1974 (11) TMI 21 - HC - Wealth-tax

Summary

Issues Involved:
1. Assessment of the beneficiary's life interest for wealth-tax purposes.
2. Assessment of the trustees under section 21(1) or section 21(4) of the Wealth-tax Act.
3. Rectification proceedings under section 35 of the Wealth-tax Act.

Summary:

1. Assessment of the Beneficiary's Life Interest:
The first petitioner, an individual with a life interest in certain trusts, was assessed for wealth-tax for the assessment years 1961-62 to 1964-65. The Wealth-tax Officer included the value of her life interest in the trust funds in her net wealth. The petitioner contended that her interest was a right to an annuity and not an asset u/s 2(e) of the Wealth-tax Act, but this contention was rejected based on a Supreme Court decision regarding these very trusts.

2. Assessment of the Trustees:
The trustees (Petitioners 2A, 2B, and 2C) argued that the shares of the beneficiaries were determinate and known, and thus, they should be assessed u/s 21(1) and not u/s 21(4) of the Wealth-tax Act. The Wealth-tax Officer, however, assessed the trustees u/s 21(4), stating that the shares were not determinate or known as on the valuation date. The Appellate Assistant Commissioner allowed a deduction for the value of the life interest but upheld the assessment u/s 21(4). The Tribunal did not permit the trustees to raise the contention regarding determinate shares as it was not pressed before the Appellate Assistant Commissioner. The Tribunal confirmed that no deduction for the life interest could be allowed under section 21(4).

3. Rectification Proceedings:
The first petitioner filed a rectification application u/s 35, contending an error apparent from the record. The Tribunal dismissed the application, stating there was no mistake apparent on the face of the record. The court held that once the trustees were assessed u/s 21(4), the beneficiary could not be assessed again for the same interest in the trust properties. The court found an error apparent from the record in assessing the beneficiary's interest directly after it had been assessed in the hands of the trustees. The Tribunal's decision rejecting the rectification application was quashed, and the Tribunal was directed to rectify the record by deleting the value of the beneficiary's interest from her total wealth for the assessment years 1961-62 to 1964-65.

Conclusion:
The court allowed the special civil application, quashed the Tribunal's order, and directed the Tribunal to rectify the mistake by deleting the value of the first petitioner's interest in the trust funds from her total wealth. Respondents Nos. 1 and 2 were ordered to pay the costs of the reference to the petitioner. Rule absolute accordingly.