1984 (5) TMI 62 - AT - Wealth-tax

Summary

Issues:
- Applicability of section 7(4) of the Wealth-tax Act, 1957 to trust property
- Interpretation of ownership and residential use in the context of trust properties
- Comparison with income-tax proceedings regarding residential property
- Verification of beneficiaries' residence for granting exemption under section 7(4)

Analysis:

The judgment by the Appellate Tribunal ITAT BOMBAY-B addresses the appeal concerning the assessment year 1976-77 related to a trust property, specifically located at 8, Turner Road, Bandra, Bombay. The primary contention revolves around the application of section 7(4) of the Wealth-tax Act, 1957 to the trust property. The assessee claimed that the property should be valued under this section due to the trustee and beneficiaries residing in it. However, the WTO rejected this claim, stating that section 7(4) did not apply to trust properties.

The AAC, in the appeal, emphasized that section 7(4) necessitates exclusive residential use by the assessee, which, in the case of a trust, poses a different scenario. The AAC noted that the property was treated as self-occupied in income-tax proceedings but declined to apply the same reasoning to wealth-tax proceedings. The AAC maintained that the provision applies to living individuals, not trusts, and refused to overturn the WTO's decision.

The Tribunal delved into legal precedents to determine the treatment of trust properties. Referring to Bai Hamabai J.K. Mehta v. CIT and CWT v. Official Trustee of West Bengal for Trust Murshidabad Estate, it was established that beneficiaries residing in a trust property should be considered as the owners for residential use exemptions. The Tribunal directed the WTO to verify if the beneficiaries indeed resided in the property, as claimed. If verified, exemption under section 7(4) should be granted, indicating a shift in the ownership perspective when beneficiaries reside in trust properties.

In conclusion, the Tribunal allowed the appeal, emphasizing the need for the WTO to investigate the beneficiaries' residence in the property to determine the applicability of the exemption under section 7(4) based on established legal principles and precedents.