TMI Blog1967 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... the time hereinafter mentioned. (d) In case the settlor predeceases her husband, then on the death of the settlor to hand over the trust properties to the settlor's husband absolutely and as the absolute owner thereof. (e) In case the settlor survives her husband to pay the whole of the net income to the settlor from the date of the death of the settlor's husband for and during the term of her natural life. (f) In case the settlor survives her husband, then on the death of the settlor to hold the trust properties UPON TRUST to divide the same into as many parts as may represent the number of children left by the settlor and to pay the income of one equal part thereof to each of them during his or her life PROVIDED THAT if any child of the settlor shall have predeceased the settlor leaving a widow or widower and or issue him or her surviving the share of such predeceased child shall be counted in the same manner as if such child had been living at the time of the settlor's death and had died immediately after her and the share of such child shall be divided in the same manner as is hereafter directed for the division of the share of the settlor's children dying after the death ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... daughter, Freny, and Mrs. Hilla Vimadalal has two daughters, Pervin and Kamal. In view of the death of her husband in the year 1936, clause (d) can now no longer be operative. The provisions of the trust deed, which we have just reproduced above, show that during her lifetime the property was to be divided into six equal parts and one equal part was to be given to the settlor and to each of her five children then alive. In case the settlor survived her husband by virtue of clause (e), the whole of the net income of the property was to be paid to the settlor during her lifetime from the date of the death of her husband. That is the position in effect today for the settlor's husband having passed away, the entire income is today payable to her. But by clauses (f) and (g) the settlor has created certain interests in favour of her children and grandchildren. Clause (f) makes provision for her own children, and it in substance provides that in case the settlor survives her husband, then on her death the trust properties are to be divided into as many parts as may represent the number of children left by the settlor and the income of one equal part thereof being paid to each of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence and at that stage all the tax authorities and the Tribunal had taken the view that the assessment of the wealth in the hands of the trustees should be made under the provisions of section 21(4) of the Wealth-tax Act, 1957, and it could not be made under section 21(1) as the assessees desired it to be. The relevant provisions of section 21 are as follows: " (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneficiaries ?" When the original reference came up for hearing before this court it was pointed out that in order that sub-section (4) of section 21 could at all apply, the initial condition to its applicability had to be fulfilled. That condition as stated in the sub-section is that the shares of the persons on whose behalf the assets are held should be found to be " indeterminate or unknown " within the meaning of those words in sub-section (4) and it was pointed out that that finding had not been given by the Tribunal in the order dated Novemher 29, 1961, out of which the reference arose. The Division Bench accepted this contention and sent back the case to the Tribunal directing it to make a further statement relating to the said contentions. It observed : "It is clear from the statement of the case as well as from the questions which the Tribunal has referred to us that it was contended by the assessee before the Tribunal that the provisions of section 21(4) were not attracted in the present case since the beneficiaries under the trust deed were definite, ascertained and ascertainable. It was contended that the assessments had to be made under the provisions of section 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule. " The charge of wealth-tax, therefore, is in respect of the net wealth and with reference to the corresponding valuation date. " Valuation date " is defined in section 2(q): " in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in clause (11) of section 2 of the Income-tax Act if an assessment were to be made under that Act for that year. " The proviso to the definition of the " valuation date " does not apply in the present case. According to this definition, therefore, the material valuation dates in the present case would be March 31, 1957, March 31, 1958, and March 31, 1959. Now, the contention of Mr. Joshi is that the finding reached by the Tribunal that the shares of the persons on whose behalf the assets were held by the trustees were determinate and known is incorrect, because of the provisions of the trust deed itself. He first of all points to the provisions contained in clause(g). We have already set forth the provisions of that clause and in substance the clause shows the intention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he " relevant date " that we have to consider. The question whether the shares of the beneficiaries are determinate or known has to be judged as on the relevant date in each respective year of taxation. Therefore, whatever may be the position as was urged by Mr. Joshi as to any future date, so far as the relevant date in each year is concerned, it is upon the terms of the trust deed always possible to determine who are the sharers and what their shares respectively are. Almost the same contention was raised in a case before the Gujarat High Court in Padmavati Jaykrishna Trust v. Commissioner of Wealth-tax. In that case one Mahalaxmibai, a widow, had made two trusts in favour of her two daughters-in-law and after their lifetime in favour of their children by her sons. It was urged that the deed in that case created a vested interest in each of the male children in the trust properties and though at the time of the assessment one of the sons had himself two sons, both of them being alive, the possibility of the sons having more sons in future could not be eliminated and, therefore, it would not be possible to say how many sons there would be at the time of the death of the settlor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. For that reason he urged again that the shares must be held to be indeterminate or unknown and they would become determinate and known only when they actually vest in the grandchildren. The word "shares" in sub-section (4) of section 21 does not, in our opinion, exclude the interest which the beneficiaries have been given in the trust property in the present case even though that interest may be contingent upon the happening of a certain event, as for instance, the death of an ancestor. The word " shares " is used in the composite expression " the shares of the persons on whose behalf the assets are held. " Therefore, the word " shares " must be understood in the context of the assets held and we can see no reason why the word " shares " should be limited only to a vested interest and not include a contingent interest. It would, in our opinion, include the interest such as the grandchildren were given under clause (g) of the trust deed. Moreover, we may point out that both in clauses (f) and (g) the word used is " share " or " shares " and not "interest." The principle, to which we have just referred, viz., that the question whether the shares are determinate and known is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited concurrently and in the same proportion and in the year of account the beneficiaries were 24 in number. The court held that the first proviso to section 41 did not apply. With great respect that is the only conclusion to which the Patna High Court could have come, because although the beneficiaries may vary from time to time as some would die and new ones may be born at any particular time, it could be stated that each beneficiary would get a specific share and that would depend on the number of beneficiaries who were then in existence. That is not the position in the case before us........" For these reasons we are of opinion that the finding reached by the Tribunal in their supplementary statement on 10th June, 1966, was the correct finding. It must be held that the shares of the persons on whose behalf the assets were held by the trustees were, upon the terms of the trust deed, not indeterminate nor unknown on each of the valuation dates relevant to the assessment years in question. Therefore, the case would be governed by the provisions of section 21(1) and not by the provisions of section 21(4). The assessments should be made under section 21(1) of the Act. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
