1980 (3) TMI 22 - HC - Wealth-tax

Summary

Issues:
1. Whether the assessee had a beneficial interest in the trust fund for the assessment years 1960-61, 1961-62, and 1962-63.
2. Whether the interest of the assessee under the trust deeds dated March 31, 1960, March 29, 1961, and March 28, 1962, should be included in the computation of his net wealth.
3. Whether the contingent interest of the assessee under the trust deeds qualifies as property under the Wealth Tax Act.

Analysis:
The judgment by the High Court of Bombay involved a case where the assessee, the son of the settlor, was the beneficiary of trusts created by his father. The trusts specified that the trustees would accumulate the trust income for 10 years before vesting the property to the assessee absolutely if he was alive at the end of the period. The Wealth Tax Officer (WTO) included the value of the beneficial interest in the assessee's net wealth for the relevant assessment years. The Appellate Assistant Commissioner (AAC) considered the interest as present and vested, contrary to the assessee's claim of it being contingent. The Tribunal, however, held that the interest was contingent and chargeable under the Wealth Tax Act.

The High Court analyzed the nature of the interest created by the trust deeds, emphasizing that it was contingent as it depended on a specified uncertain event - the vesting date after 10 years. Referring to a previous case, the court clarified that a contingent interest is created when the event triggering the interest is uncertain, as in this case. The court rejected the argument that the contingent interest should not be considered property under the Act, stating that a contingent interest qualifies as an asset and is chargeable under the Act.

Furthermore, the court addressed the contention that the contingent interest should be excluded under a specific provision of the Act if the interest was available for a period not exceeding six years from the vesting date. The court dismissed this argument, stating that the provision was applicable only if it could be positively established that the assessee would not survive beyond six years from the vesting date. As such, the court ruled against the assessee on all three questions, affirming the inclusion of the contingent interest in the computation of his net wealth. The judgment concluded with the assessee being directed to pay the costs of the reference.