1982 (1) TMI 48 - HC - Wealth-tax

Summary

Issues:
Interpretation of s. 5(1)(iv) of the Wealth-tax Act, 1957 in relation to exemption for a trustee owning a property used by beneficiaries.

Analysis:
The case involved the official trustee of West Bengal for Trust Murshidabad Estate and the assessment years 1964-65 to 1971-72. The issue revolved around whether the trustee was entitled to exemption under s. 5(1)(iv) of the Wealth-tax Act, 1957, for a part of a building at 85, Park Street, Calcutta, used by beneficiaries for residential purposes. The WTO allowed the exemption, but the AAC disagreed, stating that the trustee was not entitled to the exemption as the property vested in the trustee, not the beneficiaries. The Tribunal later held in favor of the assessee, leading to the reference to the High Court.

The main contention was whether the trustee, as the assessee, could claim exemption under s. 5(1)(iv) for a property used by beneficiaries. The revenue argued that since the trustee did not personally use the property for residential purposes, the exemption did not apply. However, the court highlighted that a trustee is assessed under the Act as a representative assessee, and the Act allows for direct assessment on beneficiaries as well. The court emphasized that the Act did not intend to deny the exemption based on the trustee's non-residential use of the property.

The court analyzed previous judgments under the Income-tax Act and emphasized that the legal ownership by the trustee did not preclude the beneficiaries from claiming exemptions under the Act. The court also distinguished cases cited by the revenue, stating that the trustee's legal ownership did not bar beneficiaries from benefiting from exemptions under the Act. The court further referred to a Supreme Court judgment to support the position that trust properties could be assessed on trustees but did not preclude direct assessment on beneficiaries.

In conclusion, the court held in favor of the assessee, stating that the trustee could claim exemption under s. 5(1)(iv) for the property at 85, Park Street, Calcutta, used by beneficiaries for residential purposes. The judgment was unanimous, and no costs were awarded.