1973 (12) TMI 37 - HC - Wealth-tax

Summary

Issues:
1. Whether the value of 500 shares of a company transferred to trustees for the benefit of a minor child could be included in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act for the assessment year 1960-61?

Analysis:

The case involved a dispute regarding the inclusion of 500 shares of a company in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act for the assessment year 1960-61. The assessee had transferred the shares to trustees for the benefit of his daughter, Maithili, as per a trust deed. The Wealth-tax Officer included the value of the shares in the assessee's net wealth, but this decision was challenged. The Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, following a Supreme Court decision related to the Indian Income-tax Act. The key question referred to the High Court was whether the shares could be considered as held for the benefit of the minor child on the valuation date.

The High Court referred to the Supreme Court case of Yeshwant Rao Ghorpade, which clarified that for assets to be included in an assessee's net wealth under section 4(1)(a)(iii), the minor child must have an immediate interest in the income on the valuation date. In the present case, the daughter, Maithili, did not have any interest in the income of the trust property on the valuation date of March 31, 1960. The court held that, based on this interpretation, the shares could not be included in the assessee's net wealth for the assessment year 1960-61.

The argument that Maithili should have an interest in both the income and the corpus on the valuation date due to a vested interest was dismissed by the court. The court emphasized that the crucial factor was whether the trustees held the trust property for the benefit of the minor child on the relevant valuation date. Ultimately, the court ruled against the revenue and in favor of the assessee, directing the Commissioner to pay the assessee's costs of the reference. Both judges concurred with the decision, and the question was answered in the negative, indicating that the value of the shares should not be included in the assessee's net wealth for the assessment year in question.