1976 (7) TMI 41 - HC - Income Tax

Summary

Issues:
1. Inclusion of dividend income from shares in assessments under Income-tax Act and Wealth-tax Act.
2. Valuation of shares held in trust for a minor child under Wealth-tax Act.

Analysis:

Issue 1: Inclusion of Dividend Income in Assessments
The assessee, an individual with substantial income, transferred 1,500 shares to trustees for the benefit of his minor child. The deed of trust specified the utilization of income for the child's welfare until he turns 21. The court noted that the shares were held by trustees for the minor's benefit, making them includible in the assessee's wealth under the Wealth-tax Act. The court referenced a similar case where even if the corpus was not utilized for the minor, the provision applied. The court upheld the inclusion of dividend income from the shares in the assessments under the Income-tax Act and Wealth-tax Act.

Issue 2: Valuation of Shares Held in Trust
Regarding the valuation of the shares held in trust for the minor child, the court clarified that the trustees were obligated to utilize both income and corpus for the child's benefit until he reached 21 years. Citing a Gujarat High Court decision, the court emphasized that even if the minor child or spouse had only a right to enjoy the income, it fell under the provision of the Wealth-tax Act. The court reasoned that the trustees' power to utilize both income and corpus for the minor made the case stronger than the precedent. Upholding the principle of uniformity in tax statutes, the court ruled in favor of the revenue, stating that the shares' value should be included in the assessee's wealth under the Wealth-tax Act. The court directed the assessee to bear the costs of the reference.

In conclusion, the court decided in favor of the revenue, upholding the inclusion of dividend income from shares in the assessments and ruling that the value of shares held in trust for the minor child should be included in the assessee's wealth under the Wealth-tax Act.