TMI Blog1970 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of the settlor's three sons, Vasantkumar, Rajender Kumar and Krishnakumar, and their wives and issues. All the three deeds of trust are in similar language and one specimen deed of trust is annexure " A " to the statement of the case. The assessees are the trustees appointed under each of the deeds of trust. In the year of account ending March 31, 1957, the assessment year being 1957-58, the trustees, as holders of the shares of Tata Iron and Steel Co. Ltd. and Associated Cement Co. Ltd., received rights-coupons for new shares. Some of these coupons were sold by the trustees and in the result in each of the trusts the trustees made capital gains which in the aggregate came to Rs. 41,085. In the deeds of trust the three sons of the settlor, being Vasantkumar, Rajender Kumar and Krishnakumar, were life-tenants being entitled to net income for the duration of their lives. Under the deed of trust in which he was the beneficiary, Krishnakumar was assessed in respect of the capital gains of Rs. 41,085 on February 26, 1958. Similarly, in respect of the capital gains made in the trust in which Vasantkumar was the beneficiary, he was assessed to tax in respect of the capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Wealth-tax and Commissioner of Income-tax v. Mrs. Hansabai Tribhuwandas Trust and submitted that in as ascertaining the applicability of the proviso to section 41 to the facts of the case, regard must be had to the accounting year alone. The fact that the birth or death of certain persons would alter shares of corpus and/or income payable in subsequent years would be irrelevant. His submission was that it was clear, on a reading of the relevant contents of each of the above deeds of trust, that the shares payable to the remainder man in the accounting year were determinate and known. Mr. Joshi for the revenue submitted that on a true construction of the provisions in these deeds of trust it was clear that the capital gains were received by the trustees in the present case for indeterminate and unknown persons. He submitted that the decisions on which Mr. Kaka for the assessee has relied arose in matters where the beneficiaries were entitled to vested interest. These cases were distinguishable, because the interests of the beneficiaries who were entitled to the benefit of the capital gains in question under the present deeds of trust were all contingent. The contingent inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ughter and/or her issues in the proportions mentioned in the first part of the sub-clause. The remaining moiety of the corpus is directed to he divided amongst the brothers and sisters of Rajender Kumar and/or their issue in such shares and proportions and on such terms as Rajender Kumar may by deed and/or will appoint and in default of such appointment, this one moiety of the corpus is directed to be paid over to the brothers of Rajender Kumar and/or their issues in the manner mentioned in the second part of sub-clause (d). Sub-clause (e) which is applicable to the facts existing in the accounting year provides that upon the death of Rajender Kumar leaving children or remoter issues the trustees should divide the corpus of the trust fund amongst the children and/or the remoter issue " living at the time of the death " of Rajender Kumar in the proportions mentioned in sub-clause (e). Under sub-clause (f), notwithstanding the provisions in sub-clause (e), it is directed that in the event of Rajender Kumar dying after adopting a son and such son and/ or his issue surviving Rajender Kumar, Rajender Kumar should have the right and power to give to such adopted son and/or his issue a sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the parties that prior to April 1, 1946, tax was not levied on capital gains. It was for the first time levied by the Income-tax and Excess Profits Tax (Amendment) Act, 1947. By the Finance Act of 1949, levy of tax on capital gains was removed as from March 31, 1948. Once again capital gains were taxed under the provisions of the Finance (No. 3) Act of 1956 as from April 1, 1957. In connection with the levy and computation of tax on capital gains, sub-sections (5) and (6) of section 17 were enacted. Under the sub-sections (6) and (7) as existing prior to the Finance (No. 3) Act, 1956, the rate of tax on capital gains was fixed between one anna in a rupee to five annas in a rupee in the proportion of the slab of gains fixed in these sub-sections. Under sub-section (6) as now amended by Finance (No. 3) Act, 1956, the rate of tax on capital gains is fixed in the following words : " On the whole amount of such inclusion (capital gains), income-tax equal to the amount which bears to the income-tax which would have been payable on his total income as reduced by two-thirds of the amount of such inclusion (capital gains earned) the same proportion as the whole amount of such inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied upon and recoverable from trustees in the like manner and to the same extent as it would be leviable upon and recoverable from the persons on whose behalf the assets are held by the trustees. The sub-section (4) of section 21 of that Act is similar to the sub-section (1) of section 41 in the Income-tax Act. That sub-section (4), inter alia, provides that where the shares of the persons on whose behalf or for whose benefit any such assets are held are indeterminate and unknown, the wealth-tax may be levied upon and recovered from the trustees at a higher rate than could be levied in ordinary cases. The contentions similar to the contentions made on behalf of the revenue in this case arose in connection with the levy and collection of wealth-tax before a Division Bench of this court in the case of Commissioner of Wealth-tax v. Mrs. Hansabai Tribhuwandas Trust. The contention of the trustees-assessees was that wealth-tax at a higher rate under sub-section (4) of section 21 was not liable to be levied and collected from the trustees. The contention of the revenue was that the beneficiaries under the deed of trust in question were indeterminate and unknown and the interest of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to consider. The question whether the shares of the beneficiaries are determinate or known has to be judged as on the relevant date in each respective year of taxation. Therefore, whatever may be the position as was urged by Mr. Joshi as to any future date, so far as the relevant date in each year is concerned, it is upon the terms of the trust deed always possible to determine who are the sharers and what their shares respectively are. " The Division Bench further referred to the case of Suhaskini Karuri v. Wealth-tax Officer, and observed : " The decision clearly lays down the principle that the question whether the shares of the beneficiaries are indeterminate or unknown has to be judged as the facts stand on the relevant date in each assessment year. " In spite of the fact that the ultimate beneficiary, Tribhuwandas, was held to have contingent interest in the corpus, in spite of the fact that there were intervening provisions in the deed of trust which may have affected the question, the Division Bench formed the view that in the case before them the share of the beneficiary for whom the assets were held (the corpus was held) by the trustees was determinate and kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (e) of clause 2 of the deed of trust were the relevant provisions which arose for consideration. It is quite clear that under that sub-clause, the sons and daughters of these life tenants were the beneficiaries entitled to have the corpus of the trust divided between themselves upon the death of the above life tenants. The capital gains in question were received by the trustees on behalf of these sons and daughters of the life-tenants. Now, it is true that the date of distribution mentioned in the sub-clause provides that the children and/or remoter issues who would be entitled to the corpus would be those who were " living at the time of the death " of each of the life-tenants. Now, this provision, possibly makes interest in favour of the sons and daughters of the life-tenant who were existing at the relevant date contingent interest. Following the ratio of the decision in the case of Commissioner of Wealth-tax v. Mrs. Hansabai Tribhuwandas Trust, the fact that these beneficiaries held contingent interest must be held to be an irrelevant fact. These persons were a determined group of persons and were known. The share that they had as beneficiaries under this clause was also such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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