussainbhai Mohamedbhai Badri : [1973]90ITR148(SC) , he stated that the word 'passes' in Section 5 means 'changed hands'. For a property to pass on death, the mere fact that the capacity of the person enjoying the property before and after death had changed was not enough and that will not bring the case within the meaning of Section 5. Moreover, the Supreme Court, in its decision in the case of CED v. Aloke Mitra : [1980]126ITR599(SC) , Shri Dastur pointed out, held that, under Sections 1 and 2 of the Finance Act, 1894 (which are similar, if not identical, to Sections 5 and 6 of the Estate Duty Act), the simultaneous existence of a right to tax was consistent with the well-known statement of Lord Macnaghten in Earl Cowley's case [1899] AC 198 ; 1 EDC 193 and could not, therefore, be sustained. In other words, his submission is that the charge to estate duty under Sections 5, 6 and 7 and/or other sections has got to be taken as an integrated charge and, therefore, if the deceased enjoyed the life interest as a holder of office within the meaning of Section 7(4), such an interest will not be chargeable to duty not only under Section 7 but also under Section 5 of the Estate Duty Act.
13. Before proceeding to consider the rival contentions, it may be desirable to observe that the accountable person's case before the departmental authorities or before the Tribunal was not that the deceased's life interest in the baronetcy fund was as a holder of office and, therefore, not liable to estate duty at all. Likewise, it was not the case of the Revenue at any earlier stage of the proceedings that the deceased's life interest in the baronetcy fund was not transferable at all. However, there can be no dispute that both the issues raised herein on behalf of the accountable person as well as the Department are not only neat legal questions but can also be considered on other aspects of the questions already referred to us. Having then regard to our court's judgment in the case of CIT v. Home Industries and Co. : [1977]107ITR609(Bom) , wherein, following the Supreme Court judgment in the case of CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) , it was held that if a different aspect of the same question was raised for the first time before the High Court, it would be permissible for the High Court to allow such aspect to be argued before it, even if that aspect had not been argued before the Tribunal, we have heard both Dr. Balasubramanian and Shri Dastur on the aforesaid two issues.
14. It is, therefore, necessary in the first instance to examine somewhat in detail the judgment of our court in CED v. Official Trustee, Maharashtra State : [1990]186ITR463(Bom) . The fund involved in that case was Sir Jamshetjee Jejeebhoy Baronetcy Fund which was created initially under the Baronetcy Act 20 of 1860. The said Act was subsequently replaced by Act 10 of 1915. Under the Act, each of the baronets in succession was, inter alia, entitled to the income of the baronetcy fund during his lifetime. Our court held that the deceased baronet did not settle any property on trust retaining for himself any life interest. There was an Act of Parliament under which a certain fund had been vested in the trustees appointed under the Act in perpetuity. The fund retained the burden of providing its income to the next baronet. Therefore, by reason of the death of the sixth baronet and the consequent successor of the life interest, no benefit accrued to the estate. Hence, Section 7(1) of the Estate Duty Act was not attracted. If Section 7(1) did not apply, Section 40 could not apply. Even assuming that Section 7(1) applied, the provisions of Section 7(4) would exclude the corpus of the trust fund from the levy of the estate duty as the deceased sixth baronet in that case was enjoying the life interest as a holder of office. The baronetcy, it was categorically held, was an office within the meaning of Section 7(4) of the Estate Duty Act. The provisions in the Act No. 10 of 1915 and the Act No. XIX of 1911 (involved herein) are identical.
15. It may be stated that Dr. Balasubramanian had made an attempt to argue that before it could be held that a person was enjoying some property as a holder of office, it was necessary to ascertain the duties and obligations of the office, etc. In our opinion, the judgment of our court is binding on us following which we would proceed on the basis that the deceased baronet herein was also enjoying life interest in the properties comprised in the Baronetcy Trust as a holder of office. The case of the deceased, thus, fell under Section 7(4) of the Estate Duty Act. That being so, it excludes the application of Section 7(1).
16. The next question is whether the life interest in the above circumstances falls or can fall under Section 5, and if so, whether Section 7(4) will exclude the application of Section 5 also. In the first place, we do not think that a life interest which obviously ceases on death so far as the deceased is concerned can be equated with a case of property passing on death as distinct from a case in which an interest ceases on death and, therefore, is deemed to pass on death in terms of Section 7(1). Moreover, in view of the Supreme Court decision in CED v. Aloke Mitra : [1980]126ITR599(SC) , it will have to be held that charge of estate duty under Sections 5, 6 and 7 etc., is an integrated charge and, therefore, the property which the deceased held as holder of an office within the meaning of Section 7(4) will not be liable to estate duty under any of the sections.
17. Further, it cannot be overlooked that, as a fact, the deceased had assigned his entire life interest in the Baronetcy Trust in favour of his son, the present baronet, long before his death in the year 1954. Thereafter, the present baronet has been enjoying the said life interest before and after the deceased's death. The only difference in the situation has been that before the deceased's death he enjoyed it as assignee, and after the death as baronet in his own right. The Supreme Court decision in the case of CED v. Hussainbhai Mohamedbhai Badri : [1973]90ITR148(SC) , lays down the law for the land. It is categorically held in that case at pages 154 and 155 :
Page 154 :
'The rule laid down in Townsend's case [1901] 2 KB 331 ; 1 EDC 536 is equally applicable to the facts of the present case. 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. This conclusion of ours receives support from the decision of this court in Mahendra Rambhai Patel v. CED : [1967]63ITR645(SC) .
Page 155 :
'This decision clearly lays down that, in determining whether a particular property 'passed' on the death of a deceased, what has to be seen is whether that deceased had any beneficial interest in that property and whether that interest 'passed' to someone on his death. The deceased Safiabai had only one-third share in the income of the trust property. That interest undoubtedly passed on her death. In the remaining two-thirds income, she had no interest and the same did not pass on her death. Her title to the property as a trustee was purely a personal right. It had no value in terms of money. It conferred no right on her. It only imposed some duties. Such a right cannot be considered as 'property'.'
18. Accordingly, we have no difficulty in holding that the deceased's life interest in the baronetcy fund, whether or not he had assigned it, was not assessable to estate duty, as it was not property which passed on death nor could be deemed to have passed on death by cesser of interest contemplated by Section 7(1) or even under Section 5 as property passing on death.
19. This takes us to the next question, viz., the deceased as a matter of fact having transferred/assigned his life interest to his son in 1947 and 1954, could it be said that he still held the said life interest as a holder of the office as on date of his death. To our mind, this question is really without any merit. If the life interest itself could not be assessed to estate duty, the fact that it was transferred whether validly or whether the transfer was invalid would result, at its worst, in restoring the position to as if the life interest was not transferred. Either way, it cannot be assessed to estate duty. In the above view of the matter, the question whether, in such circumstances, the provisions of Sections 7 to 11(a) are or are not applicable loses all its significance.
20. There is no doubt that estate duty is a charge on the property that passes on death as contemplated under Section 5 of the Estate Duty Act and Sections 6 to 16 create a charge on the property which does not actually pass but which is deemed to pass in certain circumstances. Section 11 is one of those sections. Clause (a) of Sub-section (2) which provides that, where a limited interest (like life interest in this case) is disposed of within a certain period before death, unless the bona fide possession and enjoyment of the property is given to the transferee to the entire exclusion of the deceased, such a property could be deemed to have passed on death. In the view we have taken about life interest in this case, it is equally unnecessary to examine this aspect.
21. This takes us to question No. 2 in R. A. No. 1246/(Bom) of 1975-76. The facts as regards this question are that so far as the property 'Garden Reach' at Poona is concerned, that was purchased by M/s. Cawasji Jehangir and Company in 1939. This company was started by the deceased and his father, Sir Cawasji Jehangir, first baronet, and each one of them owned 5 shares each. The father of the deceased made his disposition regarding his five shares in his lifetime while the deceased created several deeds of trust in respect of his five shares in 1936. The trusts were at first revocable and so deeds of revocation and new appointments were made in respect thereof from time to time. However, the final deeds of revocation and new appointments were made on March 29, 1957, when the deceased made all the trusts irrevocable. Two of the shares of the company were on such final deed of revocation and new appointments held by the trustees absolutely for Lady Jehangir, wife of the deceased. After March 29, 1957, the deceased ceased to have any beneficial interest in the said shares which he had settled. In January, 1958, the company effected a reduction of capital and Lady Jehangir obtained on this reduction various properties or assets of the company, one of which was the Garden Reach property situated at Poona.
22. It was stated that the deceased had gone to England in 1957 when he was 78 years old for an operation of the prostrate gland and as this operation was unsuccessful, the deceased returned to India and was an invalid during the last few years of his life. It was further stated that Lady Jehangir had sworn an affidavit to the effect that the deceased had mostly not visited the Poona property during the last two years of his life and if at all he had done so, it must have been a sort of a casual visit for a short duration along with her.
23. The short question that arose for consideration before the Tribunal was whether, on these facts, the Poona property was or could be deemed to have passed under the provisions of Section 10.
24. The Tribunal, after considering the submissions made on behalf of the two sides, did not agree with the Assistant Controller who held that, by various associated operations, within the meaning of Section 27(6), the property had come to belong to Lady Jehangir and as the deceased was not excluded from the gifted property, the property was to be deemed to have passed under the provisions of Section 10. In the opinion of the Tribunal, the facts of this case were covered by Section 2(15) of the Act. By virtue of this definition, if the deceased was not excluded from the transferred property, the provisions of Section 10 would apply. However, looking to the facts of the case, it was clear that the provisions of Section 10 would have no application to the case as it could not be said that the deceased was not excluded from the gifted property. In this connection, it was found that the deceased had not reserved any benefit to himself and he was permanently residing in 'Readymoney House' at Napean Sea Road. Even assuming for the sake of argument that the deceased had visited the Poona property on some occasions during the last two years of his death, it could not be said that the deceased was not excluded from the gifted property. In this connection, the Tribunal observed that it had been held in a number of cases that where a gift had been made by a husband to his wife and the husband had continued to reside in the gifted property, it would not attract the penalty of George Da Costa's case : [1967]63ITR497(SC) . In this connection, it may be noted that, in the Supreme Court case, it was a case of father and son and not of husband and wife. Filial love may not make joint residence between the parents and the children in the house essential or necessary but marital love might make that not only essential and fundamental but sensible, reasonable and practicable. The Calcutta High Court, in the case of Mrs. Shamsun Nehar Mansur : [1969]71ITR301(Cal) , has observed that no construction should be put on the Estate Duty Act so as to be against public policy to the extent that, whenever a husband makes a gift of a property to his wife, he should lose both the property and the wife. In such a situation, the fundamental point for consideration is that a husband's going to the wife for consortium or coverture is not a proprietary right in respect of the house gifted. In view of the above discussion, the Tribunal confirmed the order of the Appellate Controller that the provisions of Section 10 cannot apply to the facts of this case and as such this property was not to be included in the dutiable estate.
25. In our judgment, the view taken by the Tribunal must be confirmed in view of a subsequent decision of the Supreme Court in the case of CED v. Umesh Rudhra : [1979]117ITR579(SC) . This is besides the fact that there is nothing to suggest that the deceased had ever visited Poona and resided in Poona during the last two years prior to his death. The Supreme Court, it may be stated, approved the Calcutta High Court decision in Shamsun Nehar Mansur v. CED : [1969]71ITR301(Cal) relied upon by the Tribunal and held (headnote) :
'Section 10 of the Estate Duty Act, 1953, does not apply to a case where the donor makes a gift of a residential house to his wife and thereafter continues to reside there with her in the residential house.
When the residential house is gifted to the wife and she obtains possession and remains in enjoyment of it, merely because the donor in his capacity as husband continues to reside there with the wife, it cannot be said that the wife does not retain possession and enjoyment of the residential house to the exclusion of the donor.'
26. The last question is the third question in R. A. No. 1246/(Bom) of 1975-76. This represents the value of furniture, etc., lying in 'Readymoney House' at Napean Sea Road and the Poona property. Since we have already stated that the Poona property and Readymoney House are not includible in the principal value of the estate of the deceased, it must, of necessity, follow that the value of any furniture lying therein cannot be liable to estate duty.
27. Accordingly, we answer the first question in R. A. No. 124G/(Bom) of 1975-76, the only question in R. A. No. 1247/(Bom) of 1975-76 and all the three questions in R. A. No. 1092/(Bom) of 1975-76 in favour of the assessee and we answer questions Nos. 2 and 3 in R. A. No. 1246/(Bom) of 1975-76 in the affirmative and in favour of the assessee.
28. No order as to costs.