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TMI Blog1971 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... s brother Gautam Sarabhai until she attains the age of thirty years provided however that during the minority of the said Manna the Trustees shall be at liberty either to utilise the net income of the Trust funds for the support benefit, education and advancement in life of the said Manna or to pay the net income of the Trust funds to Kamalini Khatau mother of the said Manna as the Guardian of the said Manna for the said purpose and the receipt of the said Kamalini Khatau as the guardian of the said Manna of the net income shall be a valid and effectual discharge to the Trustees who shall not be liable to see to the application thereof. (b) If and when the said Manna shall attain the age of thirty years, but not otherwise, the Trustees shall hold the Trust Funds in trust for the said Manna absolutely. (c) If the said Manna shall die before attaining the age of thirty years leaving a child or children her surviving, the Trustees shall hold the Trust Funds in trust for such child or children of the said Manna and if more than one in equal shares absolutely, provided, however, that if the said Manna shall die before attaining the age of 30 years without leaving a child or children h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in such proportions as the Trustees may think fit for the maintenance, support, education and benefit of Manna and Shyamali the daughters of the Settlor's brother Gautam and the Trustees shall also be at liberty to have recourse to and utilise any portion or portions of the corpus of the Trust Funds to the extent of a moiety thereof in the aggregate for the maintenance, support, education and benefit of the said Manna and Shyamali or either of them in such manner and in such proportions and at such time or times as the Trustees may in their discretion think fit. The accumulation of income shall be invested by the Trustees in any of the securities or investments hereby authorised and shall after expiration of the said period of 18 years form part of the Trust Funds. (3) On the expiration of the said period of 18 years from the date hereof the Trustees shall hold the Trust Funds or the balance thereof as the case may be in trust for the said Manna and Shyamali in equal shares or for the survivor of them absolutely provided however that if the said Manna and Shyamali shall have died before the expiration of the period of 18 years leaving a child or children, such child or children ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds with only this difference that instead of a period of 18 years, the period of distribution provided in the second trust deed dated 12th February, 1958, is 20 years and that provided in the trust deed dated 21st February, 1958, is 22 years and there is an additional clause in each of these two trust deeds after clause (2) which provides: " (3) On the expiration of the said period of 18 years and until the expiration of a further period of two years" (in the case of the second trust deed dated 12th February, 1958, and four years in the case of the first trust deed dated 21st February, 1958) "thereafter the Trustees shall pay the net income of the Trust Funds or of the balance of the Trust Funds as the case may be to the said Manna and the said Shyamali in equal shares for their absolute use and benefit provided however that if the said Manna or Shyamali shall die after the expiration of the period of 18 years and before the expiration of the further period of two years leaving a child or children, the Trustees shall pay the share of such deceased daughter, viz., Manna or Shyamali, in the net income of the Trust Funds to such child or children if more than one in equal shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corpus but it was a vested interest and its value was therefore includible in the net wealth of the assessee. The assessee gave a two-fold answer to this contention. The first answer was a denial of the contention. The assessee urged that under the trust deeds she had no interest in the corpus on the relevant valuation dates, what she had was merely spes successionis and since it was not transferable and had no saleable value, its value was nil. The assessee also contended in the alternative that in any event even if she had an interest in the corpus, it was not liable to be included in her net wealth since the trustees of the trust deeds had already been assessed to wealth-tax in respect of the corpus of the trust properties under section 21(4). The Tribunal was impressed by the first contention of the assessee and it held that since under the trust deeds the assessee was to acquire interest in the corpus only on attaining a specified age and not till then, the assessee had no interest in the corpus of the trust properties on the relevant valuation dates but what she had was a mere spes successionis which had no value and the Appellate Assistant Commissioner was, therefore, righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessionis. A spes successionis is a bare or naked possibility such as the chance of a relation obtaining a legacy on the death of a kinsman or any other possibility of a like nature which must be distinguished from a possibility coupled with interest. Where interest in corpus is given to a donee under a settlement and such interest is contingent on the happening of an uncertain event, the donee acquires a contingent interest in the corpus which becomes vested on the happening of the uncertain event and such contingent interest, though dependent on a possibility for its vesting, is very much different from a spes successionis. It is a form of property which is assignable or transferable and on which money can be raised unlike spes successsonis which is non-transferable by reason of section 6(a) of the Transfer of Property Act. This distinction between the two legal concepts is clear and well-defined and it has been recognised in several judicial decisions. We may mention only two of them: Ma Yait v. Official Assignee and Commissioner of Wealth-tax v. Ashokkumar Ramanlal. It is, therefore, clear that even if the gift of the corpus to the assessee were regarded as contingent on her a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is therefore clearly a contingent gift and the interest created is a contingent interest, the contingency being the happening of an uncertain event, namely, the attainment of the age of thirty years by the assessee. This conclusion follows clearly and inevitably from the application of the rule enacted in section 21 of the Transfer of Property Act. But, as pointed out by the Supreme Court in Rajes Kanta Roy v. Smt. Shanti Devi, the intention of the settlor is to be collected from the settlement as a whole and no one clause should be construed in isolation and, therefore, we must see whether there is anything in the other parts of the trust deed dated 12th September, 1956, which shows that the gift of the corpus, though apparently contingent, was really intended to create a vested interest. Now the main provision on which the learned Advocate-General on behalf of the revenue relied as indicative of the settlor's intention to create a vested interest was that contained in clause (2), sub-clause (a), which imposes an obligation on the trustees to pay the net income of the trust properties to the assessee until she attains the age of thirty years. The argument of the learned Advocate- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and if the intention of the settlor is otherwise clear and manifest, effect should be given to such intention, despite the rule. Here in the present case the settlor has made it clear in plain and unmistakable words that the assessee should have interest in the corpus only if she attains the age of thirty years and not otherwise. The word "if" is sufficiently expressive of the intention to confer a contingent interest but as if anticipating that by reason of clause (2), sub-clause (a), it may be contended relying on the rule of interpretation contained in the exception to section 21 that the interest given to the asssssee in the corpus is a vested interest, the settlor has, with a view to leave no doubt as to her intention, added the words "but not otherwise". These words must be given due meaning and effect and the manifest intention of the settlor expressed in these words should not be defeated by relying on a rule of interpretation enacted in the exception to section 21. If it is held on an application of the rule of construction enacted in the exception to section 21 that the interest in the corpus given to the assessee vested in her on the date of the trust deed, such a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een alive at that date. But what is to happen if the asessee and Shyamali are both dead and there is no child of either of them alive at the date when the period of eighteen years comes to an end? The answer is provided by clause (4) which says that in such an event the corpus must come to the person or persons, object or objects, purpose or purposes as appointed by Gautam Sarabhai, the father of the assessee and Shyamali, in exercise of a power of appointment conferred upon him. Now the lauguage used in clauses (3) and (4) is clearly expressive of the settlor's intent that there shall be no vesting of interest in the corpus until the expiration of the period of eighteen years. The significant words used by the settlor in clause (3) are: "On the expiration of the said period of 18 years. . . . the Trustees shall hold the Trust Funds...in trust for the said Manna and Shyamali in equal shares or for the survivor of them absolutely." These words show that the assessee is to receive the interest in the corpus only on the expiration of the period of eighteen years provided she is alive at that date. If the assessee dies before that date but Shyamali is then alive, the whole of the corpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to receive one-half of the income of the trust funds during the period of eighteen years. If the settlor had given one-half of the corpus to the assessee on the expiration of the period of eighteen years and directed that in the meantime one-half of the net income of the trust funds should go to the assessee, it might have been possible to argue, in the absence of other countervailing circumstances, that the interest in one-half of the corpus given to the assessee was a vested interest and possession only was postponed till the expiration of the period of eighteen years. But here the assessee has not been given any right to any part of the income of the trust funds. Clause (2) vests a discretion in the trustees either to accumulate the net income of the trust funds or to utilise the same in such manner, at such time or times and in such proportions as the trustees may think fit for the maintenance, support, education and benefit of the assessee and Shyamali. The trustees may, in the exercise of their discretion, choose not to spend any part of the net income of the trust fund for the maintenance, support, education or benefit of the assessee and the assessee cannot do anything abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of the corpus shall be utilised for her benefit during the period up to the expiration of a period of eighteen years and no inference can be drawn from this clause that the settlor intended to create a vested interest in the assessee. The revenue also relied on clause (6) of the trust deed which confers a right on the trustees to purchase or construct a house or other residential premises for the personal residence of the assessee but this provision would come into operation only after the assessee attains majority and before the period of eighteen years comes to an end. Moreover, it does not appear from this clause as to what portion of the corpus would be required for purchasing or constructing a house or other residential premises for the personal residence of the assessee should the assessee require the trustees to do so. What kind of house or other residential premises should be purchased or constructed for the personal residence of the assessee and how large it should be and where it should be situate would be matters which would obviously rest in the discretion of the trustees and it would be for the trustees to decide as to what portion of the corpus should be utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us of the trust funds under the four trust deeds and what she had was merely a spes sucessionis. We are of the view that the assessee had a contingent interest in the corpus of the trust funds and the value of such contingent interest was liable to be included in the net wealth of the assessee on the relevant valuation dates subject to our decision on the third question submitted to us for our opinion. That takes us to the next question whether the assessee can be assessed to wealth-tax in respect of her contingent interest under the aforesaid four trusts when the trustees of those trusts have already been assessed to wealth-tax in respect of the trust properties under section 21(4) of the Wealth-tax Act, 1957. This question arises only in regard to the assessment year 1958-59 and to appreciate its proper scope and ambit, it is necessary to notice a few facts found by the Tribunal. The trustees of the trust deed dated 12th September, 1956, were assessed to wealth-tax in respect of the trust properties for the assessment year 1958-59 by an order dated 30th March, 1959. The assessments of the trustees of the two trust deeds dated 12th February, 1958, and the third trust deed dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a number of decisions and it would be sufficient if we refer only to one of them, namely, the decision of the House of Lords in Heritable Reversionary Co. Ltd. v. Millar. The House of Lords was called upon in this case to construe the expression "belonging to the creditor" as used in the Scottish Bankruptcy Act of 1856 and; while construing this expression, Lord Macnaghten observed: " The words 'property' and 'belonging to' are not technical words in the law of Scotland. They are to be understood, I think, in their ordinary signification. They are in fact convertible terms; you can hardly explain the one except by using the other. A man's property is that which is his own, that which belongs to him. What belongs to him is his property. No one in ordinary parlance would speak of land or funds held only in trust for another as the property of the trustee. Land or funds so held are not the trustee's property in any real sense any more than a bankrupt's sequestered estate is the property of the trustee in bankruptcy. It is true that in the present case the complete feudal title was in the bankrupt. It is true that in a strict legal view the right of the beneficiaries was only a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t difficulty is bound to arise where there are more than one beneficiary and the shares of the beneficiaries are indeterminate or unknown. It would not be possible to predicate in such a case what precisely is the interest of each beneficiary in the trust properties for the purpose of inclusion in computation of his net wealth. How then is the assessment to wealth-tax in respect of the trust properties to be made in a case of this kind? This problem was solved by the legislature by providing that where it is not possible to assess the beneficiaries in respect of their interest in the trust properties, because their shares are indeterminate or unknown, the assessment to wealth-tax may be made on the trustees as if the beneficiaries on whose behalf or for whose benefit the trust properties are held were an individual. While making this provision, the legislature also permitted assessment to wealth-tax to be made on the trustees, even where there is a single beneficiary or there are more beneficiaries than one but their shares are determinate and known, as such a procedure would be highly convenient to the revenue from the point of view of recovery of the wealth-tax since the trust pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of such beneficiary, an amount equal to the sum so paid......" It is clear from these provisions that the assessment which is contemplated to be made on the trustees under sub-sections (1) and (4) 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 trustees. Sub-section (1) provides that in respect of trust properties held by the trustees, wealth-tax shall be levied upon them in the like manner and to the same extent as it would be leviable upon the beneficiary for whose benefit the trust properties are held. This provision obviously can apply only where the trust properties are held by the trustees for the benefit of a single beneficiary or where there are more beneficiaries than one, the individual shares of the beneficiaries in the trust properties are determinate and known. Where such is the case, wealth-tax can be levied on the trustees in respect of the interest of any particular beneficiary in the trust properties in the same manner and to the same extent as it would be leviable upon the beneficiary and in respect of such interest in the trust pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to assessment where the trustees hold the trust properties for the benefit of a single beneficiary or, there being more beneficiaries than one, the individual shares of the beneficiaries in the trust properties are determinate and known. But what is to happen where there are more than one beneficiary and their individual shares in the trust properties are indeterminate or unknown? The answer to this question is provided by sub-section (4) which provides that where the shares of the beneficiaries for whose benefit the trust properties are held are indeterminate or unknown, the wealth-tax may be levied upon the trustees as if the beneficiaries for whose benefit the trust properties are held were an individual for the purposes of the Act. Since the interests of the beneficiaries in the trust properties in such a case would be indeterminate or unknown, it would not be possible to make direct assessment on any beneficiary in respect of his interest in the trust properties nor would it be possible to levy wealth-tax on the trustees in respect of the interest of any beneficiary in the trust properties "in the like manner and to the same extent as it would be leviable upon" such benef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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