THE COMMISSIONER OF STAMPS v. CORNELIS HERAT RANDENI

022-NLR-NLR-V-28-THE-COMMISSIONER-OF-STAMPS-v.-CORNELIS-HERAT-RANDENI.pdf


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Present: Schneider A.C.J. and Maartensz A.J.
THE COMMISSIONER OF STAMPS v. CORNELISHERAT RANDENI.108—(Inty.) D. C. Cliilaw, 1,473.
Estate Duty Ordinance, No. 8 of 1919, s. 19—Joint, gift in favourof children—Reservation of life-interest—Death of one of thedonors—Property passing on death—Liability to pay estate duty.
Where a husband and wife made a gift of property to theirchildren, reserving to themselves the right of possession duringtheir joint lives and the life of the survivor.
Held, that on the death of the husband the children were underno liability to pay estate duty, as no interest accrued to them onthe death of their father.
O
NE Issevis Appuhamy and his wife Mangohamy made a jointgift of certain lands to their children, reserving the right of
possession of the lands during their joint lives and the life of the sur-vivor of them. Isseris died in 1922, and in terms of the deeds of; giftMangohamy became solely entitled to the possession of the lands.At the instance of the Commissioner of Stamps, citation issued onthe children to show cause why writ of execution should not issueagainst them for the payment of estate duty. They disclaimedliability on the ground that, although they were the donees underthe deeds of gift, no interest accrued to them on the death of Isseris.
This contention was upheld by the District Judge.
J. E. M. Obeyesehere, C.C. (for Crown), appellant.
V. Perera (with him Ameresekere), for the respondents.
October 12, 1926. Schneider A.C.J.—
For the purpose of this appeal we were asked to accept certainfacts as having been admitted. Those facts are these: Some landswere donated by one Isseris Appuhamy and his wife Mangohamyto their children who are now represented by the first, second, third,fourth, and fifth respondents to this appeal. The donors reservedn right of possession for themselves in all the property donatedduring the life time of both of them and of the survivor of them.Isseris died in September, 1922, leaving his widow surviving himwhereby she became solely entitled to the right of possession reserved
1926.
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1086. in the deeds of gift. The Commissioner of Stamps, who is theSoinnaDHB •PP^ant,' applied to the District Court under the provision inA.O.J. section 32 of the Estate Duty Ordinance, No. 8 of 1919, for aTheCommi*- Nation on the respondents to show cause why execution for the
amount of the estate duty owing should not issue against them.The respondents showed cause. They submitted that they were notliable to pay the estate duty under the provisions of the Ordinance.The District Judge upheld the respondents* contention. Heexpressed an opinion as to the liability of the widow, but herliability was not the question before him.
The appeal was argued before us upon the footing that theassessment of estate duty made by the Commissioner must beaccepted as correct, and that we had only to consider the questionof the liability of the respondents to pay the duty claimed fromthem. But the question of the liability of the respondents cannotbe decided without reference to the provisions of the law underwhich the duty is leviable. Not only section 7, but wherever elsein the Ordinance property is referred to it is clear that the referenceis to “ property' passing on the death M of a person. The words“ property passing on the death " are interpreted in the Ordinance(section 2). What then is the property which passed on the deathof Isseris? Upon the admitted facts no property in any sensepassed to the respondents. As donees in the deeds of gift theybecame entitled to the dominium of the lands donated immediatelythe deeds were executed. The possession of the lands and theright of possession remained in Isseris and his wife. The onlychange brought about by the death of Isseris Mas that his wifebecame entitled solely to the possession of the lands. Her previousright of possession was enlarged to that extent. Whether in thosecircumstances there was a passing of property to her on the deathof the deceased is a question which seems to me to requiresome argument. But that question does not arise upon thisappeal.
Crown Counsel, who appeared for the appellant, submitted thatthe estate duty which was sought to be recovered from the respond-ents was duty leviable under section 8 (1) (e) of the Ordinance,and that the word “ property ” there meant the lands which werethe subject matter of the donations, and the donations themselveswere “ past settlements ” made by the deceased. This contentionappears to me to be wholly unsustainable. It rests entirely upon amisconception of the words 11 property passing. ” As I have alreadysaid, it is quite obvious from the provisions of the Ordinance that*' property M means property “ passing on the death of the deceased. ”That sub-section might be construed as having reference to theinterest which, in this case, passed to the widow, but even of thatI am doubtful.
oioner ofStamps v.Cornell*
Moral
Randeni
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The section which really requires consideration lor the determine-tion of this appeal is section 19, which deals with the liability for soraroe.estate duty. In sub-section (1) it imposes the duty imperatively A.C.J.on the executor to pay the estate duty on “ all property coming to TfoCommia*him, or being under his control," and it permits him to pay the ^oner0festate duty in respect of any property not coming within that cSSSkTdescription if the persons accountable for the duty request him to Herolmake such payment. In sub-section (2), cases are dealt with wherethe estate duty has not been paid by the executor: —
It enacts that- estate duty shall be paid by the person to
whom any property passes for any beneficial interest inpossession.
It then enacts that the following two classes of persons *' shall
be accountable for the estate duty on the property ”passing " to the extent of the property actually receivedor disposed of by them M:
Every trustee, guardian, or other person in whom anyinterest 41 in the property so passing ” or themanagement thereof is vested.
(/)) livery person in whom “ the same " (that is, " the pro-perty 60 passing ”) « vested by alienation or otherderivative title.
Crown Counsel contended that the respondents came under thelast class of persons. This contention, too, appears to me to heentirely unsustainable. The persons contemplated in this classclearly are those in whom the property passing on the death of thedeceased is vested at the time the estate duty becomes payable,either by an alienation effected by the person to whom the propertyhad passed on the death for any beneficial interest in possession,or by a derivative title, that is, for instance, by right of intestatesuccession. The respondents clearly do not come within this classof persons. To my mind the construction of section 19 presentsno difficulty. That section has been modelled upon section B (4)of the Finance Act, 1894,1 which is as follows:—
“ Where property passes on the death of the deceased, and hisexecutor is not accountable for the estate duty in respectof such property, every person to whom any property sopasses for any beneficial interest in possession, and also,to the extent of the property actually received or disposedof by him, every trustee, guardian, committee, or otherperson in whom any interest in the property so passingor the management thereof is at any time vested, andevery person in whom the same is vested in possessionby alienation or derivative title shall be accountable for
1 (1894) 87 <0 88 ViU. Ch. 80.
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1926.
the estate duty on the property, and shall within the timerequired by this Act or such later time as the Commissionersallow, deliver to the Commissioners and verily an account,to the best of his knowledge and belief of the property :Provided that nothing in this section contained shallrender a person accountable for duty who acts merely asagent or bailiff for another person in the management ofthe property.
&DBNBIDER
A.C.J.
^The Commis-
sioner ofStamps v.CornellHerat
1tandem
The language, of the English Act renders the meaning of section19 of our Ordinance clearer, if I might say so.
We were invited by Crown Counsel to express the opinion thatthe widow is liable to pay the estate duty claimed from therespondents. This I must decline to do for the obvious reason thatshe is not a party to this appeal, and also for other reasons.
I dismiss the appeal with costs.
Maartensz A.J.—
The inquiry from which this appeal arises was held on an applica-tion by the Commissioner of Stamps made under the provisions ofsection 32 of the Estate Duty Ordinance, No. 8 of 1919, that therespondents should be cited to show cause why execution shouldnot issue against them for the recovery of estate duty alleged to bedue in respect of certain property which belonged to MahatantirigeIsseris Appuhamy, whose estate is being administered in thisaction.
The respondents showed cause and the Commissioner of Stampsappeals from the order of the District Court declaring therespondents not liable to pay the estate duty claimed.
The facts as stated at the bar are as follows: The propertiesin respect to which estate duty is claimed were the subject of threedeeds of gift executed by the intestate. They are—
{a) Deed No. 12,427 dated January 26, 1907.
(6) Deed No. 4,120 dated July 5, 1922."
These two deeds were executed in favour of M. Dona Johanna-hamy, the fifth citee, respondent.
(c) Deed No. 12,425 dated January 26, 1907, executed in favourof Liyanchihamy, the predecessor in title of the first,second, third, and fourth oitees, respondents.
In all three deeds the donor reserved a life interest in favour ofhimself and his wife, Selestina Arachchige Mangohamy, and it was.admitted that the entire usufruct vested in the widow and thatthe donees acquired no beneficial interest on the death of thedonor.
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The appeal turns on the construction of section 19. sub-section (2),of the Estate Duty Ordinance, 1919, which enacts as follows: —
19.(2) Estate duty, so far as not paid by the executor, shall be
paid by the person to whom any property passes for anybeneficial interest in possession, and also to the extent ofthe property actually received or disposed of by him, byevery trustee, guardian, or other person in whom anyinterest in the property so passing or the managementthereof is vested, and every person in whom the same isvested by alienation or other derivative title shall beaccountable for the estate duty on the property. Providedthat nothing in this section contained shall render a personaccountable for duty who acts merely as agent for anotherperson in the management of property.
1928.
Maabxensz
AJ.
The Commis-sioner ofStamps u.CorneliaHeratJtandeni
Under this section estate duty, so far as not paid by the executor,is payable by three classes of persons, namely—
By the person to whom any property passes for any beneficial
interest in possession;
By every trustee, guardian, or other person in whom any
interest in the property so passing or the managementthereof is vested to the extent of the property actuallyreceived or disposed of by him;
By every person in whom the same is vested by alienation or
other derivative title.
The appellant argued that the word “ same ” used with referenceto the persons in class (c) means the property simpliciter and doesnot mean the property passing on the death of the deceased andthat this part of the section should read thus: “ Estate duty so faras not paid by the executor shall be paid by every person in whomthe property is vested by alienation or any other derivative title. ”If this argument is sound the citees respondents would no doubt beliable to pay the estate duty payable in respect of the propertyvested in them by the deeds of gift referred to above. But thisconstruction of the word “ same ” is, in my opinion, repugnant tothe Ordinance as a whole and to the terms of the sub-section itself.
The Ordinance provides for the recovery of estate duties. Section7. which enacts as follows: —
“ In the case of every person dying after the commencement ofthis Ordinance, there shall, save as hereinafter expresslyprovided, be levied and paid, upon the value of all propertysettled or not settled, which passes -on the death of suchperson, a duty called ‘estate duty, ’ at the graduatedrates set forth in the schedule to this Ordinance ”
describes the property on which estate duty should be levied andpaid as property which passes on the death of a person.
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Mpfc By section 2 “ property passing on the deatli ” includesMAAiermnz property passing either immediately on the death or after anyinterval, either certainly or contingently, and either originallyTOff Commit- or by way of substitutive limitation; and the expression “ on
the death ” includes 44 at a time ascertainable only by referenceto the death. ’*
Section 18 provides 44 that the estate duty payable iu respectof any property passing on the death of a deceased person shall bea first charge on all the immovable property of the deceased comingto an executor or being under his control, so far as the dutypayable by such executor is concerned and on the property passingto any other person, so far as the duty payable by such otherperson is concerned. ”
fionercf
atampev.
Vomdie
Herat
Rattdeki
Section 19 prescribes the person or persons by whom estateduty shall be payable. Under sub-section (1) the executor isliable to pay the estate duty on all the property coming to himor being under his control.
These sections establish as clearly as possible that estate dutyis payable on property passing on the death of the deceased personby the person to whom it passes and I am of opinion that the word“ some ” should be read as referring to such property.
Sub-section (2) of section 19 is modelled on sub-section (4) ofsection 8 of the Finance Act (57 and 58 Viet. c. 30). The modelsub-section which runs thus—
44 Where property passes on the death of the deceased and hisexecutor is not accountable for the estate duty in respectof such property, every person to whom any property sopasses for any beneficial interest in possession, and alsoto the extent of the property actually received or disposedof by him ever}* trustee, guardian, committee, or otherperson in whom any interest in the property so passingor the management thereof is ‘ at any time vested, andevery person in whom the same is vested in possession byalienation or other derivative title ..,. '*—■
leaves no room for doubt that the word 44 same ” refers to theproperty passing on the deatli of the deceased. The draftsmanof sub-section (2) of section 19, in my opinion, intended to give itthe same effect as the English Act.
I therefore hold that the word “ same ” refers to the propertypassing on the death of the deceased and that the section withreference to the persons in class (c) should read: 44 By every personin whom the property passing on the death of the deceased is vestedby alienation or other derivative title. M This clause was no doubtintended to catch up the persons who had by alienation or otherderivative title acquired the interest of any person to whom propertyvwould pass on the death of a person.
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The next question is whether any property passed to the eiteesrespondents on the death of the deceased. According to the factsstated at the bar the title to the property had passed to the doneesbefore the death of the deceased by virtue of the deeds of gift inquestion subject to a usufructuary interest in favour of the donor andhis wife and all that passed on the death of the deceased was hisusufructuary interest which devolved on his widow. The respond-ents thereof got nothing of the property which passed on death.
I accordingly hold that the oitees respondents are not liable topay estate duty and dismiss the appeal with costs.
I should mention that the appeal was argtied and decided onfacts stated at the bar as neither the deeds of gift in question nora statement of the facts on affidavit or otherwise have been filedin the record.
1986.
Musram
A.J.
The Commis-sioner ofStamps v.CorneliaHeratJtandmi
Appeal dismissed.