1966 (4) TMI 91 - HC - Wealth-tax

Summary

Issues Involved:
1. Whether the trustee under the Trust deed dated 19th July 1949 executed by Kripashankar D. Worah was assessable to Wealth Tax under Section 21 of the Wealth Tax Act.

Issue-wise Detailed Analysis:

1. Background and Trust Deed Provisions:
The case involves four references under Section 27(1) of the Wealth Tax Act for the assessment years 1957-58, 1958-59, 1959-60, and 1960-61. The assessments were made on the trustee of the K.D. Worah Trust, who was the settlor himself. The trust deed provided that the settlor would be the trustee and outlined the distribution of shares and properties among his family members. The trust was created for the maintenance of the settlor, his wife, and their minor children, with specific provisions for the distribution of assets upon certain events like the death of the settlor or the marriage of his daughters.

2. Assessment and Appeals:
The Wealth-tax Officer assessed the trustee under Section 21(4) of the Wealth Tax Act, which was annulled by the Appellate Assistant Commissioner but later restored by the Income Tax Appellate Tribunal. The question for consideration was whether the trustee could be assessed under Section 21 of the Wealth Tax Act.

3. Interpretation of Section 21 of the Wealth Tax Act:
Section 21 of the Act specifies that wealth tax shall be levied on trustees in the same manner and to the same extent as it would be on the person on whose behalf the assets are held. The court examined whether the trustee held the assets "on behalf of" the beneficiaries or "for the benefit of" the beneficiaries. It was concluded that the trustee holds the assets as the legal owner and not on behalf of the beneficiaries.

4. Legal Distinction Between "On Behalf Of" and "For the Benefit Of":
The court emphasized the legal distinction between "on behalf of" and "for the benefit of." The former implies a representative capacity, while the latter indicates the trustee's legal ownership of the assets for the beneficiaries' benefit. The trustee, therefore, could not be assessed under Section 21 as he did not hold the assets on behalf of the beneficiaries.

5. Application of Trusts Act and Supreme Court Precedents:
The court referred to the Trusts Act and the Supreme Court's decision in W. O. Holdsworth v. State of Uttar Pradesh, which clarified that trustees hold trust property in their own right for the beneficiaries' benefit, not on their behalf. This precedent supported the conclusion that the trustee in this case could not be assessed under Section 21.

6. Amendment to Section 21 in 1964:
The court noted the 1964 amendment to Section 21, which included the expression "for the benefit of" in addition to "on behalf of." However, this amendment did not apply to the assessment years in question. The amendment was seen as a clarification rather than a rectification of a flaw.

7. Conclusion:
The court concluded that the trustee under the Trust deed dated 19th July 1949 was not assessable to Wealth Tax under Section 21 of the Wealth Tax Act. The trustee held the assets for the benefit of the beneficiaries and not on their behalf, thus falling outside the scope of Section 21.

Final Judgment:
The reference question was answered in the negative, indicating that the trustee was not assessable under Section 21 of the Wealth Tax Act. The reference was disposed of with no order for costs.