1988 (9) TMI 83 - AT - Wealth-tax

Summary

Issues:
Inclusion of trust amount in net wealth under Wealth Tax Act, 1957.

Detailed Analysis:
The appeal in question pertains to the assessment year 1985-86, where the assessee settled Rs. 50,000 on a trust for the benefit of his minor granddaughter as per a Deed of Trust dated 26th Oct., 1980. The trust fund was to be utilized for the marriage expenses and customary gifts for the granddaughter. The issue arose when the WTO included this amount in the net wealth of the assessee, a decision upheld by CWT (A) leading to the current appeal before the tribunal.

The crux of the matter lies in the interpretation of Section 4(1)(a)(vi) of the Wealth Tax Act, 1957, which includes assets transferred by an individual to an association of persons after June 1, 1973, for the benefit of specified individuals. The key question here is whether the transfer was made for the immediate or deferred benefit of the assessee's minor granddaughter. If the transfer was deemed for her benefit, the amount would be includible under the Act.

The tribunal analyzed the nature of the benefit conferred by the trust deed on the minor granddaughter. It was observed that the benefit was not immediate as she was to receive it upon marriage or upon reaching the age of 25, which would be after attaining majority. The tribunal delved into the interpretation of "deferred benefit," concluding that the benefit must be deferred within the minority of the child to be considered a benefit to the minor under the Act.

In support of its interpretation, the tribunal cited a decision of the Bombay High Court and subsequent judgments by other high courts which upheld a similar understanding of "immediate or deferred benefit" concerning minor beneficiaries. The tribunal held that the trust amount settled by the assessee did not attract the provisions of Section 4(1)(a)(vi) of the Wealth Tax Act, 1957, and thus, directed the exclusion of the amount from the net wealth of the assessee.

Consequently, the appeal was allowed in favor of the assessee, emphasizing the importance of the timing of benefit accrual to minor beneficiaries in determining the applicability of wealth tax provisions.