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TMI Blog1970 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... milar language and one specimen deed of trust is annexure " A " to the statement of the case. The assessees are the trustees appointed under each of the deeds of trust. In the year of account ending March 31, 1957, the assessment year being 1957-58, the trustees, as holders of the shares of Tata Iron and Steel Co. Ltd. and Associated Cement Co. Ltd., received rights-coupons for new shares. Some of these coupons were sold by the trustees and in the result in each of the trusts the trustees made capital gains which in the aggregate came to Rs. 41,085. In the deeds of trust the three sons of the settlor, being Vasantkumar, Rajender Kumar and Krishnakumar, were life-tenants being entitled to net income for the duration of their lives. Under the deed of trust in which he was the beneficiary, Krishnakumar was assessed in respect of the capital gains of Rs. 41,085 on February 26, 1958. Similarly, in respect of the capital gains made in the trust in which Vasantkumar was the beneficiary, he was assessed to tax in respect of the capital gains made in that trust. Same was done under the trust in favour of Rajender Kumar. These assessments were challenged and ultimately in the matter of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to section 41 to the facts of the case, regard must be had to the accounting year alone. The fact that the birth or death of certain persons would alter shares of corpus and/or income payable in subsequent years would be irrelevant. His submission was that it was clear, on a reading of the relevant contents of each of the above deeds of trust, that the shares payable to the remainder man in the accounting year were determinate and known. Mr. Joshi for the revenue submitted that on a true construction of the provisions in these deeds of trust it was clear that the capital gains were received by the trustees in the present case for indeterminate and unknown persons. He submitted that the decisions on which Mr. Kaka for the assessee has relied arose in matters where the beneficiaries were entitled to vested interest. These cases were distinguishable, because the interests of the beneficiaries who were entitled to the benefit of the capital gains in question under the present deeds of trust were all contingent. The contingent interest being neither heritable nor transferable must be held to belong to indeterminate and unknown persons. The capital gains in all these three cases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongst the brothers and sisters of Rajender Kumar and/or their issue in such shares and proportions and on such terms as Rajender Kumar may by deed and/or will appoint and in default of such appointment, this one moiety of the corpus is directed to be paid over to the brothers of Rajender Kumar and/or their issues in the manner mentioned in the second part of sub-clause (d). Sub-clause (e) which is applicable to the facts existing in the accounting year provides that upon the death of Rajender Kumar leaving children or remoter issues the trustees should divide the corpus of the trust fund amongst the children and/or the remoter issue " living at the time of the death " of Rajender Kumar in the proportions mentioned in sub-clause (e). Under sub-clause (f), notwithstanding the provisions in sub-clause (e), it is directed that in the event of Rajender Kumar dying after adopting a son and such son and/ or his issue surviving Rajender Kumar, Rajender Kumar should have the right and power to give to such adopted son and/or his issue a share of the corpus not exceeding the share which such adopted son or issue would have received if he were a natural born legitimate son. Similar are the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Amendment) Act, 1947. By the Finance Act of 1949, levy of tax on capital gains was removed as from March 31, 1948. Once again capital gains were taxed under the provisions of the Finance (No. 3) Act of 1956 as from April 1, 1957. In connection with the levy and computation of tax on capital gains, sub-sections (5) and (6) of section 17 were enacted. Under the sub-sections (6) and (7) as existing prior to the Finance (No. 3) Act, 1956, the rate of tax on capital gains was fixed between one anna in a rupee to five annas in a rupee in the proportion of the slab of gains fixed in these sub-sections. Under sub-section (6) as now amended by Finance (No. 3) Act, 1956, the rate of tax on capital gains is fixed in the following words : " On the whole amount of such inclusion (capital gains), income-tax equal to the amount which bears to the income-tax which would have been payable on his total income as reduced by two-thirds of the amount of such inclusion (capital gains earned) the same proportion as the whole amount of such inclusion bears to such reduced total income. " The rate of tax as levied by the above provision may be explained in the following words : " The tax on capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets are held by the trustees. The sub-section (4) of section 21 of that Act is similar to the sub-section (1) of section 41 in the Income-tax Act. That sub-section (4), inter alia, provides that where the shares of the persons on whose behalf or for whose benefit any such assets are held are indeterminate and unknown, the wealth-tax may be levied upon and recovered from the trustees at a higher rate than could be levied in ordinary cases. The contentions similar to the contentions made on behalf of the revenue in this case arose in connection with the levy and collection of wealth-tax before a Division Bench of this court in the case of Commissioner of Wealth-tax v. Mrs. Hansabai Tribhuwandas Trust. The contention of the trustees-assessees was that wealth-tax at a higher rate under sub-section (4) of section 21 was not liable to be levied and collected from the trustees. The contention of the revenue was that the beneficiaries under the deed of trust in question were indeterminate and unknown and the interest of such beneficiaries was contingent interest and accordingly provisions in sub-section (4) were applicable. In connection with these rival submissions, the Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation. 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. " The Division Bench further referred to the case of Suhaskini Karuri v. Wealth-tax Officer, and observed : " The decision clearly lays down the principle that the question whether the shares of the beneficiaries are indeterminate or unknown has to be judged as the facts stand on the relevant date in each assessment year. " In spite of the fact that the ultimate beneficiary, Tribhuwandas, was held to have contingent interest in the corpus, in spite of the fact that there were intervening provisions in the deed of trust which may have affected the question, the Division Bench formed the view that in the case before them the share of the beneficiary for whom the assets were held (the corpus was held) by the trustees was determinate and known. In that connection, the Division Bench negatived the submission made by Mr. Joshi by relying upon the following phrases in sub-section (4) : shares of the persons on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese life tenants were the beneficiaries entitled to have the corpus of the trust divided between themselves upon the death of the above life tenants. The capital gains in question were received by the trustees on behalf of these sons and daughters of the life-tenants. Now, it is true that the date of distribution mentioned in the sub-clause provides that the children and/or remoter issues who would be entitled to the corpus would be those who were " living at the time of the death " of each of the life-tenants. Now, this provision, possibly makes interest in favour of the sons and daughters of the life-tenant who were existing at the relevant date contingent interest. Following the ratio of the decision in the case of Commissioner of Wealth-tax v. Mrs. Hansabai Tribhuwandas Trust, the fact that these beneficiaries held contingent interest must be held to be an irrelevant fact. These persons were a determined group of persons and were known. The share that they had as beneficiaries under this clause was also such as could be easily ascertained and determined as on the date when capital gains accrued in the relevant year of account. Now, having regard to this finding, it is impossib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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