1986 (5) TMI 68 - AT - Wealth-tax

Issues Involved:
1. Validity of the reopening of the assessment.
2. Quantum of wealth determined.
3. Determinacy of beneficiaries' shares in trust funds.
4. Application of wealth tax rates to different parts of the trust fund.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment:
The appellants challenged the initiation of proceedings under section 17(1)(b) of the Wealth-tax Act, 1957, arguing that the information from the audit party could not be considered valid information for reopening the assessment. The Tribunal observed that the audit party merely conveyed information regarding the provisions of the trust deed and did not provide any new information of law. The Wealth Tax Officer (WTO) examined the trust deeds after receiving the audit note and found that the provisions of sub-section (4) of section 21 were applicable. The Tribunal upheld the reopening of the proceedings, stating that the WTO did not originally note the provisions of the trust deeds, which indicated that Part A was determinate and Part B was indeterminate. The reopening was thus valid as per the Hon'ble Supreme Court's decision in the Indian and Eastern Newspaper Society case.

2. Quantum of Wealth Determined:
The appellants contested the quantum of wealth determined by the WTO in the reassessments. The Tribunal noted that the original assessments did not separately indicate moieties A and B of the trust funds. The reassessments were based on the audit party's observation that the shares of the beneficiaries in the trusts were indeterminate. The Tribunal confirmed the findings of the AAC that Part B of the trust fund was indeterminate, and thus, the provisions of sub-section (4) of section 21 were applicable. The quantum of wealth determined by the WTO in the reassessments was upheld.

3. Determinacy of Beneficiaries' Shares in Trust Funds:
The Tribunal examined the trust deeds and found that Part A of the trust fund was to be absolutely settled on the wife of Anurag Dalmia and Parag Dalmia, respectively. In case they did not marry or died unmarried, the trust fund was to be handed over to the children of Sanjay Dalmia and Archana Dalmia. Therefore, the shares of the beneficiaries in Part A were determinate. However, Part B of the trust fund was to be applied for the children of Anurag Dalmia and Parag Dalmia, and the trustees had discretion in dividing the income and corpus among the children. Thus, the shares of the beneficiaries in Part B were indeterminate. The Tribunal confirmed the AAC's finding that Part B of the trust fund was indeterminate and liable to be assessed under sub-section (4) of section 21.

4. Application of Wealth Tax Rates to Different Parts of the Trust Fund:
The appellants argued that the AAC should have directed the WTO to apply the rates of wealth tax to Part A of the trust fund as if it was an independent trust and not merge it with Part B for the purposes of wealth tax. The Tribunal agreed with the appellants' submission, stating that two separate assessments should be made for the trust funds - one for Part A under sub-section (3) of section 21 and another for Part B under sub-section (4) of section 21. The Tribunal clarified that the AAC's orders implied this separation, and thus, the appeals were partly allowed on this point.

Conclusion:
The Tribunal upheld the validity of the reopening of the assessments and the quantum of wealth determined by the WTO. It confirmed that Part B of the trust fund was indeterminate and liable to be assessed under sub-section (4) of section 21. The Tribunal also clarified that separate assessments should be made for Part A and Part B of the trust funds, applying the appropriate wealth tax rates. The appeals were thus partly allowed.

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