TMI Blog1994 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial interest in the trust and it was only a separate asset forming part of the corpus owned by the trustees which would devolve on a future date. It was argued that the CIT(A) mixed up the beneficial interest under the trust with the asset comprising the corpus although these were separate assets as the right in the corpus of trust and right as residual beneficiary were two different things. 2. We have heard the learned representative Smt. Shobha Jagtiani for the appellant and the learned Departmental Representative Shri N.C. Nair. Their arguments are taken into consideration. 3. It would be better to clarify at this stage only that the hearing of the appeal was completed on 14th July, 1994. The learned Departmental Representative Shri N.C. Nair, presented an application dt. 15th July, 1994 on 18th July, 1994 before us that he learnt that the subject of taxing casual and non-recurring receipts on sale of rights in property was being heard by the Special Bench, ITAT, Bombay, in the case of Cadell Weaving Mills Co. Pvt. Ltd. vs. CIT in ITA No. 7699/Bom/93 and, therefore, he requested to defer till the order of the Special Bench in the aforesaid case comes out. We releas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have present rights on the life interest and benefits of which were subject to so many contingencies and which could devolve only on a future day. Therefore, according to the Assessing Officer and the CIT(A), the appellant had no benefits arising out of the same. 6. Secondly, according to them, the said remainderman's reversionary interest in a private trust had no cost to start with. Therefore, the provisions of capital gains were not attracted. Receipt was held as from a chance buyer and according to the Departmental authorities, the same was in the nature of casual income. They further held that the appellant's investing the sale proceeds in capital gains bonds did not qualify for the benefit under s. 54E of the Act. Therefore, the Assessing Officer brought the entire amount to tax under the head 'income from other sources' and the CIT(A) agreed to the same. 7. Three propositions were put before the CIT(A) and those propositions were repeated before us at the time of hearing. They are as follows: (i) Remainderman's reversionary interest was a capital asset in terms of s. 2(14) of the IT Act and any income arising out of transfer of such asset was to be assessed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of acquisition. 9. If the right to reversionary interest of life of a remainderman is there, then, as per the s. 49, the asset is also there. If the cost of the said asset would be the cost of the previous owner, then the capital gain can be computed. We do not agree that the right of the appellant in the beneficial interest of the trust would devolve only on a future day. The right of remainderman's reversionary interest comes into existence on the date when he acquires this right. It does not appear correct to say that reversionary life interest would come into existence only on the contingency date when all the present beneficial life interests would cease to exist. It would be incorrect to say that the appellant does not hold any existing right on the interest. Sec. 2(14) further clarifies as to what is the meaning of "capital asset". In accordance with the said section, "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession but this section neither includes the kind of remainderman's reversionary interest nor exclude the same. Remainderman's reversionary interest is nothing but a right and the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf, as observed by him in the last portion of paragraph 6 on page 5 of his order that this receipt arose out of sale of right. His further view was that this sale of a right was only a possibility but had not become a reality. The right was sold and the value came into existence which has been reflected as capital gains. Therefore, the said right cannot only be a possibility but it had become a reality. It was a case of capital gains arising out of sale of capital asset and it had not been covered under the second proviso to s. 10(3) of the Act. 12. As this right of remainderman's reversionary interest was a capital asset and it was tried to be submitted relying on the decisions of the Supreme Court in the case of United Commercial Bank Ltd. vs. CIT (1957) 32 ITR 688 (SC) and in the case of CIT vs. Chugandas (1965) 55 ITR 721 (SC) wherein, the Supreme Court held in those decisions that the income which was specifically made chargeable under a distinct head cannot be brought to charge under a different head. In fact, these decisions support the appellant's contention that the capital gains arose out of the sale of a right. If remainderman's reversionary interest can be charged as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax it here as income from other sources, there should not be any disparity between the identical claims of two brothers. Such disparity from the Department cannot be allowed. 15. Few more facts narrated at the time of hearing of this appeal require to be considered hereinunder: Mr. Nusserwanjee Nowrosjee Wadia created a trust on 30th Jan., 1947 as a settlor for the benefits of Neville Wadia. Mr. Nusli Wadia and Miss. Diana Clara were son and daughter of Mr. Neville Wadia. Mr. Neville Wadia released his interest in favour of Mr. Nusli Wadia and Miss. Diana Clara on 30th March, 1957. Diana Clara was 51 years old in 1991. She could not adopt any body under Zoroastrian Law. She had interests in M/s. Lochness Investments Ltd. and M/s. Jehreen Investments Ltd. She sold her life interests in favour of Mr. Nusli Wadia for Rs. 30 lakhs. Remainderman's reversionary interests came to Mr. Nusli Wadia and Mr. Jehangir Wadia. The life interest of Miss. Diana Clara came to an end. The corpus of the trust was originally of 1001 shares of Bombay Dyeing. The said original shares of 1001 became 3,11,440 shares of the value of Rs. 1 crore and 35 lakhs. The valuation of the said shares was m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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