TMI Blog1977 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Appellate Tribunal and it was also agreed before us that the deeds of trusts are more or less similar and that it would be sufficient if the provisions of the Family trust are referred to. By the deed of trust dated May 16, 1950, which created the " Family trust " the late Nizam transferred a corpus of Rs. 9 crores in Government securities to the trustees constituted by him. The corpus was to be notionally divided into 175 equal units. Five of the units were to constitute a fund called the " reserve fund " and 3 1/2 units were to constitute a " Family trust expenses fund ". The remaining 1661 units were allotted to the relatives mentioned in the II schedule in the manner specified in the schedule, the number of units allocated to each individual relative being mentioned there. The II schedule was divided into two parts. In part I of the II schedule were mentioned his wife, Laila Begum, her five sons and two daughters and his another wife, Jani Begum, and her minor son. In part II of the II schedule were mentioned the other wives, sons, daughters, daughters-in-law, sons-in-law would be sons-in-law and certain ladies of rank. None of the beneficiaries mentioned in the II schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er's units as set out earlier. The income from the units allocated by the deed and those subsequently added thereto was to be paid to the son during his life. On and after the death of the son, the corpus of the units allocated to him were to be divided amongst his children or remoter issue per stirpes and on the basis that every male child has to get 2 shares to 1 share for every female standing in the same degree of relationship. If the son dies without leaving any child or remoter issue, the units allocated to him should be divided into sub-parts and added to the units allocated to the other surviving sons and daughters of Laila Begum by the settlor and the issue of any deceased son or daughter of Laila Begum, again on the basis that each male was to receive 2 parts to 4 allocated to every female. The parts thus added were to be added to the unit of corpus allocated to the specified beneficiaries to be held on the same trusts as the basic unit allocated to them. Any parts which were thus allocated to sons and daughters of Laila Begum who were born after the date of the trust deed were to be taken by them absolutely. Sub-clause (c) of clause 2 made similar provisions regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit was to be paid to the husband. There was also a special provision regarding the minor daughter of the second son of the settlor directing the retention of it in a separate reserve fund account for being spent on her requirements until she attains the age of majority. On the death of any one of the relatives specified in part II of the second schedule, the corpus of the unit allocated to him or her was to be divided and distributed, subject to some restrictions, amongst the children and remoter issue per stirpes and in the ratio of 2 : 1 as between males and females. On the death of any of the relatives without leaving behind any child or remoter issue, his share in the corpus was to be divided among the other relatives of the settlor, but in accordance with certain rules. Sub-clause (d) made a special provision in respect of Dulhan Pasha Begum. On her death, the 5 units allocated to her were to be added to the units allocated to her daughter, Shahzadi Begum, and after the death of Shahzadi Begum it was to be divided among her heirs as specified in the trust deed. Broadly again, the relatives mentioned in the second schedule were to be entitled to the income of the units alloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to wealth-tax on the value of the units allocated to them under the deed of trust. Appeals were preferred to the Appellate Assistant Commissioner. He held that the trustees could not be assessed on 13 1/2 units collectively, that the clauses constituting the reserve fund and the expenses account fund and the clauses creating a trust in favour of the future sons-in-law were to be treated as three: separate trusts and that they should accordingly be assessed separately. In this reference we are not concerned with the assessments made on the trustees in respect of the reserve fund and the expenses account fund. In the appeals preferred by the beneficiaries against their assessments the Assistant Commissioner held that inasmuch as the beneficiaries were entitled only to the income from their units during their lives they could be assessed to wealth-tax only on the respective values of their life interests in the units and not on the value of the corpus. He, therefore, set aside the several individual assessments made on the beneficiaries with a direction to the Wealth-tax Officer to assess them afresh on the basis of the value of their life interests. The Wealth-tax Officer, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he should have given a definite finding regarding the applicability of section 21(4) or section 3 to the facts of the case. 2. The learned Appellate Assistant Commissioner has annulled the assessment order as discussed in para 23 of his order. Having done so, he should have given the computation of wealth assessable in this case, in the hands of the trustees." The Tribunal ordered that they would permit the additional grounds to be raised only for the purpose of supporting the assessments already made but not for the purpose of enhancing the assessments. It was argued before the Tribunal by the department that the trustees were liable to be assessed under section 3 of the Wealth-tax Act and that the procedure prescribed by section 21 was only optional and could not override section 3. This contention was rejected by the Tribunal who held that sections 2 and 21 had to be read together and that the assessees could not be taxed under section 3 to the exclusion of section 21. Turning to section 21 of the Act the Tribunal rejected the contention of the assessees that section 21(4) was not attracted as the beneficiaries could not be said to be unknown and their shares could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proper provision applicable was section 2 of the Wealth-tax Act since the trustees alone were the legal owners of the entire trust fund. Section 21 was merely optional and the department was not bound to apply section 21. He urged that even if sections 3 and 21 had to be read together, section 21 was inapplicable to the present case as it could not be said that the trustees were holding the fund on behalf of the beneficiaries. He pointed out that at the relevant time section 21 referred only to persons holding on behalf of others, but not to persons holding on behalf of or for the benefit of others. He invited our attention to the fact that the words " for the benefit of " were introduced into section 21 at a later point of time. Sri Anantha Babu also urged that the Tribunal having permitted the department to raise additional grounds was not justified in restricting their scope to merely supporting the assessments already made. He also submitted that, on a plain reading of section 21(4) of the Act, the whole of the remainder wealth had to be necessarily taxed in entirety in the hands of the trustees and not separately in respect of the several units or groups of units allocated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule." " 21. (1) In the case of assets chargeable to tax under this Act, which are held by a court of wards or an administrator-general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a valid deed of wakf), the wealth-tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, receiver, manager or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held, and the provisions of this Act shall apply accordingly. (2) Nothing contained in sub-section (1) shall prevent either the direct assessment of the person on whose behalf the assets above referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai Jethalal Vaidya [1958] 34 ITR 187, 196, 197 (Bom), Chagla C.J. pointed out: " It is clear that these observations were not necessary for the decision of the case, and, what is more, having heard a full argument on the scheme of the Act and especially the scheme of section 41, we feel that the observations made were not quite correct if they were intended to convey the meaning that the provisions of section 41 were not mandatory but those provisions may or may not be followed at the option of the department. To the extent that the judgment decided what it did, Mr. Palkhivala for the assessee does not find any fault. To the extent that the observations are obiter and were unnecessary for the decision of the case, Mr. Palkhivala says that in the interests of the assessee we must make it clear that we should not have conveyed to the department the impression that it was open to them to increase the burden of the assessee to pay tax. Mr. Palkhivala is right that any such interpretation would be opposed to well-known principles of taxation law. If the legislature lays down that in a certain case the burden of taxation upon a particular type of assessee should be a particular burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or executor or in any capacity recognised by law. Section 11 provided: " Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income-tax by each person on the agricultural income derived from such land and received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same." It will be noticed at once that while the definition of " person " in section 2(11) included a trustee, section 11(1) did not refer to a trustee at all. The question arose whether the trustees under a will should be assessed in accordance with section 11(1). Their Lordships of the Supreme Court held that in order that section 11(1) might apply two conditions had to be satisfied: (1) that a person should hold the agricultura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11, while referring to common manager, receiver, etc., did not include trustees along with them, that is to say, the benefit of the provisions of section 11 was not expressly extended to lands held by a trustee. The question, therefore, was whether a trustee would come within the meaning of the expression " or the like " holding lands on behalf of persons jointly interested in such lands. Their Lordships of the Supreme Court held that a trustee would not be a common manager, receiver, administrator or the like holding lands on behalf of other persons. It is in that context that the observations of their Lordships of the Supreme Court should be understood. It is a well-settled rule of construction that there is no presumption that a word or expression has the same meaning when used in different enactments. Even when used in different parts of the same enactment the presumption that the word or expression carries the same meaning is very slight. If there is sufficient reason that can be assigned an expression in one part of an Act can be construed in a different sense from that which it bears in another part of an Act. (Vide Shamrao Vishnu Parulekar v. District Magistrate, Thana AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the property vests and in others it does not vest, but they only manage the property. In general law the property does not vest in a receiver or manager but it vests in a trustee, but both trustees and receivers are included in section 41 of the Act. The common thread that passes through all of them is that they function legally or factually for others : they manage the property for the benefit of others. That the technical doctrine of vesting is not imported in the section is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him. In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section. A reasonable interpretation of the section is that all the categories of persons mentioned therein are deemed to receive the income on behalf of another person or persons or manage the same for his or their benefit. None of them has any beneficial interest in the income; he collects the income for the benefit of others. In this view even if the nattamaigars were trustees in whom the properties' of the Durgha vested, they should be deemed to have received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department contended that under section 21(4) of the Wealth-tax Act the Wealth-tax Officer was found to make a consolidated assessment on the entire remainder wealth. The learned counsel argued that it could not be predicated as to who would be entitled to the corpus of the units and in what shares under the provisions of the deed of trust when the time arrived for the taking of the Corpus after the death of the holders of life interests. It was, therefore, argued that the shares of the persons on whose behalf the assets were held were indeterminate or unknown and section 21(4) was thus attracted to the facts of the case. The first answer of the learned counsel for the assessee was that section 21(4) was not attracted to the facts of the present. case since it could not be said that the shares of the persons on whose behalf the assets were held were indeterminate or unknown on the valuation date. He invited our attention to section 3 of the Act which prescribes that tax shall be charged in respect of the net wealth of an assessee on the valuation date. " Net wealth " is defined in section 2(a) as meaning the aggregate value of all the assets belonging to the assessee on the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sons and, in the event of the death of any of these sons, his share was to be divided amongst his sons. The trust was to come to an end when all the sons and grandsons died. The sons of the grandsons would then deal with the property as they thought best. It was argued for the department that the number of beneficiaries was not known because a son might die leaving several grandsons and, therefore, the shares of persons on whose behalf the assets were held were indeterminate or unknown. The Calcutta High Court did not accept this contention. It was observed : " The share of a beneficiary can, be said to be indeterminate if at the relevant time the share cannot be determined. Merely because the number of, beneficiaries varies from time to time, one cannot say that it is indeterminate ............ In the present case, there seems to be no difficulty in determining the share of the beneficiaries during the relevant account period. The will clearly lays down as to who would be entitled to the income and it is a mere matter of calculation as to how many sons and grandsons were in existence at the relevant date and to calculate, according to their respective shares, as provided und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that the question whether the shares of the beneficiaries, in that case, the sons and grandsons and the deities, were determinate or known had to be ascertained with reference to the relevant valuation date and not with reference to any future date or period, such as the date of distribution or division of the assets. " Referring to the distinction sought to be made by the learned Advocate-General that in the Calcutta case the settlor had eight sons who were mentioned in the will and each one of them was given a share and, therefore, there was no question of variation in the number of beneficiaries by reason of the birth in future of grandson or grandsons, the learned judges observed : " That, in a way, is true. The share of each of the eight sons was definite and, the sons being only eight, the number of the beneficiaries also was certain and determinate. Since the assets were to be distributed amongst the eight sons only and not amongst the grandsons, there was no question of any variation in the number of beneficiaries. But the learned judge was dealing with the contention urged before him, namely, that in the event of birth of a grandson in future there was a likel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned were somewhat analogous to the terms of the present trust. Under the terms of that trust, in so far as they are relevant, the settlor was entitled to the income from the trust properties during her lifetime. On her death the income from the properties was to be divided equally among the surviving children of the settlor. But there was a proviso which said that the share of a predeceased child should, in respect of one moiety, go to his or her widow or widower and the other moiety to his child or children equally, with the difference that the widow or widower got only an interest in the income for life while the settlor's grand-child or grand-children would get the corpus itself. It was further provided that on the death of any child of the settlor after the death of the settlor, half income from the share of such child should be paid to the widow or widower of the child until the death or remarriage of such widow or widower and that the remaining half of the corpus should be divided in equal shares amongst each of the children of such widow or widower. It was urged by the department that the shares of the grand-children who were to finally get the corpus of the estate were l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Bombay reiterated the same position in Commissioner of Wealth-tax v. Hansabai Tribhuwandas Trust [1968] 69 ITR 527 (Bom). On a consideration of the above cases we are satisfied that it cannot be said that the shares of the persons on whose behalf the assets are held by the trustees in the present case are indeterminate or unknown so as to attract the provisions of section 21(4) of the Wealth-tax Act. The second answer of the learned counsel for the assessee to the submission made on behalf of the department was that the indeterminateness, if there was any, would be confined only to the shares in the particular units represented by a particular holder of a life estate. The children and the remoter issue of the holder of the life estate would take the corpus of the units whose income was enjoyed by the holder of the life estate and even if the provisions of section 21(4) applied, the children and the remoter issue of a particular holder of life estate alone should be treated as an individual and assessed separately. The remainder estates corresponding to the several holders of life estates should not be clubbed together. This was the view which was accepted by the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so long as it is accepted that by a single document more than one trust can be created, the fact that the trustees did not as a matter of fact create separate trust deeds, is of no consequence at all. There is ample and unquestionable authority for this proposition in the Supreme Court decision relied upon by the appellant's representative. That being so, I fail to see how the non-execution of separate trust deeds can mitigate against the principle underlying the matter. In this view of the matter, I hold that by a single deed of trust dated May 10, 1950, the settlor had created a separate trust in favour of each of the relatives mentioned in the second schedule." The Income-tax Appellate Tribunal took a different view and said: " We shall proceed to examine these contentions starting with that as to the proper interpretation of the trust deed. The question is whether the trust deed dated May 10, 1950, creates a single trust or a number of separate trusts. It is common ground before us and, indeed, there cannot be much doubt about it in view of the decision of the Supreme Court in Commissioner of Income-tax v. Manilal Dhanji [1962] 44 ITR 876 (SC) that there could be a numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate trust. It seems to us that to do this would be to disintegrate the settlement provided for by the settlor in a way not contemplated by him. His contemplation was of a single settlement to be administered by a single body of trustees and he provided for a special reserve fund and expenses account to supplement the provisions regarding administration. We will be reading something into the document which is not there if we were to say that the trustees are holding 31 units for bearing the expenses proportionately to the several units or that the reserve fund is being similarly held. After a careful consideration we have come to the conclusion that the proper construction of the settlement deed would be that it constitutes a single trust with a number of beneficiaries and not as many trusts as there are ' units or beneficiaries '." We are inclined to agree with the conclusion and the reasons of the Appellate Assistant Commissioner rather than with the conclusions and reasons of the Income-tax Appellate Tribunal. The learned counsel for the department submitted that the proper test to determine the question would be whether the settlor could have created separate trusts in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal in favour of the assessees. The questions are of some importance and complexity and they turn on the true interpretation of sections 3 and 21 of the Wealth-tax Act, 1957, but since they can be answered only by applying the correct interpretation to the facts of the case, it is necessary to briefly recapitulate the facts giving rise to these appeals. In the year 1950, the late Nawab Sir Mir Osman Ali Khan Bahadur, the Nizam of Hyderabad and Berar, created several trusts out of which we are concerned in these appeals with the trust known as the " family trust ". The Nizam, by a deed of trust, dated 16th May, 1950, created the family trust by transferring a corpus of Rs. 9 crores in Government securities to the trustees constituted by him. The corpus was notionally divided into 175 equal units, out of which five units constituted a fund called the " reserve fund ", 3 1/2 units constituted a " family trust expenses fund " and the remaining 166 1/2 units were allocated amongst the relatives mentioned in the first column of the second schedule in the manner specified in that schedule, the number of units allocated to each individual relative being that mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, sub-clause (b) of clause 4 provided that the trustees shall divide the four units allocated to him together with the subsequently added parts out of Laila Begum's unit into such sub-parts and in such manner that they shall allocate two equal sub-parts each to each of the then surviving sons of Laila Begum by the settlor and the issue then surviving of any predeceased son and one equal sub-part each to each of the then surviving daughters of Laila Begum by the settlor and the issue then surviving of any predeceased daughter. The parts of such surviving sons and daughters of Laila Begum as are specified in the second schedule were to be added to and amalgamated with the basic units, four or two as the case may be, allocated to them and they were to be held on the same trusts as those declared in respect of such basic units. So far as concerns the sub-parts allocated to the surviving sons and daughters of Laila Begum who were born after the date of the trust deed, it was directed that such sub-parts would be taken by them absolutely and so also the sub-parts allocated to the issue of any predeceased son or daughter of Laila Begum were to be divided between them absolutely per stir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that detailed and elaborate provisions were made in the trust deed regarding the disposition of the different units allocated to the various beneficiaries specified in part I of the second schedule and every contingency was taken care of in laying down the mode of devolution, so that at any particular point of time, one could always say who would be the beneficiaries entitled to the corpus, if the owner of the life interest were to die at that point of time. The remaining 136 1/2 units left after the allocation of 30 units as set out in clause 4 were dealt with in clause 5 of the trust deed. These 136 1/2 units were allocated to the respective relatives of the settlor specified in part II of the second schedule in the respective proportions set out against their names. Sub-clause (a) of clause 5 provided that the income of the respective unit or units or fraction thereof allocated to the respective relative shall be paid to them respectively for life. But so far as the 15 daughters of the settlor were concerned, to each of whom three units were allocated, it was provided that out of the income of such three units, each daughter was to be paid only 2/3rds part of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two units during her lifetime. Sub-clause (b) of clause 5 provided for the devolution of the respective unit or units or fraction thereof allocated to the respective relatives on their death. It was directed that on the death of any of these relatives, the corpus of the unit or units or fraction thereof allocated to him or her should be divided and distributed, subject to some restrictions, amongst the children and remoter issue per stirpes in the ratio of 2: 1 as between male and female children standing in the same degree of relationship. The contingency of any of these relatives dying without leaving any child or remoter issue him or her surviving was dealt with in sub-clause (c) of clause 5 which provided that in that event the unit or units or the fraction thereof allocated to such relative should be divided amongst the other relatives of the settlor but in accordance with certain specified rules. Sub-clause (d) of clause 5 made a special provision in regard to Dulhan Pasha Begum, namely, that on her death, the five units allocated to her should be added to and amalgamated with the four units allocated to her daughter, Shahzadi Begum, to be held upon the same trusts as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred absolutely to the ultimate beneficiaries, the trustees should transfer and hand over 3 1/2 units comprising this fund to the then successor-in-title of the settlor or to the eldest male descendant in the direct male line of succession of the settlor according to the rule of primogeniture. During the course of assessment of the trustees (hereinafter referred to as " the assessees ") to wealth-tax for the assessment year 1957-58, a question arose as to how the assessment to wealth-tax should be made. The Wealth-tax Officer assessed the assessees to wealth-tax on the value of 13 1/2 units of the trust fund comprising 5 units allocated to the reserve fund, 3 1/2 units allocated to the family trust expenses account and 5 units representing the units allocated to the future husbands of the then unmarried daughters of the settlor. The wealth corresponding to the remaining 161 1/2 units was assessed in the hands of the several beneficiaries specified in the second schedule, who were assessed to wealth-tax on the value of the respective units allocated to them under the trust deed. Similar assessments were also made for the assessment year 1958-59 with this difference that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner set aside the assessments made on the beneficiaries and directed the Wealth-tax Officer to make fresh assessments by including only the value of the life interest of each of the beneficiaries in his or her assessment. The Wealth-tax Officer accordingly valued the life interest of each of the beneficiaries in the respective unit or units allocated to him or her and made assessment to wealth-tax by including the value of such life interest. But the result of making assessments on this basis on the several beneficiaries was that the value of the " remainder wealth " in respect of 1661 units escaped tax. The Wealth-tax Officer was of the view that the beneficiaries in respect of the several remainder estates after the lives of the immediate beneficiaries mentioned in the second schedule were unknown and their shares indeterminate and the assessees were, therefore, liable to be assessed in respect of the remainder wealth under section 21, sub-section (4), of the Wealth-tax Act. The Wealth-tax Officer accordingly reopened the assessments made on the assessees for the assessment years 1957-58 to 1960-61 and made fresh assessments on the assessees in respect of the " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also sought to be urged on behalf of the revenue at the hearing of the appeals and one of them was--and that is the only contention material for our purpose--that the Appellate Assistant Commissioner should have of given a definite finding regarding the applicability of section 21, sub-section (4), or section 3 to the facts of the case ". The argument of the revenue in regard to this contention was that the assessees were liable to be assessed as an " individual " under section 3 in respect of the entire corpus of the trust fund and section 21, sub-section (4), being merely a machinery section did not have the effect of overriding the charge imposed on the assessees under section 3. The Tribunal allowed the revenue to raise this new contention, but made it clear that it would be only " for the purpose of supporting the assessments already made and not for the purpose of enhancing the assessments ". The answer given by the assessees to this contention was that section 3 had no application at all, because the assessees as trustees would be an " association of persons " and under the Wealth-tax Act an " association of persons " is not an assessable entity and they went on further to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. The revenue thereupon applied to the Tribunal for referring to the High Court certain questions of law said to arise out of the order of the Tribunal and on the application of the revenue, the Tribunal referred the following questions for the decision of the High Court: (i) Whether the trustees are liable to be assessed under section 3 of the Wealth-tax Act in the status of an ' individual ' ? (ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 3 of the Wealth-tax Act should not be considered as subject to the provisions of section 21 of the above Act ? (iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in refusing to admit the additional ground filed on behalf of the department (in W.T.As. Nos. 690 to 694 of 1963-64), except to the extent of supporting the assessment as made ? (iv) Whether, on a proper, construction of the trust deed in question, the Tribunal was correct in holding that the settlor had created only one trust in favour of several beneficiaries and not separate and independent trusts in favour of several bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deed created one single indivisible trust but there were really several distinct and separate trusts created by the trust deed in favour of each of the relatives mentioned in the second schedule. This view taken by the High Court necessarily resulted in questions Nos. (5) and (6) being answered in favour of the assessees. That left the third question, but so far as that is concerned, the High Court-took the view that it was not necessary to consider it in view of the answers given to the other questions. It is this decision of the High Court on the various questions referred by the Tribunal which is impugned in the present appeals preferred by special leave. Before we take up the questions of law that arise for consideration in these appeals, we may clear the ground at the outset by pointing out that though before the High Court, it was contended on behalf of the assessees that they were not liable to be assessed to wealth under section 3 since, unlike the charging section in the Income-tax Act, section 3 did not provide for levy of wealth-tax on " association of persons ", this contention was not pressed before us and it was conceded, and in our opinion rightly, that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be assessed to wealth-tax in respect of the trust properties under section 3. It is only by reason of section 21 that he would be assessable and hence assessment cannot be made on him except in accordance with the provisions of section 21. Prima facie, there seems to be force in this argument, but we do not think it necessary to express any final opinion upon it, since there is an alternative argument advanced on behalf of the assessees which is quite substantial and leaves no room for judicial doubt or hesitation. Let us assume that the trustee of a trust would be assessable in respect of the trust properties under section 3, even in the absence of section 21. But section 3 imposes the charge of wealth-tax " subject to the other provisions " of the Act and these other provisions include section 21. Section 3 is, therefore, made expressly subject to section 21 and it must yield to that section in so far as the latter makes special provision for assessment of a trustee of a trust. Section 21 is mandatory in its terms and as it stood at the material time, it provided as follows: " 21. (1) In the case of assets chargeable to tax under this Act, which are held by a court of wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover the sum so paid from such beneficiary, and may retain out of any assets that he may hold on behalf or for the benefit of such beneficiary, an amount equal to the sum so paid ........" It would, therefore, be clear on a combined reading of sections 3 and 21 that whenever assessment is made on a trustee, it must be made in accordance with the provisions of section 21. Every case of assessment on a trustee must necessarily fall under section 21 and he cannot be assessed apart from and without reference to the provisions of that section. To take a contrary view giving option to the revenue to assess the trustee under section 3 without following the provisions of section 21 would be to refuse to give effect to the words " subject to the other provisions of this Act " in section 3, to ignore the maxim generalia specialibus non derogant and to deny mandatory force and effect to the provisions enacted in section 2l. It may be noted that, while interpreting the corresponding provisions in section 41 of the Indian Income-tax Act, 1922, and section 161 of the Income-tax Act, 1961, this court in C. R. Nagappa v. Commissioner of Income-tax [1969] 73 ITR 626, 632, 633 (SC) approved the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is analogous to section 41(1) of the Indian Income-tax Act, 1922. The only difference between the two sections is that whereas the former deals with assets, the latter deals with income. Subject to this difference, the two provisions are identically worded. Hence, the decisions rendered under section 41(1) of the Indian Income-tax Act, 1922, have a bearing on the question arising for decision in this case." It must, therefore, be held to be incontrovertible that whenever a trustee is sought to be assessed, the assessment must be made in accordance with the provisions of section 21. It must also be noted that the assessment which is contemplated to be made on the trustee under sub-section (1) or sub-section (4) of section 21 is assessment in a representative capacity. It is really the beneficiaries who are sought to be assessed in respect of their interest in the trust properties through the trustee. Sub-section (1) provides that in respect of trust properties held by a trustee, wealth-tax shall be levied upon him " in the like manner and to the same extent " as it would be leviable on the beneficiary for whose benefit the trust properties are held. This provision obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erminate or unknown and that is why it is provided that the assessment may be made on the trustee as if the beneficiaries for whose benefit the trust properties are held were an individual. The beneficial interest is treated as if it belonged to one individual beneficiary and assessment is made on the trustees in the same manner and to the same extent as it would be on such fictional beneficiary. It will, therefore, be seen that in this case too, it is the beneficial interest which is assessed to wealth-tax in the hands of the trustee and not the corpus of the trust properties. This position becomes abundantly clear if if we look at sub-section (5) which clearly postulates that where a trustee is assessed under sub-section (1) or sub-section (4), the assessment is made on him " in respect of the net wealth ", of the beneficiary, that is, the beneficial interest belonging to him. Now, wherever there is a trust, it is obvious there must be beneficiaries under the trust, because the very concept of a trust connotes that though the legal title vests in the trustee, he does not own or hold the trust properties for his personal benefit but he holds the same for the benefit of others, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the trustee or to make direct assessment on each of the three beneficiaries. If the trustee is assessed under sub-section (1) of section 21, three separate assessments would have to be made on him, one in respect of the actuarial valuation of the life interest of A, which may be, to take an ad hoc figure, say, Rs. 5 lakhs, and the other two in respect of the actuarial valuations of the remaindermen's interests of B and C, which may be, to take again an ad hoc figure, say, Rs. 2 lakhs each. But, as pointed out above, the revenue may, instead of assessing the trustee, proceed to make direct assessment on each of the three beneficiaries A, B and C and in that case, Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs would be included in the net wealth of A, B and C, respectively. The result would be that though the value of the corpus of the trust property is Rs. 10 lakhs, the assessments, whether made on the trustee or on each of the three beneficiaries, would be only in respect of Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs and the balance of Rs. 1 lakh would not be subject to taxation. In fact, in most cases, if not all, the aggregate of the values of the life interest and the remaind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual under sub-section (4) of section 21. The difference between the value of the corpus of the trust property and the aggregate of the actuarial valuations of the life interest of A and the remainderman's interest would not be assessable in the hands of the trustee because, as pointed out above, the trustee can be taxed only in respect of the beneficial interests and there being no other beneficiary apart from A: and such of the children of A as the trustee might think fit, the balance of the value of the corpus cannot be brought to tax in the hands of the trustee under sub-section (1) or (4) of section 21. It is, therefore, obvious that no part of the corpus of the trust funds could be assessed in the hands of the assessees, but the assessment could be made on the assessees only in respect of the beneficial interests of the beneficiaries in the trust funds under sub-sections (1) and (4) of section 21. Now, so far as the beneficiaries specified in the second schedule are concerned, each of them had a life interest in the unit or units allocated to him or her and the assessees were liable under sub-section (1) of section 21 to be assessed in respect of such life interest " in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indeterminate and unknown. The expression " where the shares of the beneficiaries are indeterminate or unknown " carried with it, by necessary implication, a situation where the beneficiaries themselves are indeterminate or unknown. Such, for example, would be the case in the modified illustration given above. There, the beneficiaries are such of the children of A as the trustee might think fit and the beneficiaries themselves would, therefore, be indeterminate and unknown and yet sub-section (4) of section 21 would apply in their case. To take any other view would be to deny full meaning and effect to the words " where the shares of the beneficiaries are indeterminate or unknown " and to create a lacuna where, even though the beneficial interest in the remainder is disposed of under the trust deed, such beneficial interest would escape assessment. The correct interpretation of sub-section (4) of section 21 must, therefore, be that even where the beneficiaries of the remainder are indeterminate or unknown, the trustee can be assessed to wealth-tax in respect of the totality of the beneficial interest in the remainder, treating the beneficiaries fictionally as an individual. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tna High Curt in Khan Bahadur M. Habibur Rehman v. Commissioner of Income-tax [1945] 13 ITR 189 (Pat) and since then this view has been followed by the Calcutta High Court in Suhashini Karuri v. Wealth-tax Officer, Calcutta [1962] 46 ITR 953 (Cal), the Bombay High Court in Trustees of Putlibai R. F. Mulla Trust v. Commissioner of Wealth-tax [1967] 66 ITR 653 (Bom) and Commissioner of Wealth-tax v. Trustees of Mrs. Hansabai Tribhuwandas Trust [1968] 69 ITR 527 (Bom) and the Gujarat High Court in Padmavati Jaykrishna Trust v. Commissioner of Wealth-tax [1966] 61 ITR 66 (Guj). The Calcutta High Court pointed out in Suhashini Karuri's case [1962] 46 ITR 953, 963 (Cal) : " The share of a beneficiary can be said to be indeterminate if at the relevant time the share cannot be determined, but merely because the number of beneficiaries varies from time to time, one cannot say that it is indeterminate." The same proposition was formulated in slightly different language by the Bombay High Court in Trustees of Putlibai R. F. Mulla Trust's case [1967] 66 ITR 653, 660, 661 (Bom): " The question whether the shares of the beneficiaries are determinate or known has to be judged as on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho would be entitled to the corpus of such unit or units in determinate and specific shares, either immediately on the death of such life tenant or after another life interest. The remainder in respect of each set of unit or units allocated to the respective relative specified in the second schedule was, therefore, liable to be assessed in the hands of the assessees under section 21, sub-section (1), " in the same manner and to the same extent " as each beneficiary in respect of his determinate and known share in such remainder. That plainly excluded the applicability of sub-section (4) of section 21 in the assessment of the remainder. The High Court also examined the question whether the trust deed created one single indivisible trust or several distinct and separate trusts and, disagreeing with the view taken by the Tribunal, came to the conclusion that " the deed of trust created several trusts in favour of the relatives specified in the second schedule and their issues ". But, on the view taken by us that it is sub. section (1) of section 21 and not sub-section (4) of that section which applies in the assessment of the remainder in respect of each set of unit or units in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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