1967 (2) TMI 19 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of the assessment of trustees under section 21(4) of the Wealth-tax Act.
2. Calculation of the value of assets for wealth-tax purposes in accordance with the actuarial valuation of beneficiaries' interests.

Detailed Analysis:

Issue 1: Validity of the Assessment under Section 21(4) of the Wealth-tax Act
The primary issue is whether the assessment of the trustees of the Putlibai R. F. Mulla Trust should be made under section 21(4) of the Wealth-tax Act, 1957, or under section 21(1) as desired by the assessees. Section 21(1) stipulates that wealth-tax should be levied upon and recoverable from the trustee in the same manner and to the same extent as it would be upon the beneficiaries. In contrast, section 21(4) applies when the shares of the beneficiaries are indeterminate or unknown, treating them as if they were one individual, leading to a higher tax rate.

The Tribunal initially held that the shares of the persons on whose behalf the assets were held were determinate and known. This decision was based on the clauses (c) to (g) of the trust deed, which outlined specific shares for the settlor, her children, and grandchildren. The Tribunal's finding was that, despite potential future variations due to births and deaths, the shares were definite and ascertainable on the relevant valuation dates.

The court agreed with the Tribunal, emphasizing that the shares must be judged as of the relevant valuation date. The court stated, "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, the shares were determinate and known on March 31, 1957, March 31, 1958, and March 31, 1959. Consequently, the assessment should be made under section 21(1), not section 21(4).

Issue 2: Calculation of the Value of Assets for Wealth-tax Purposes
The second issue concerned the method of calculating the value of assets for wealth-tax purposes. Given the court's decision on the first issue, this question became moot. The court noted, "Since we have now negatived that question, we do not think that the second question arises and it is not necessary to answer it."

Conclusion:
The court concluded that the shares of the persons on whose behalf the assets were held by the trustees were determinate and known on the relevant valuation dates. Therefore, the assessments should be made under section 21(1) of the Wealth-tax Act. The first question was answered in the negative, and the second question was deemed unnecessary to address. The Commissioner was ordered to pay the costs of the assessees.