TMI Blog1998 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... actuary is correct? - 3. Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal is justified in holding that the rate of interest as given in the Wealth-tax Rules for valuation of life interest is applicable to the present case where the corpus is jewellery which is appreciable asset?" - - - - - Dated:- 5-3-1998 - Judge(s) : MS. S. V. MARUTHI., T. N. C. RANGARAJAN. JUDGMENT The judgment of the court was delivered by T.N.C. RANGARAJAN J.-In these cases, certain common questions have been referred by the Appellate Tribunal. In R. C. Nos. 106 of 1989, 107 of 1989, 116 of 1989, 133 of 1989, 134 of 1989 and 229 of 1990 the following three questions have been referred: "1. Whether, on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable to the present case where the corpus is jewellery which is an appreciable asset? 3. Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal is justified in holding that the rate of interest adopted by the assessee's actuary is correct?" The admitted facts are that the assessees are all beneficiaries of a trust called H.E.H. the Nizam's Jewellery Trust. The assessees returned the value of their interest in the trust properties on the basis of the valuer's report. The Wealth-tax Officer accepted the returns. In some cases, the Commissioner of Wealth-tax considered such assessments to be erroneous and prejudicial to the Revenue. In other cases, the Wealth-tax Officer, himself reopened the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l conclusion for the purpose of deducting the estate duty leviable on that event. He also pointed out that the Appellate Tribunal has referred to the principles of valuation given in the books by Dymond and Green on Death Duties. In order to understand the issue raised, we have to keep in mind the provisions of section 21 of the Wealth-tax Act which brings to charge the asset held by a trustee. According to that section wealth-tax has to be levied on the trustee in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf or for whose benefit the assets are held. In the present case, the beneficiaries are remaindermen, who are entitled to the benefit only on the death of the life ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the future either by reason of some beneficiaries ceasing to exist or some new beneficiaries coming into being. In view of this exposition of the law, the interest of the remaindermen has to be valued on the valuation date as if the life tenant had died on that date. If that were so, the logical conclusion is that, on that date, there will be an estate duty liability which will be a charge on the estate. Under section 7 of the Wealth-tax Act, the value of the asset has to be estimated as the market value which a willing buyer will pay as the price which it would fetch if sold in the open market and a willing buyer would naturally consider what he will get on the event of the life tenant dying and the interest of the remainderman being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... level of rents. The statute says that you must imagine a certain state of affairs: it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs'." In the case relied on by the Revenue, the question was whether in ascertaining the value of a share under the breakup method in rule 1D of the Wealth-tax Rules, the capital gains tax that may be payable in case shares are sold is liable to be deducted. The Supreme Court pointed out that even though a fiction could go to its logical extent in the case of valuation of a share by a breakup method, there was no sale of asset and there was therefore no question of capital gains tax being attracted or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as one of the items. This being the accepted formula of the Department in the analogous statute we see no reason to entertain the objection of the Revenue that there is any extension of a fiction beyond the needs of the situation. Our answer to the first question in all the cases and the second question in the second batch of cases is, therefore, in the affirmative and against the Revenue. With reference to the second and third questions in the first batch of cases, it is not in dispute that the valuer has taken only the rate of interest given in the table annexed to the Wealth-tax Rules. Hence, our answer to these questions is also affirmative and against the Revenue. With reference to the third question in the second batch of case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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