1984 (1) TMI 96 - AT - Wealth-tax

Issues Involved:
1. Whether the trust properties can be assessed for wealth-tax after the dissolution of the trust.
2. Whether the trustees can be assessed for the net wealth held by the trust on the valuation dates.
3. Whether the reversionary interest can be subjected to section 21(1) or section 21(4) of the Wealth-tax Act, 1957.
4. Whether the trustees were holding properties by virtue of any trust declared by a duly executed instrument in writing.

Issue-wise Detailed Analysis:

1. Assessment of Trust Properties Post-Dissolution:
The assessee contended that no assessment could be made post-dissolution of the trust. The Appellate Tribunal rejected this submission, stating that the trust properties are owned by the trustees under general law and the Indian Trust Act. The Tribunal referenced the Privy Council decision in *Chhatra Kumari Devi v. Mohan Bikram Shah* and the Supreme Court decision in *Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur*, which clarified that the term "belonging to" includes possession of an interest less than full ownership. Thus, the trust properties belong to the trustees, making them subject to wealth-tax under section 3 of the Act.

2. Assessment of Trustees for Net Wealth:
The Tribunal held that trustees could be assessed for the net wealth held by the trust on the relevant valuation dates. The Supreme Court's decision in *CWT v. Kripashankar Dayashanker Worah* was cited, which established that trustees could be assessed under section 3 of the Wealth-tax Act. The Tribunal also referenced the Calcutta High Court decision in *Suhashini Karuri v. WTO*, which treated joint trustees as a single unit assessable under section 3. Therefore, the trustees, even after the dissolution of the trust, could be assessed for the net wealth held on the valuation dates.

3. Reversionary Interest and Section 21:
The assessee argued that section 21(1) does not apply to reversionary interest because such an interest must be held by a trustee appointed under a duly executed trust instrument. The Tribunal disagreed, stating that section 21 was designed to equalize the liability to pay wealth-tax by the trustees to the amount payable if the beneficiaries were assessed directly. The Supreme Court in *Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust* indicated that section 3 should be read along with section 21 when assessing a trust. The Tribunal concluded that the trustees would be assessable under section 3 without the limitations of section 21, but since the AAC had already provided the benefit of section 21, the department had not appealed on this point.

4. Trustees Holding Properties by Virtue of a Trust Deed:
The assessee contended that the trustees were holding properties not by virtue of any trust declared by a duly executed instrument but due to section 83 of the Indian Trusts Act. The Tribunal acknowledged this but clarified that section 21 does not cover fiduciary relationships under sections 80 to 85 of the Indian Trusts Act. The Tribunal emphasized that section 21 benefits trustees by minimizing their tax burden, and if section 21 did not apply, the trustees would be assessable under section 3 without the benefits of section 21. However, since the AAC had already given the benefit of section 21, this point did not advance the assessee's case.

Conclusion:
The Tribunal dismissed both the departmental and assessee's appeals. The trustees were held assessable for the net wealth held by the trust on the valuation dates, even after the trust's dissolution, and the reversionary interest was subject to section 21 of the Wealth-tax Act. The Tribunal's decision was grounded in established legal principles and precedents, ensuring that the trustees' obligations under the Wealth-tax Act were upheld.

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