1998 (8) TMI 82 - HC - Wealth-tax

Summary

Issues Involved:
1. Beneficial interest in the shares fund and its liability to wealth-tax under section 21(1).
2. Liability of the jewellery fund to wealth-tax under section 21(1).
3. Validity of subsequent assessments under section 21(1) after direct assessment on the beneficiary.
4. Nature of assessments under section 21(1) as double assessments.

Issue-Wise Detailed Analysis:

1. Beneficial Interest in the Shares Fund:
The Tribunal held that the assessee had no beneficial interest in the entire corpus regarding the shares fund liable to be assessed to wealth-tax under section 21(1). This view was supported by the decision in R. C. No. 67 of 1969, where it was determined that the interest of Anwar Begum in the shares fund is not an asset within the meaning of section 2(e) of the Wealth-tax Act. The reasoning was that her interest was in the nature of a right to receive annuity, which cannot be commuted into a lump sum grant, thus falling under the exclusionary clause.

2. Liability of the Jewellery Fund to Wealth-tax:
The main point of contention was whether the jewellery fund was liable to be assessed to wealth-tax under section 21(1). The Division Bench found a conflict between two decisions: R. C. No. 67 of 1969 and CWT v. Trustees of H. E. H. the Nizam's Sahebzadi Anwar Begum Trust [1981] 129 ITR 796. The Tribunal followed R. C. No. 67 of 1969, concluding that the right to wear jewellery on ceremonial occasions did not constitute an asset within the meaning of section 2(e) of the Wealth-tax Act. The Full Bench reaffirmed this view, holding that the limited privilege to wear jewellery did not amount to a proprietary interest or asset. The decision in CWT v. Trustees was distinguished as it dealt with whether the jewellery fund was liable to be taxed under section 21(1) and not whether the right to wear jewellery was an asset.

3. Validity of Subsequent Assessments Under Section 21(1):
The Tribunal held that it was not open to the Wealth-tax Officer to make an assessment under section 21(1) subsequent to the direct assessment on the beneficiary. This was based on the principle that once an option to assess the beneficiary directly was exercised, the officer could not resile from that option and assess the trustees again.

4. Nature of Assessments Under Section 21(1) as Double Assessments:
The Tribunal also held that the assessments under section 21(1) were not justified as they amounted to double assessments. Since the shares fund and jewellery fund were not liable to wealth-tax in the hands of Anwar Begum, these assessments were deemed unnecessary.

Conclusion:
The Full Bench upheld the Tribunal's decision, affirming that the right to wear jewellery on ceremonial occasions and the interest in the shares fund did not constitute assets within the meaning of the Wealth-tax Act. Consequently, the questions regarding subsequent and double assessments under section 21(1) were rendered moot. The reference case was disposed of with no orders as to costs.