9911796707
TMI Blog1999 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... dest 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 the trust after completion of the age of 45 years in the case of his daughter and 25 years in the case of his grandsons ; if the object of the trust cannot be fulfilled, the trust property was to be applied for the children of the beneficiary or other children. The trusts created by the settlor are on uniform pattern, namely, at the time of settling the trust, a sum of Rs. 1,116 was settled with the provision to augment the trust fund from time to time by further contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 presuming that the High Court has rightly arrived at the conclusion that assessment is to be made under section 21(4) of the Act, yet it committed an error in giving final direction contrary to the ratio laid down by this court in the case of CWT v. Trustees of H.E.H. the Nizam's Family (Reminder Wealth) Trust [1977] 108 ITR 555. He submitted that once it is held that the trust was valid, the wealth-tax assessment is required to be made under the provisions of section 21(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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-section (1) or (4) of section 21, it is the beneficial interests which are taxable in the hands of the trustee in a representative capacity and the liability of the trustee cannot be greater than the aggregate liability of the beneficiaries and no part of the corpus of the trust property can be assessed in the hands of the trustee under section 3. This aspect is considered in detail in the aforesaid decision. The court first reproduced the relevant part of section 21, as it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 capacity under subsection (1) or assess it directly in the hands of the beneficiary by including it in the net wealth of the beneficiary. What is important to note is that in either case what is taxed is the interest of the beneficiary in the trust properties and not the corpus of the trust properties. So also where beneficiaries are more than one, and their shares are indeterminate or unknown, the trustees would be assessable in respect of their total beneficial interest in the trust propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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