Pathak, J.
1. The Central Board of Direct Taxes has referred the following question for the opinion of this court :
' Whether, on the facts and in the circumstances of the case, the sum of Rs. 3,61,939, or any part thereof being the value of the properties settled by the deceased as wakf properties, was rightly included in the principal value of the estate of the deceased and charged to estate duty under Section 12 or, in the alternative, under Section 10 of the Estate Duty Act '
2. Haji Ahmed Hussain Rizvi died on December 28, 1955. His son, Syed Ahmed Hussain Aslam Rizvi, furnished an account of the property passing on his death to the Assistant Controller of Estate Duty. The deceased had executed a deed of wakf, and the Assistant Controller held that the wakf properties valued at Rs. 3,61,939, mast be deemed to have passed on the death of the deceased under Section 12, Estate Duty Act, or, alternatively, under Section 10 of that Act. An appeal was preferred by the accountable person 1o the Board, and the appeal was dismissed. The present reference has been made at the instance of the accountable person.
3. The deceased was the absolute owner of property worth Rs. 4,50,000. On January 1, 1940, he executed a deed of wakf in respect of this property creating a wakf-alal-ul-aulad. He appointed himself as the first mutawalli for the period of his life. After him, his wife was to be the mutawalli and after her the sons of the deceased in succession. The primary object of the wakf was to arrange for the maintenance of his sons and daughters and a daughter's son. The profits from certain properties were set apart for charitable purposes. Under paragraph 7 he reserved to himself the power to alter the provisions of the deed in his discretion including the power to modify the rights of the beneficiaries, to include some and exclude others and to increase or decrease their shares.
4. On November 30, 1947, he executed a supplementary deed making certain changes in the order of succession of mutawallis but without affecting the provision that he would continue as the first mutawalli during his life to be followed by his wife during her life. A further provision was made that he and his wife would, during their respective periods of mutawalliship, have the power to spend the income from the endowed property for their own personal needs, for the benefit of their children and relations or for charity in any way they considered proper. They were under no obligation to maintain accounts or to render accounts to any one. Under a further clause he reserved to himself and his wife the right to reside in certain residential properties.
5. Towards the end of the deed he repeated the clause that as mutawalli he could have the power to make changes in the wakf deed including the power to modify the rights of the grantees, to bring in new grantees or to exclude the existing ones and to modify their shares.
6. On July 1, 1950, the settlor executed yet a second supplementary deed. Under the wakf deed, as now amended, he vacated the office of mutawalli, which now passed to his wife. All that he retained to himself was the right to reside in certain specified house properties, and the power to amend the conditions of the wakf deed, the list of beneficiaries and the extent of their shares.
7. In the appeal of the accountable person before the Board, it was contended that a wakf was not a settlement within the meaning of Section 12 of the Estate Duty Act. It was also contended that the deceased had not reserved any interest in the wakf property, and, therefore, Section 12 was not attracted. Both contentions were rejected. The Board held that a wakf fell within the scope of Section 12, and that by the power reserved by the deceased to alter the list of beneficieries and add to it he could include himself as a beneficiary and receive the benefit of income from the waqf property. The Board also found that the deceased had been residing in one of the wakf properties until his death. Alternatively, the Board held that the case fell within the terms of Section 10 inasmuch as the wakf deed could be construed as creating an immediate gift inter vivos.
8. Before us, it is urged on behalf of the accountable person that the wakf is not a ' settlement' within the meaning of Section 12, and the Board had erred in holding to the contrary. At the relevant time Section 12 of the Estate Duty Act provided:
' 12. (1) Property passing under any settlement made by the deceased by deed or any other instrument not taking effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself the right by theexercise of any power, to restore to himself or to re-claim the absolute interest in such property shall be deemed to pass on the settlor's death:
Provided that the property shall not be deemed to pass on the settlor's death by reason only that any such interest or right was so reserved if by means of the surrender of such interest or right the property is subsequently enjoyed to the entire exclusion of the settlor and of any benefit to him by contract or otherwise, for at least two years before his death.
Explanation,--A settlor reserving an interest in the settled property for the maintenance of himself and any of his relatives (as defined in Section 27) shall be deemed to reserve an interest for himself within the meaning of this section.
(2) Notwithstanding anything contained in Sub-section (1) where property is settled by a person on one or more other persons for their respective lives and after their death, on the settlor for life and thereafter on other persons and the settlor dies before his interest in the property becomes an interest in possession, the property shall not be deemed to pass on the settlor's death within the meaning of this section.'
9. It is contended on behalf of the accountable person that the wakf effected by the deceased vested the property in God Almighty and there can be no question of the property being settled as understood in Section 12. It is pointed out that by. Section 2(19) ' settled property ' has been defined as meaning:
' Property which stands limited to, or in trust for, any persons, natural or juridical, by way of succession ...'
10. The submission is that it is only where the property devolves by way of succession that one can speak of ' settled property. The property under a wakf-alal-ul-aulad, it is pointed out, vests in God once and for all and does not pass by way of succession. Therefore, it cannot be considered as 'settled property' within the meaning of Section 2(19). And as Section 12 deals with property passing under a settlement and, therefore, with 'settled property ', wakf property cannot be the subject of Section 12. That is the first contention.
11. The question then is whether ' property passing under any settlement made by the deceased' can be said to extend to wakf property. A ' settlement' is defined by Section 2(19) as ' any disposition including a dedication or endowment whereby property is settled'. Therefore, a dedication or endowment will be a ' settlement'. There are no limiting words suggesting that the dedication or endowment must be in favour of one class of persons and not another or that for the purposes of the definition the property dedicated or endowed must vest not in God but in others. The argument on behalf of the accountable person is that it cannot referto property which vests in God because by the definition in Section 2(19) ' settled property ' means property which stands limited to, or in trust for, any persons by way of succession. If is property which vests successively in one person after another, it is urged, and that is not what happens when wakf property vests in God. When can it be said that property stands limited to or in trust for any persons by way of succession In England, settlement estate duty is payable under Section 5(1) of the Finance Act, 1894. It is a duty on the principal value of ' settled ' property. What is ' settled ' property within the meaning of Section 5(1) is indicated by Section 22(1)(i) of that Act. It defines the expression 'settlement' to mean an instrument whether relating to real property or personal property, which is a ' settlement ' within the meaning of Section 2 of the Settled Land Act, 1882, or if it relates to real property, would be a settlement within the meaning of that section. Section 2 of the Settled Land Act, 1882 defines ' settlement ' as:
' Any . . . instrument. . . under or by virtue of which . . . any land or any estate or interest in land, stands for the time being limited to or in trust for any persons by way of succession creates or is for purposes of this Act a settlement, ......'
12. Examining the meaning of the expression ' by way of succession ' in Attorney-General v. Owen, [1899] 2 Q.B. 253, 266 ; I E.D.C. 222, 233 (Q.B.).Kennedy J. observed :
' ' By way of succession ' seems to me to be a phrase to which one ought, in dealing with this Act, not to assign a narrow or strictly technical meaning, but to treat it as equivalent to ' successively upon death '; and substantially under the present will the property out of which the annuities are paid is property to which, so far as benefit is concerned, the annuitants are entitled during life, and which, so far as benefit is concerned, passes to the residuary devisees upon the deaths of the annuitants. There is a succession, in a popular but correct sense, in the enjoyment of this portion of the testatrix's residuary estate which comes to them upon the decease of the annuitants.'
13. It would seem, theretore, that when we speak of ' settled ' property as property limited or in trust for any persons by way of succession, reference is intended to property held, for the benefit of a number of persons where the benefit passes to them one after the other in succession. It is the beneficial interest which must pass by way of succession. Kennedy J, repeatedly refers to that aspect. He says with reference to the case before him, that the property is one,
' .... which, so far as benefit is concerned, the annuitants are entitled during life, and which, so far as benefit is concerned, passes to the residuary devisees upon the deaths of the annuitants.'
14. Reference is intended to the beneficiaries for whose benefit the property is limited or stands in trust If they are beneficiaries entitled to succeed each other the property can be treated as 'settled property'. In the instant case, while the wakf property may be said to vest in God what falls to be decided is whether the beneficiaries under the wakf are entitled to enjoy settled property by way of succession. Upon the terms of the wakf deed the anwer must be in the affirmative. In paragraph 5 of the wakf deed, as last amended, the income of the endowed property has first to be applied to the payment of Government dues and thereafter 80% has to be kept apart for the maintenance of the family members. After deducting a proportionate share on account of the expenditure incurred on the management, upkeep and development of the endowed property and the salaries of the trustees, the balance has to be divided by the mutawalli amongst the wakif's children and their children, generation after generation, in accordance with the shares as defined by Mohammedan law and as warranted by the conditions of the time subject to the other terms and conditions of this deed. If the line of descent becomes extinct and there docs not remain any person alive having the right to income under the Mohammedan law then the income from the endowed property to the extent it was payable to the deceased's descendants will be spent for ever on certain charitable deeds. The charitable deeds for the purposes of the wakf have been indicated as
' maintenance and support of the wakf's relations and of orphans and widows of the wakif's family, who are not heirs of the wakif; Muslim widows, orphans, destitutes, helpless persons and travellers in general; and granting of scholarship, for religious and wordly education and granting of aid to Muslim institutions.'
15. The settlor clearly contemplated that successive generations would enjoy the benefit of the wakf and thereafter it would pass to the persons covered by the charitable purposes.It seems to us that upon these considerations the property must be considered to be ' settled property ' and the wakf, being a dedication or endowment, must be considered to be a settlement within the meaning of Section 2(19). Inasmuch as the property comprised in the wakf passes under a settlement, it is property which falls within the scope of Section 12. It is next contended on behalf of the accountable person that the deceased had no interest in the property which could attract the provisions of Section 12. It is pointed out that after vacating the office ot mutawalli in 1950, he had no interest left in the wakf property. Now, Section 12(1) speaks ot property in which the deceased settlor has reserved to himself an interest in the property passing under the settlement for life or any other period determinable by reference to death. Upon analysing the terms andconditions of the wakf deed, as last amended, it appears that the settlor retained to himself the right to reside in certain specified house properties and the power to amend the terms oi the wakf deed, the list of beneficiaries and the extent of their shares. Are these conditions sufficient to bring the property within the scope of Section 12 The power to amend the terms of the settlement is couched in the following language :
'7. (e) In future also, I the wakif during my life-time, shall have the right of making amendments, alterations, cancellations and additions of conditions in this wakf deed, as warranted by the prevailing conditions, which right I enjoy at present; and during my life-time I shall specially have the power to make amendments in the rights of the grantees, to include some stranger amongst them and to exclude any body and to increase or decrease the amount of their shares. '
16. The power reserved by this, clause is expressed in the widest terms. While perhaps it does not extend to the power of revoking the wakf, it enables the settlor to travel over a wide field, curtailing interests presently enjoyed on the one hand, and in creating or enlarging them in other directions. In so far as the power is exercised for the purpose of including some one not already a beneficiary, it could extend to including the settlor himself. The wide amplitude of power in the clause supports such a conclusion. If that be so, the settlor has reserved to himself the right to benefit from the wakf property for life by the simple device of including himself in the list of beneficiaries or grantees.
17. In Attorney-General v. Heywood, [1887] 19 Q.B.D. 326 ; I E.D.C. 13, 15, 16 (Q.B.).the Queen's Bench Division had before it a case where under the terms of the settlement the settlor assigned to the trustees a sum of money upon trust declaring that the trustees should apply the income for the benefit of the settlor and his wife and children, or at their discretion, for the benefit of one or more such persons to the exclusion of others, and after the settlor's death the money was to be held subject to trusts in favour of his widow and children. The question was whether Section 38(2)(c) of the Customs and Inland Revenue Act, 1881, applied. That provision, it may be mentioned, is, in its material terms, comparable with Section 12(1) of our Act. Stephen J. observed:
' The whole question here is whether by this settlement an interest for life is reserved, either expressly or by implication, to the settlor. The clause on which this question turns ought to be interpreted with reference to the scheme of the Act, and adopting that principle of construction I have come to the conclusion that the word ' interest' in the statute ought to be interpreted so as to include that which was reserved to the settlor in the present case. By the terms of the settlement during the life-time of the settlor the trustees were to apply the income of the settled property to his use or to that of certain other persons who were specified, but they had a discretion, which would have enabled them, if they had thought fit, to apply the whole for the benefit of such other persons to the exclusion of the settlor. I am clearly of opinion that what was reserved to the settlor was a life interest, for certain other persons would receive a benefit by his death. '
18. Wills J., dealing with the argument that no interest was reserved to the settlor because whether or not he received any benefit from the trust property depended upon the absolute discretion of the trustees, said:
' The word ' interest' is capable of different meanings, according to the context in which it is used or the subject-matter to which it is applied. If the contention for the defendants is right nobody has any interest in the property settled, and yet the whole fund was to be held for the benefit of three classes of persons--the husband, the wife, and the children; and the sum of the benefits conferred on all these three classes taken together, being the sum of three nothings amounts to nothing, whereas, on the other hand, it must necessarily comprehend the whole interest in the fund. This is simply a reductio ad absurdum. This application of the word 'interest' is not confined to a vested or a necessarily contingent interest. The Act was meant to cast a wider net than such a construction would imply.... I am of opinion that the settlement now before us gives the settlor a species of interest. The Act of Parliament was meant to meet cases in which an interest of some sort was conferred and which were not already provided for, and I think the language used is sufficiently comprehensive to include the present case.'
19. The view taken in that case was followed by the Court of Appeal in Attorney-General v. Farrel, [1931] 1 K.B. 81 ; 2 E.D.C. 400, 416 (C.A.). In this case also, the trustees were vested with the power to apply the net rents and the profits for the benefit of the settlor, his wife and children as the trustees, in their absolute discretion, thought fit. Lord Hanworth M. R., observed that for the purposes of Section 38(2)(c), it must be held that where there is a discretionary trust a possible object of that trust holds an interest within that provision. Greer L. J., feeling himself compelled to follow the decision in Heywood said:
' In that case the only interest which the settlor retained in the sumof money settled by him was the expectation, well founded or ill founded,that the trustees would exercise their discretion in his favour; but the trustees might quite lawfully have refused to give him anything, and have distributed the income among his wife and children. He had a mere expectationthat the discretion which was vested in the trustees might be exercised inhis favour, either partly or entirely, and that in my judgment is exactlythe position that Major Alfred Stourton was in this case. He had no legal right to force the trustees to give him anything ; at the same time he had in a colloquial sense an interest in the estate, because it was an estate out of which something might be allotted to him in the discretion of the trutees, Whether that is an interest within the meaning of the Act of 1881 has, I think, been determined by Attorney-General v. Heywood, and the decision has stood since the year 1887, a period of forty-three years. '
Corner L.J. also came to the opinion that Section 38(2)(c) came into play,
20. In the instant case, it is true that the settlor had not included himself in the list of beneficiaries and that so long as he did not do so, he was not entitled to the benefits enjoyed by the other beneficiaries. But the power to do so vested in him absolutely. It was a power which he could exercise in his absolute discretion. We see little difference between a case where the settlor included himself among the beneficiaries and left it to the absolute discretion of the trustees to extend the benefit of the trust income to him and the instant case where the settlor had reserved to himself the right to include his name among the beneficiaries thereby automatically entitling himself to the benefit of the income of the wakf property. The power to amend the wakf deed so as to include himself among the beneficiaries is only an instance of the wide powers reserved by the settlor to himself. As we have said the powers under Clause 7(e) are expressed in the widest terms. So long as the character of the wakf is maintained, it is open to the settlor to make any changes--and changes which may directly benefit him in the terms and conditions of the deed. We are of opinion that the settlor reserved an interest in the wakf property for life and therefore the case falls within the scope of Section 12, And that would mean, as was held by the Bombay High Court in Khatizabai Mohomed Ibrahim v. Controller of Estate Duty, [1959] 37 I.T.R. (E.D.) 53 (Bom.). that not merely the interest so reserved but the whole of such property must be deemed to pass on the death of the settlor.
21. In some respects, the amplitude of the power reserved to the settlor to amend the wakf deed is comparable with the power of appointment conferred upon a person to dispose of property. Under Section 3(1)(a) ' a person shall be deemed competent to dispose of property if he has such an estate or interest therein or such general power as would, if he were sui juris, enable him to dispose of property '. A person may not be the owner of property but he may have the power to determine how the property should be disposed of. He has within the meaning of Section 2(13), the ' power to appoint property'. In In re Penrose: Penrose v. Penrose, [1933] Ch. 793 (Ch. D.). Luxmoore J. held that the deceased was competent to dispose where he had a limitedpower to appoint by deed or will to the members of a class which included himself, so that he could have appointed to himself and thus put the property under his sole control. And, as has been observed in Dymond's Death Duties, 13th edition, volume 1, page 764 :
'... .it is not necessary that the power of disposition be exercised. '
22. These observations, although made in the context of the competence of a person to dispose of property and, therefore, referable to Section 6 of the Act, art: helpful in appreciating the dimensions of the power reserved by the settlor to himself in the matter of amending the wakf deed.
23. In case, it can be said that Clause 7(e) of the wakf deed does not have the effect which we think it has, the question next arises whether the right reserved by the settlor to reside in the residential properties covered by the wakf is an interest contemplated by Section 12. In our opinion, it is. The settlor was entitled as of right under the terms of the wakf deed to reside in those properties. That right inhered in him to the date of his death. At no point of time was it surrendered. The Board has found that the settlor did reside in the wakf properties up to the date of his death. On behalf of the accountable person reliance is placed upon the proviso to Section 12(1). We do not think that the proviso can be invoked. It cannot be said that the residential properties were enjoyed to the entire exclusion of the settlor or of any benefit to him by contract or otherwise. We have been referred to Mrs. Shamsun Nehar Mansur v. Controller of Estate Duty, [1969] 71 I.T.R. 301 (Cal.). In that case the Calcutta High Court found that the husband, after gifting the house to his wife, resided therein for the purposes of enjoying the company of his wife and not in the exercise of any proprietary right reserved to himself. The court held that Section 10 which was invoked by the revenue would not be attracted. We may point out that in Estate Duty Reference No. 93 of 1966, Bibi Ahmadi Begum v. Controller of Estate Duty [1972] 83 I.T.R. 303.decided on March 18, 1971, we have with regret, found ourselves unable to agree with the view taken in that case and have held that before Section 10 was amended in 1965 such property would be covered by that section.
24. In the event it is held that the interest of the settlor must be confined to a right of residence only so far as Section 12 is concerned, the value of the wakf property which can be considered for the purpose of estate duty is the value to be set upon the residential property alone. For this purpose, it will be necessary to refer to the specific residential property mentioned in the wakf deed in respect of which the right of residence has been reserved by the settlor. It was held in Attorney-General v. Grey, [1898] 1 Q.B. 318, 325 (Q.B.)that where several properties are comprised in the settlement or gift, a reservation of interest in one of them would result in Section 38(2)(c), Customs andInland Revenue Act, 1881, being attracted in respect of that property only and not the others.
25. But in the view which has found favour with us that Clause 7(e) of the wakf deed reserves an interest in the settlor in respect of the entire wakf property, we are of opinion that the Board is right in including in the principal value the larger sum of Rs. 3,61,939.
26. The Board has held, in the alternative, that Section 10 of the Act applies. It is urged on behalf of the accountable person that Section 10 cannot apply because the settlor has not made a gift of any property. It is pointed out that a distinction must be maintained between a wakf deed and a gift. We are inclined to agree. As was pointed out in Khalizabai:
' Wakfs are a speciality of Muslim law. There is no element of gift in a wakf. The primary concept is that it is a permanent dedication -by a person professing the Mussalman faith of any property for any purpose recognized by the Mussalman law as religious, pious or charitable. The concept of retention or detention is not wholly absent and is even permissible. A wakf extinguishes the right of the wakif and transfers ownership to God. The mutawalli is the manager of the wakf, but the property does not vest in him as it would in a trustee in the case of an ordinary settlement. Of course, as we have already mentioned in the case before us, there is the vesting of the property in the trustees. When we refer to the basic principles of the law of wakf and the provisions of the relevant statute validating certain wakfs, it is extremely difficult to see how it can be said that there is any gift in case of a wakf which gift can be brought within the ambit of Section 10 of the Estate Duty Act.'
But as we have held that Section 12 applies, we need not proceed further with this question.
27. We hold that the sum of Rs. 3,61,939 was rightly included in the principal value of the estate of the deceased and charged to estate duty under Section 12 of the Estate Duty Act. The question referred is answered accordingly.
28. The Controller of Estate Duty is entitled to his costs, which we assess at Rs. 200. Counsel's fee is assessed in the same figure.