TMI Blog1996 (3) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined accordingly. (4) Without prejudice to the above it is submitted that even if it is to be held to be a discretionary trust what is to be assessed is life interest and the remaindermen's interest. The appellant further submits that if each of this is below the minimum amount liable to tax then there would be no tax payable. (5) The appellant further submits that from the total value of the trust the value of the life interest and remaindermen's interest is to be deducted and the balance amount is not liable to tax. The appellant submits that provisions of s. 21(1)(A) are applicable to the trust assessable under s. 21(1) and not s. 21(4). It is submitted that the balance of the wealth will not be liable to tax. (6) Without prejudice to the above the appellant submits that even if it is held that the balance of wealth is taxable then if the same is below the minimum amount not liable to wealth-tax again the same will not be liable to tax. It is submitted that the same be held so now. (7) The learned Dy. CWT has erred in trying to distinguish the decisions of Supreme Court and High Court. (8) Your appellant craves leave to add, alter and/or to amend all or any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 306 : (1977) 108 ITR 555 (SC). The Hon'ble Supreme Court has clearly held that s. 3 of WT Act must yield to s. 21, as s. 21 makes a special provision for assessment of the trustee of a trust. The judgment of the Hon'ble Madras High Court thus does not lay down the correct law as it is clearly contrary to an earlier decision of the Supreme Court. 5.2 Shri Misra, the learned Senior Departmental Representative, further submitted that the Hon'ble Supreme Court in Ujagar Prints vs. Union of India Ors. (1989) 75 CTR (Allied Laws)(SC) 1 : (1989) 179 ITR 317 (SC) has clearly held that the word "levied" is a wide and generic expression. It is an expression of wide import and takes in all the stages of charge, quantification and recovery. He also invited our attention towards the judgment of the Supreme Court in the case of CIT vs. Kamalini Khatau (1994) 119 CTR (SC) 169 : (1994) 209 ITR 101 (SC) wherein it was held that the word "charged" in the context in which it is used in s. 164 means only "levied". Shri Misra, the learned Senior Departmental Representative, then invited our attention towards various judgments in relation to the interpretation of statutory provisions. He relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been duly considered by the Tribunal in the earlier decision in the case of Sangita Trust No. 1 Ors. at page 3 of the said order. The Tribunal has thus taken into consideration all the arguments before rendering the decision in the case of Sangita Trust No. 1 Ors. Therefore, there is no justification in reconsideration of the view consistently taken by the Tribunal in earlier similar matters. Shri Talati, the learned counsel, also invited our attention towards various observations made by the Hon'ble Supreme Court in the case of Kamalini Khatau with a view to indicate that the question for determination before the Supreme Court in that case was entirely different. The findings given by the Supreme Court that the word "charged" in the context in which it is used in s. 64 means only "levied", have to be understood in the light of the facts of that case which are clearly distinguishable than the facts of the present case. He also invited our attention towards the observations made by the Hon'ble Supreme Court in the case of Jyotendrasinhji vs. S.I. Tripathi Ors. (1993) 111 CTR (SC) 370 : (1993) 201 ITR 611 (SC). Shri Talati, the learned counsel for the assessee, further br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier decision of the Tribunal in the case of Sangita Trust No. 1 Ors. Respectfully following the reasons and conclusions arrived at by the Tribunal in paras 6 and 7 of the said order, we hold that all these assessees have rightly been held to be discretionary trusts and the provisions of s. 21(4) are clearly applicable and the assessees are not entitled to any exemption/deduction as provided under s. 5(1A) of the Act. The findings given by the CIT(A) in relation to this ground are, therefore, confirmed. 7.4 As regards the grounds 4 and 5 are concerned, we respectfully follow the earlier decision of the Tribunal in the case of Sangita Trust No. 1 Ors. and hold that in case of a private discretionary trust where the shares are indeterminate or unknown it is beneficial interest alone which is assessed to wealth-tax in the hands of the trustees and not the entire value of the corpus of the trust properties. We therefore accept the assessee's contention that an aggregate of only the life interest and the remaindermen's interest will be assessable to wealth-tax in the hands of these discretionary trusts. The aforesaid findings are supported by elaborate reasons given by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of Distributors (Baroda) P. Ltd. vs. Union of India Ors. (1985) 47 CTR (SC) 349 at 362 : (1985) 155 ITR 120 (SC) at 140: "But, even if, in our view, the decision in Cloth Traders' case is erroneous, the question still remains whether we should overturn it. Ordinarily, we would be reluctant to overturn a decision given by a Bench of this Court, because it is essential that there should be continuity and consistency in judicial decisions and law should be certain and definite. It is almost as important that the law should be settled permanently as that it should be settled correctly. But there may be circumstances where public interest demands that the previous decision be reviewed and reconsidered. The doctrine of stare decisis should not deter the Court from overruling an earlier decision, if it is satisfied that such decision is manifestly wrong or proceeds upon a mistaken assumption in regard to the existence or continuance of a statutory provision or is contrary to another decision of the Court. It was Jackson, J., who said in his dissenting opinion in Massachusetts vs. United States 333 US 611: "I see no reason why I should be consciously wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual bears no wealth-tax, such a trust affords scope for avoidance of wealth-tax liability altogether where the net wealth of the trust does not exceed Rs. 1,00,000. Where the net wealth of the trust exceeds Rs. 1,00,000, only the excess bears tax at the progressive rates as stated earlier. 21. In order to put an effective curb on the proliferation of such trusts, it is proposed to subject the income of such trust to tax at a flat rate of 65 per cent or at the appropriate higher rate of tax which would be applicable if such income were the total income of an AOP. The provisions for charging tax at the flat rate of 65 per cent will not, however, apply in the following types of cases: (i) Where none of the beneficiaries of the trust has any other income chargeable to tax. (ii) Where the trust is declared by will. (iii) Where the trust was created by a non-testamentary instrument before the 1st March, 1970, and the ITO is satisfied having regard to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the dependent relatives of the settlor, and where the settlor is an HUF exclusively for the benefit of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, bona fide, exclusively for the benefit of the dependent relatives of the settlor, and where the settlor is an HUF, exclusively for the benefit of the dependent members of the family. In these categories of cases, the net wealth of the trust will be chargeable to wealth-tax at the rates applicable in the case of an individual." 9.2 From the foregoing clauses in the Memorandum explaining the provisions contained in the Finance Bill, 1970, it is glaringly clear that the provisions of s. 21(4) of the Act were inserted with a view to put an effective curb on the proliferation on such large number of private discretionary trusts by the device of creation of multiplicity of such trusts. The Hon'ble Madras High Court in the case of Haresh Anitha Trust has clearly observed that it is undoubtedly true that the intention which appears from the Memorandum, was not to make available the initial exemption of Rs. 1 lakh to a private discretionary trust. However, the Hon'ble High Court then proceeded to render its decision on the basis of the interpretation of the meaning of the expression "leviable" and "charged" used in different provisions contained in the IT Act and the WT Act. The ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible." The judgment of the Hon'ble Madras High Court in the case of Haresh Anitha Trust will, therefore, have to be considered by the subordinate Tribunals in the light of the aforesaid well settled principles of law relevant to the interpretation laid down by the apex Court. One more reason which compels us to reconsider our earlier decision in the case of Sangita Trust No. 1 Ors. is that the Hon'ble Madras High Court while deciding the case of Haresh Anitha Trust did not at all take into consideration an earlier judgment of the Supreme Court in the case of Trustees of H.E.H. Nizam's Family Trust. This judgment was rendered by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rustee is being assessed to tax, his burden which will ultimately fall upon the beneficiaries should be increased and whether that burden should be increased or not should be left to the option of the Department. The basic idea underlying s. 41, and which is in conformity with principle, is that the liability of the trustees should be co-extensive with that of the beneficiaries and in no sense a wider or a larger liability. Therefore, it is clear that every case of an assessment against a trustee must fall under s. 41, and it is equally clear that, even though a trustee is being assessed, the assessment must proceed in the manner laid down in the Chapter III. Sec. 41 only comes into play after the income has been computed in accordance with Chapter III. Then the question of payment of tax arises and it is that stage that s. 41 issues a mandate to the taxing Department that, when they are dealing with the income of a trustee they must levy the tax and recover it in the manner laid down in s. 41'. This Court also observed that the same considerations must apply in the interpretation of s. 161(2) of the IT Act, 1961. The same view, it may be pointed out, was taken by this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been reversed by the Supreme Court in (1994) 119 CTR (SC) 169 : (1994) 209 ITR 101 (SC). The Supreme Court in said judgment has clearly observed that the word "charged" in the context in which it is used in s. 164 means only "levied". The observations made by the Supreme Court at page 176 of 119 CTR and 109 of 209 ITR are quoted below: "We may now revert to the High Court's judgment. The majority judgment laid emphasis upon the word "charge" in the marginal note to s. 164 and upon the word "charged" in the body thereof. The charge created by s. 4 was in accordance with and subject to the provisions of the Act and it was held that, therefore, the charge in the case of the special class of representative assessees created by s. 164 prevailed over the charge created by s. 4. In cases falling under s. 164 one had to look only to its provisions rather than to the provisions of s. 161." Again at page 177 of 119 CTR and 111 of 209 ITR, the Supreme Court further observed as under: "As regards the use of the word "charge" in the marginal note and the body of s. 164 in contradistinction to the use of the expression "levied upon" and 'recovered from' in s. 161, the difference in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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