1968 (2) TMI 4 - HC - Wealth-tax

Trust - shares of the persons on whose behalf the trustees under the two trust deeds were holding the assets were determinate and known - s. 21(4) not applicable - each of the beneficiaries to the extent of his share would be liable to be assessed

Summary

Issues Involved:
1. Applicability of section 21(4) of the Wealth-tax Act to the trusts dated May 17, 1954, and July 13, 1956.
2. Determination of whether the shares of the beneficiaries are determinate and known or indeterminate and unknown.

Issue-Wise Detailed Analysis:

1. Applicability of Section 21(4) of the Wealth-tax Act:
The primary issue was whether section 21(4) of the Wealth-tax Act applied to the trusts executed by Nanalal Haridas for the assessment years 1958-59, 1959-60, and 1960-61. The Wealth-tax Officer applied section 21(4), asserting that the shares in the trust property were not determinate or known on the valuation dates, as they depended on "certain contingencies happening." This stance was upheld by the Appellate Assistant Commissioner, who noted that the shares of the beneficiaries were indeterminate, thus justifying the application of section 21(4).

2. Determination of Beneficiaries' Shares:
The Tribunal reversed the decisions of the Wealth-tax Officer and the Appellate Assistant Commissioner, concluding that the shares of the beneficiaries were determinate and known. The Tribunal relied on the decision in Suhashini Karuri v. Wealth-tax Officer, Calcutta, and found that the interest of Hansabai and the legal heirs of her husband could be ascertained with certainty and valued by actuaries.

The Department contended that the shares of the beneficiaries were indeterminate and unknown, arguing that Hansabai must be deemed to have a share in the corpus of the trust property along with the contingent interest of other beneficiaries. They claimed that the interests were dependent on various events, making them indeterminate and unknown.

The court referred to its recent decision in Trustees of Putlibai R. F. Mulla Trust v. Commissioner of Wealth-tax, which established that the determination of whether the shares of the beneficiaries are indeterminate or unknown should be judged as on the relevant date in each assessment year. The court found that, on the relevant dates, the shares were determinate and known.

For the first trust deed, the court noted that Hansabai had a clear interest in the net income, and the son of Nanalal had a contingent interest in the corpus, contingent upon Hansabai ceasing to be the wife or widow of Tribhuwandas. For the second trust deed, the court found that the shares were also determinate and known, as the corpus was to be handed over to Tribhuwandas if alive, or to the sons of Nanalal in equal shares if more than one.

The court concluded that the difficulty of computation or ascertainment should not impede the application of the law, as actuarial calculations could determine the present worth of life interests or contingent remainders. The court held that the shares of the beneficiaries were determinate and known, and thus section 21(4) did not apply.

Conclusion:
The court answered the question in the negative, determining that the shares of the beneficiaries were determinate and known on the relevant dates, and therefore, section 21(4) of the Wealth-tax Act did not apply to the trusts in question. The Commissioner was ordered to pay the costs of the assessee.