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TMI Blog1970 (7) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... e property settled on trust consisted of certain shares valued at Rs. 2,19,765 and also a sum of Rs. 2,80,235, which had been deposited by the settlor with the Indian Press Ltd., Allahabad. The total value of the amount settled on trust was, thus, Rs. 5,00,000 only, at the inception. The property so settled has been referred to in the deed as endowed property. Subsequently, the trustees acquired extensive house properties in Allahabad and also movable properties with the trust money which constituted the basis of the assessment of the net wealth of the trust, during the three relevant assessment years. Under the terms of the deed of trust, the settlor constituted himself the sole trustee and the absolute sebayet of his family deity, Sri Sri Sridharjee, who is one of the beneficiaries. After the setllor's death, the management and administration of the trust estate vested in a board of trustees. The agendum of the deed runs as follows "Now these presents witnesseth....that the settlor doth hereby....convey, transfer, alienate and make over....to and in favour of the trustees (after divesting himself fully and completely) the said endowed property by way of endowment of religious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad. (3) that 10 per cent. of the net income shall be devoted to the granting of allowances to relatives and dependants of the settlor. The first recipients of the allowances shall be the following, and they shall respectively receive the following allowance during life:- (a) the settlors eldest daughter-in-law, Srimati Durgamoni Ghosh, Rs. 50 per mensem for life; (b) the settlor's daughter, Hari Bibha alias Chhabi, Rs. 50 per mensem for life; (c) the settlor's niece-in-law, Srimati Megh Mala Dasi, wife of the settlor's nephew, the late Hari Charan Bose Rs. 30 per mensem, for life; (d) the settlor's grand nephew, Sriman Kedar Nath Bose, Rs. 30 per mensem, for life. (4) Without prejudice to the above payments and out of the said 10% of net income, the trustees shall have liberty, from time to time, to select for enjoyment of allowances, other relatives and dependents of the settlor or the settlor's family, out of such funds as may be available under this deed of trust. Any amount left after disbursement of the allowances mentioned above shall be made into a separate fund, called the 'Relatives' Allowances Fund' for maintenance of relatives and dependents of the settlor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment should be made under section 21 of the Wealth-tax Act, and there would be as many assessments as there are beneficiaries provided their shares are determinable or known. On an analysis of clause 7 of the trust deed, quoted hereinabove, the Appellate Assistant Commissioner found that only 20 per cent. of the assets were assessable directly in the hands of the trustees under section 21(4) of the Act and another 20 per cent. was completely exempt. As regards the remaining 60 per cent. the Appellate Assistant Commissioner held that the benefits were to be shared by the five sebayets equally and, therefore, there would be five separated assessments under section 21(1) in respect of 12 per cent. of the assets in the hands of each of them. Dissatisfied with the order of the Appellate Assistant Commissioner, the Wealth-tax Officer appealed to the Tribunal. The Tribunal held, on a construction of the deed dated July 24, 1924, that the settlor had transferred the properties to the trustees who were the owners thereof. The settlor, no doubt, enjoined upoin the trustees who were the owners thereof. The settlor, no doubt, enjoined upon the trustees to spend the income of the trust pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly caluse 7(2) thereof, the assessee was eligible for any exemption based on section 5(1)(i) of the Act ?" Sri B. L. Gupta, appearing on behalf of the assessee, contended that under the deed dated July 24, 1924, an insignificant portion of the income from properties in question was dedicated to the deity, Sri Sri Sidharjee and the charitable institutions named in the deed, while the bulk of the income was intended to be given to the descendants and other relations of the settlor for their benefit. The benefit to the deity, according to Sri Gupta, being unsubstantial, the document does not evidence an endowment of the completes kind and the property continued to remain secular subject to a charge for charity and the deity. It was argued that the transaction, evidenced by the document, is, in essence, a gift to the named beneficiaries, who should be regarded as owners of the corpus of the property to the extent of their interest in the income thereof. Sri Gupta referred to the principles laid down in Hindu Law of Religious & Charitable Trusts by the late Sri B. K. Mukerjee, 3rd edition. At page 136 of that treatise the following passage appears: "There are cases again where althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the conveyance was made "by way of endowment of religious and charitable trust, to, unto and in favour and on behalf of the said deity....." but these words do not detract from the real tenor of the document. It is a clear case of the creation of a trust conveying the property to the trustees. The ownership of the property, therefore, vested in the trustees and not in the grantees or the beneficiaries as contended by Sri Gupta. The relevant provisions of sub-sections (1) and (4) of section 21 of the Act may be quoted here with advantage: "21. (1) In the case of assets chargeable to tax under this Act which are held by.....any trustee appointed under a trust declared by a dully executed instrument in writing, whether testamentary or otherwise.....the wealth-tax shall be levied upon and recoverable from .....trustee,.....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....... (4) Notwithstanding anything contained in this section, where the Shares (if the persons on whose behalf any such assets are held are indeterminate or unknown, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty on behalf of, that is, for the benefit of the beneficiaries. We are of opinion, therefore, that section 21(1) of the Act would be applicable in the instant case, provided the shares of the beneficiaries are determinate or known; otherwise, section 21(4) would apply. If section 21(1) applies, the trustees will be assessable "in the like manner and to the same extent" as the beneficiaries. This means three things: (i) there will be as many assessments in the hands of the trustees as there are beneficiaries with known or determinate shares; (ii) the assessments would be made in the same status as that attributable to the beneficiaries; and (iii) the extent, or the amount of the tax payable by the trustees, would be the same as that payable by such beneficiaries if they had been assessed separately. As already noted, the Tribunal held that the provisions of section 21(1) were not applicable inasmuch as the beneficiaries in the present case were entitled only to a share of the income from the truse properties and they had no interest in the corpus thereof. In my opinion, the Teibunal entirely misconceived the law in point. Section 21(1) of the Act does not lay down that in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 per cent. of the net income of the property is concerned, it was held by any beneficiary. The assessment must, therefore, be made pro tanto under section 21(4) of the Act. Sub-clause (2): Under the sub-caluse there are three beneficiaries, namely, (i) the deity, Sri Sri Sridharjee and two charitable institutions, namely, (ii) "Haripada Infimary", a homeopathic dispensary and, (iii) "Golapmohini Fund", an fund for the maintenance of widows, orphans and students. They are entitled, as between themselves, to receive 5 per cent. of the net income of the trust. The deed does not, however, say what proportion this income shall be divided between the three beneficiaries. The allocation has been left entirely to the discretion of the trustees. The Appellate Assistant Commissioner found that, in the past, five per cent. of the net income had been expended for the deity, and the remaining ton per cent. for the two charitable institutions. But that does not make the shares of the three beneficiaries determinate for the obvious reason that the allocation may be varied by the trustees at their discretion. The result is that the shares of the three beneficiaries must be regarded as indeterm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the trustees. Sub-clause(5): Under this sub-clause sixty per cent of the net income of the trust property has to be granted to the sebayets in the manner prescribed in items Nos. (a) and (b) of that sub-clause. Under item No. (a) the trustees have to pay 25 per cent. of the said sixty per cent. of the net income, or, in other words, fifteen per cent. of the net income, to the sebayets of the deity, in equal shares, as remuneration for their services. Under item No. (b) the remaining 75 per cent. of the said sixty per cent. of the net income, or, in other words, 45 per cent. of the net income, was required to be divided into five equal shares. Each such share was to be paid to each sebayet for the maintenance of his family. The trustees have been directed to divide each such share among such members of the line of each sebayet as they (the trustees) may decide. The direction of the settlor in point was, obviously, to ensure that the allowance was paid to persons deserving of the same. The relevant provision in sub-clause (5)(b) states: The remaining 75 per cent. of the said sixty per cent. of income shall be divided into five equal shares. Each such share is to be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is analogous to a onerous gift mentioned in section 127 of the Transfer of Property Act. In such a case, the donee is regarded as the recipient of the gift despite the burden or the condition attached to the gift. Here, the sebayet must be regarded as the beneficiary of the "B" allowance in spite of the condition that the allowance must be utilised for maintenance of deserving members of his family. In this connection it should be borne in mind that the first three out of the six trustees mentioned in clause 2 of the trust deed are also the first three out of the five sebayets mentioned in clause 16 of the deed. The selection of the first trustees and the first sebayets and their successors in office has been so designed by the settlor as to leave little scope to the trustees to abuse the authority given to them under sub-clause (5)(b). Considering the over all scheme of the settlement and keeping in view the principle of harmonious construction, it seems to me clear that the sebayets were intended to be benefited by the "B" allowance in the manner mentioned in sub-clause (5)(b) and they should, therefore, be regarded as the beneficiares under that sub-clause. The shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the religious endowment under sub-clause (2)(a) is a secular one and, moreover, the fund assigned to the two charitable institutions is also iindeterminate. It cannot, therefore, be said that the trustees were holding any specific propery for any puplic purpose of a charitable or religious nature within the meaning of section 5(1)(i) of the Act. In view of what I have discussed above, I would answer questions referred by the Tribunal as follows: Question No. 1: The trustees held the assets on behalf of the benficiarits named in the deed of trust. Question No. 2: This question as framed by the Tribunal postulates that the beneficiaries have shares in the assets held by the trustees. I have pointed out above that the beneficiaries can have no share in the trust estate of which the trustees are the legal owners. Hence, the words "in the said assets" occurring in question No. 2, as framed by the Tribunal, are deleted and the question is reframed as follows: "If the answer to the above question is in the affirmative, whether the shares of the beneficiaries, under annexure 'A', can be said to be known or determinate so as to attract assessment in the manner contemplated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets for the benefit of the beneficiaries, and that question must be answered in the affirmative. The second question raises the point whether the shares of the beneficiaries can be said to be known or determinate so as to attract sub-section (1) of section 21. Under clause (1) of paragraph 7 of the deed the trustees are required to set apart 15 per cent. of the net income annually for investing in securities and properties to be added to the endowed property. I agree that, in this regard, sub-section (4) of section 21 is attracted. Clause (2) of paragraph 7 is concerned with the distribution of 15 per cent. of the net income for the purpose of the worship of the deity, Sri Sri Sridharjee, and the maintenance of the "Haripada Infirmary" and the "Golapmohini Fund". I agree with my learned brother that as the shares of the deity and the two charitable institutions in this 15 per cent. have been left to the discretion of the trustees, sub-section (4) of section 21 comes into play. Clause (3) of paragraph 7 specifies four persons as the recipients of specified allowances from out of 10 per cent. of the net income. I agree with my learned brother that to the extent that there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the deed. All this has been left to the unfettered decision of the trustees. In my opinion, the provision of sub-clause (b) of clause (5) invites the application of sub-section (4) of section 21. In this regard, I deeply regret, I am unable to share the opinion of my learned brother that sub-section (1) of section 21 is attracted. The beneficiaries under sub-clause (b) of clause (5) are not the sebayets, but the members of their family. The sebayets are merely chosen as the immediate recipients of the amount which they hold for the benefit of those members of their respective families as have been selected by the trustees for the enjoyment of that benefit. I answer the second question accordingly. As regards the third question referred by the Appellate Tribunal, in view of my answer to the second question the conclusion of the Tribunal that sub-section (4) of section 21 governs the assessment cannot be accepted to the extent that it is contrary to what has been said in reply to the second question. The fourth question raises the point whether the assessee is eligible for any exemption based on clause (i) of sub-section (1) of section 5 having particular regard to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Having heard the learned counsel for the trustees and the revenue on August 10, 1970, I recorded my opinion to the effect that the trustees are liable to be assessed in respect of the in qtiestion in accordance with the provisions of sub-section (1) of section 21 of the Wealth-tax Act. I had then directed that I shall give my reasons for the opinion later which I proceed to do now. It is unnecessary for me to detail the various terms of the deed of trust and discuss the scheme evidenced by the sale as they have been so ablyset forth by Mukerjee J. Suffice it to say that Chintamani Ghosh, the author or the trust, had three main objects in view. The first one was, that 15% of the net income every year would be invested in securities and properties and allowed to be added to the endowed property. The second object was that 15% of the net income shall be spent on the worship, performance of cermonies, festival and ritual of the family deity, Sri Sri Sridharjee. The remainder of 70% of the net income was to be spent for the benefit of the members of the family of the author, 10% going out as allowances to relatives and dependants named by the author and 60% to the sons of the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be spent by the trustees; sub-clause (a) relates to "A" allowance to be paid to the sons in five equal shares; the "B" allowance is also to be divided into five equal shares and paid to each of the five sons. Thus the whole amount of 60 per cent. is to be divided into five equal shares and paid by the trustees to the five sons. Therefore, the duty cast upon the trustees is to disburse the 60 per cent. of the net income by demarcating one-fourth into "A" allowance and the remaining three-fourths into "B" allowance and they are under a duty to pay the same to the sons in equal shares. The only difference between "A" allowance and "B" allowance seems to be that while "A" allowance is for the absolute enjoyment of the sons, the "B" allowance is for the maintenance of their family. So far as the trustees are concerned they have to pay both the allowances to the sons. It is clear from sub-clause (b) of clause (5) which says that the "remaining 75 per cent. of the said 60 per cent. of the income shall be divided into five equal shares". Each such share is to be paid to each sebayet for the maintenance of his family. The trustees would be failing in their duty if they defaulted in pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maintenance of the family would be so held by the trustees for the benefit or on behalf of the head of the family. Once the money goes into the hands of the head of the family how it is to be disbursed, in my judgment, will not wipe out the benefit which accrues to each of the sons of the author, the benefit being money in their hands for the maintenance of their respective families. On a true construction of sub-clause (b) the conclusion is inescapable that each of the sons of the author as head of his family is to disburse the share of "B" allowance received by him from the trustees, though in disbursing the same he would be bound by the judgment of the trustees. The provision with regard to the fixation of the shares among members of the line of each of the sons is only a limitation on the absolute discretion of each of the sons as head of their respective families for spending the amount in maintaining the members of their families. If the trustees do not perform their duties of dividing the "B" allowance into five equal shares and putting it in the hands of each of the sons for the maintenance of their respective families, that duty can legally he enforced at the instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of the persons on whose behalf any such assets are held are indeterminate or unknown. Here, the shares from which the allowances ultimately are to be paid to the members of the family of each of the sons are determinate and known and as said above the amount of "B" allowance is held by the trustees on behalf of the sons of the author, though demarcated for the purpose of the maintenance of the family of each of the sons. The stage of distribution of allowances to the members of the family of each of the sons is reached after the amount of "B" allowance has passed out of the hands of the trustees on having been paid out to each of the sons in equal shares. It is not possible, therefore, to say that at the time when the payment of allowance actually is to be made to any member of the family of the sons as decided upon by the trustees, the trustees are holding any asset on behalf of any such member of the family as the asset had already passed out of the hands of the trustees into the hands of the sons of the author in known and determinate portion. In fact, at the time of distribution of allowances to members of the family, the assets are held by the respective head of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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