1994 (12) TMI 59 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the wealth of the trust is exempt u/s 5(1) of the Wealth-tax Act, 1957.

Summary:

Issue 1: Exemption of Wealth of the Trust u/s 5(1) of the Wealth-tax Act, 1957

The primary issue in this case is whether the wealth of the trust is exempt u/s 5(1) of the Wealth-tax Act, 1957. The assessee, State Bank of India, acting as executors and trustees of two trusts, claimed exemption under section 5(1)(i) of the Wealth-tax Act, 1957. The Wealth-tax Officer did not accept this contention and assessed the bank in respect of the entire wealth of the two trusts. However, the Appellate Assistant Commissioner of Wealth-tax held that the trusts fulfilled the requirements of section 5(1)(i) and thus were exempt from wealth-tax. This decision was affirmed by the Income-tax Appellate Tribunal.

The Revenue contended that the Tribunal's decision was based on its own decision in the assessee's case under the Income-tax Act, 1961, which was later reversed by the court in CIT v. State Bank of India [1988] 169 ITR 298. However, the court noted that the conditions for exemption under section 5(1)(i) of the Wealth-tax Act are different from those under section 11 of the Income-tax Act. The court emphasized that the exemption u/s 5(1)(i) pertains to any property held under trust for any public purpose of a charitable or religious nature in India, without the additional conditions imposed by the Income-tax Act.

The court examined the scheme of the Wealth-tax Act, particularly sections 2(c), 3, 21, and 5, and concluded that the assessment of trustees must be made in accordance with section 21. The Supreme Court's decision in CWT v. Trustees of H. E. H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 was cited, which established that trustees are assessable to wealth-tax in respect of the assets held in trust, and the exemption u/s 5(1)(i) applies to properties held for public charitable or religious purposes.

The court found that the Tribunal had recorded a categorical finding that the requirements of section 5(1)(i) were met by the trusts in question. This finding was not challenged in the reference. Therefore, the court held that the assessee was entitled to exemption u/s 5(1)(i) of the Wealth-tax Act in respect of the assets of the said trusts.

Conclusion:

The court answered the question in the affirmative, holding that the Tribunal was right in exempting the net wealth of the two trusts from wealth-tax u/s 5(1)(i) of the Wealth-tax Act. There was no order as to costs.