TMI Blog1986 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... l is right in holding that the assessee who has a life interest in the testamentary trust estate of the late C. H. Kinnison comprising, inter alia, of the shares in an Indian company and commission from the managing agency of an Indian company can be said to have an interest in such shares and commission and that such interest is property located in India so as to be taxable under the Wealth-tax Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the life interest of the assessee in the testamentary trust estate of the late C. H. Kinnison is not an annuity which is exempt under section 2(e)(iv) of the Wealth-tax Act ? " Heilgers and Co., were managing agents of Kinnison jute Mills Co. Ltd. and Naihati jute Mills Co. Ltd., both Indian companies, for several years. Heilgers and Co. entered into a sub-partnership from time to time with James Alexander Kinnison under which the two shared equally the emoluments from the managing agency. The last of such sub-partnership agreements was entered into on December 16, 1907. Kinnison died on April 13, 1916, leaving a will dated June 2,1916 (sic), under which he gave all his property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Appellate Assistant Commissioner who held that the assessee possessed rights and interest in the shares and the managing agency which were tangible movable properties located in India and, therefore, subject to wealth-tax under the Wealth-tax Act. He rejected also the contention regarding the valuation of the assets. The assessee then appealed for all the six assessment years to the Appellate Tribunal. She contended that the assets held by her were situated outside India, and being a non-resident, she was not taxable thereon. Alternatively, she urged that she was entitled to exemption under sub-clause (iv) of clause (e) of section 2 of the Wealth-tax Act. The Appellate Tribunal did not accept either contention and dismissed the appeals. At the instance of the assessee, the Appellate Tribunal referred the two questions of law set out earlier to the High Court of Calcutta for each of the six assessment years. By its judgment dated February 16, 1973, the High Court answered the first question in favour of the assessee and against the Revenue and the second question in favour of the Revenue and against the assessee. Thereafter, the Revenue obtained a certificate under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idue of the ready monies arising from such calling in and conversion of the estate, with the consent of the assessee during her life and afterwards at the discretion of the trustees, in the investments authorised under the will and to transpose such investments into others, and to stand possessed of the residue of such monies and all investments and the income thereof upon trust subject to the further powers and provisions declared under the will. It was provided that the trustees would pay the income of the residuary trust fund to the assessee during her life. After the death of the assessee, the trustees would stand possessed of the residuary trust fund in trust for the benefit of the testator's children in accordance with the further provisions of the will. The trustees were also empowered to exercise the power of appropriation conferred upon personal representative by section 41 of the Administration of Estate Act, 1925. They were also empowered to determine what articles would pass under any specific bequest contained in the will and to determine whether any monies were to be considered as capital or income, and whether and in what manner any expenses or other payments ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n English woman who resided in England, the appropriate forum for the administration of the trust estate and for enforcement of the rights of the beneficiary under the will were the appropriate courts in England. The High Court observed that the right of the assessee was a right in the nature of a chose-in-action enforceable in the appropriate Courts of England, that the nature and character of the asset must be considered to be foreign in quality, and that the assets of the assessee must be regarded as foreign assets and, therefore, not located in India. In conclusion, the High Court held that the assessee was entitled to the benefit of clause (i) of section 6 of the Wealth-tax Act. It will be evident from a perusal of the judgment under appeal that in reaching its conclusions, the High Court relied principally on Attorney General v. Johnson [1907] 2 KB 885. In that case, the testator, who at the time of his death, was entitled to a certain tea estate situate in Upper Assam, executed a will appointing two executors and trustees, and after bequeathing certain legacies, he left the residue of his real and personal estate to the trustees upon trust to sell the residuary estate (as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was the subject of considerable comment in the Courts in England, reference may be made appropriately to what was said there. The testator executed a will in which, after bequeathing various legacies and annuities, he gave all the residue of his real and personal estate to two executors upon trust to pay the income to his wife and after her death to distribute it between his brother and certain other persons. The executors and trustees were to leave the residuary personal estate invested as they found it at the time of the testator's death unless they considered it proper to change any investment. By a codicil, he revoked the gift to his brother and gave that share to his wife absolutely. The testator was domiciled in England and upon his death, the will and codicil were proved in England by his executors who were themselves domiciled in England but the testator's estate included mortgages on real estate in New Zealand. The wife died in 1893, and her will likewise was proved in England by her executors (the appellants), two of whom were also her husband's executors. In estimating the probate duty payable upon her one-fourth share of her husband's residuary personal estate, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answer to the question, and that is that the debtors are here and have to administer here. The fixing of the character of the asset by the presence of the debtor may or may not have been logical, but it is so: and if it is a debt and the debtor is here, that is the character of the asset as fixed by the residence of the debtor, and the asset is English." To the same effect, Lord Herschell pointed out (at pages 18 and 19): " ...until the estate is fully administered it is impossible to say of what assets the residuary estate will consist; we do not know how much the amount of the debt remaining unpaid was in the present case, and there was only one legacy unpaid... In truth, the right she had was to require the executors of her husband to administer his estate completely, and she had an interest to the extent of one-fourth in what should prove to be the residuary estate of the testator, Algernon Tollemache. Well, where was that situate? It seems to me that it can only be said to have been situate in this country." Lord Macnaghten and Lord Shand were of the same opinion. Lord Davey pointed out that at the time of the lady's death, the testator's personal estate had not been fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All that the assessee was entitled to on the valuation dates was the right to have the trust administered and, as the High Court has observed, having regard to the several considerations patent in this case that the settlement was an English settlement created by an Englishman who was resident in England, that it was an English will proved in England and the trustees were residents in England and moreover that the assessee, the beneficiary, was an English woman who was also residing in England, the proper forum for the enforcement of the rights of the beneficiary under the will was the appropriate court in England. We agree with the High Court that the asset in question was a right in the nature of a chose-in-action enforceable in England. The right of the assessee was a right enforceable in that court and, therefore, must be regarded as a foreign asset, an asset not located in India. We affirm the answer returned by the High Court to the first question referred to it and agree that the question must be answered in the negative, in favour of the assessee and against the Revenue and that the appeal must, therefore, be dismissed. As the respondent has not entered appearance in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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