TMI Blog1999 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Tribunal was justified in holding that only the value of the interest of the beneficiary in the trust could be included in the net wealth and not the value of the corpus of the trust itself ?" The facts in brief are that one Sri A. V. Reddy of Kadiam in East Godavari District created four trusts for the benefit of his three grandchildren and daughter. One trust was created for the benefit of his grandson, Dexter Anand Sear (eldest son of his daughter, Margaret) and the relevant trust deed was executed on March 14, 1972. Another trust deed was created on October 5, 1970, for the benefit of the settlor's grandson, Harish Reddy. A third trust deed was created on October 2, 1970, for the benefit of the settlor's grandson, B.V. Satish Reddy and a fourth trust deed was created on July 6, 1971, for settlor's second daughter, Mrs. Lalitha Anderson. The trust deeds were similar ; the author of the trust constituted himself as the sole trustee ; he had the discretion to apply the whole or any portion of the income for the beneficiary and accumulate the residue by investing ; the trust funds were to be transferred and made over to the beneficiary of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the conclusion that the fund is held by the trustee on behalf of and for the benefit of the beneficiary or the beneficiaries whose interest may come to surface at a future date depending upon the happening of the events provided in the trust deed ; on the valuation dates under consideration, it was not possible to say that the trustee held the fund of the trust on behalf of or for the benefit of known beneficiaries and much less could it be said that the shares of the persons on whose behalf the trust fund is held were determinate and known. Hence, the wealth-tax assessment is to be made under section 21(4) of the Act; the trustee will have to be assessed on the entire value of the trust fund in the status of an individual. Thereafter, the court upheld the assessment made by the Wealth tax Officer subject to any relief in the quantum granted either by the Appellate Assistant Commissioner or by the Income-tax Appellate Tribunal. That finding of the High Court is challenged in these appeals by special leave. Learned counsel for the appellant submitted that in these cases, wealth-tax assessment is required to be made under section 2l(1) or 21(2). He further submitted that presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is apparent that the rights of the beneficiaries to get the corpus of the trust fund come into existence at the future date when the condition regarding the survival is fulfilled. The High Court, therefore, rightly arrived at the conclusion that interest of beneficiary is indeterminate or unknown and is contingent and, therefore, held that section 21(4) would be applicable. In this view of the matter, there is no substance in the contention of learned counsel for the appellant that the trust should be assessed under section 21(1) of the Wealth-tax Act. Once it is held that assessment is to be made under section 21(4), there is no question of assessing the wealth-tax on the entire value of the trust fund. In such a situation, in the case of Nizam's Family Trust [1977] 108 ITR 555 (SC), this court has laid down that two assessments are required to be made on the trustee ; one in respect of the actuarial valuation of the life interest of the beneficiary under sub-section (1) of section 21 and the other in respect of the actuarial valuation of the totality of the beneficial interest in the remainder as if it belonged to one individual under sub-section (4) of section 21. Under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I ; or (b) at the rate of three per cent ; whichever course would be more beneficial to the revenue." After considering the various contentions raised by the parties and exhaustively dealing with the provisions of the Wealth-tax Act, the court inter alia, held thus : (a) Charging section 3 of the Wealth-tax Act is made expressly subject to section 21 and it must yield to that section in so far as the latter makes a special provision for assessment of a trustee of a trust. Section 21 is mandatory in its terms. (b) Once it is established that a trustee of a trust can be assessed only in accordance with the provisions of section 21 and under these provisions, it is only the beneficial interests which are taxed in the hands of the trustee, it must follow as a necessary corollary that no part of the value of the corpus in excess of the aggregate value of the beneficial interest can be brought to tax in the assessment of the trustee. (c) Under the scheme of section 21, the Revenue has two modes of assessment available for assessing the interest of a beneficiary in the trust properties ; it may either assess such interest in the hands of the trustee in a representative capac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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