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Validity of addition of value of shares transferred to a trust under Wealth-tax Act, 1957 Existence of a valid trust under section 6 of the Indian Trusts Act Analysis: The High Court of Allahabad was presented with two questions of law under section 27(1) of the Wealth-tax Act, 1957. The first issue pertained to the justification of confirming the deletion of an addition of Rs. 6,87,077 made on account of the value of shares transferred to a trust. The second issue revolved around the validation of a trust's existence even if the basic conditions of section 6 of the Indian Trusts Act were not satisfied. The reference was related to the assessment year 1980-81. Regarding the first issue, the respondent/assessee had transferred shares to a trust named First Son of Pankaj Mohan. The Wealth-tax Officer included the value of these shares in the assessment, arguing that the trust was invalid as the sole beneficiary was not in existence. However, the Commissioner of Wealth-tax (Appeals) and the Tribunal both upheld the claim of the respondent, leading to the High Court's consideration. Citing precedents such as CIT v. Brig. Kapil Mohan and Wife of Rakesh Mohan P. Trust v. CWT, the High Court determined that trusts for unborn children are valid. Therefore, the Tribunal was deemed justified in deleting the addition of the shares' value to the trust. Moving on to the second issue, the High Court found that the trust in question was valid despite not fulfilling the basic conditions of section 6 of the Indian Trusts Act. Relying on previous judgments and legal principles, the court concluded that the Tribunal's decision to uphold the trust's validity was appropriate. Consequently, both questions referred to the court were answered in favor of the assessee and against the Revenue. No costs were awarded in this matter.
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