1977 (5) TMI 1 - SC - Wealth-tax

Trust - trustees are liable to be assessed under section 3 of the Wealth-tax Act in the status of an individual - Tribunal was not right in holding that the provisions of section 3 of should not be considered as subject to the provisions of section 21 - Revenue s appeals are accordingly dismissed

Issues Involved:
1. Liability of trustees under section 3 of the Wealth-tax Act.
2. Applicability of section 21 of the Wealth-tax Act.
3. Refusal to admit additional grounds by the Appellate Tribunal.
4. Determination of whether a single trust or multiple trusts were created.
5. Application of section 21(4) to assess remainder wealth.
6. Applicability of section 21(4) in the context of the case.

Detailed Analysis:

Issue 1: Liability of Trustees under Section 3 of the Wealth-tax Act
The High Court held that trustees can be assessed under section 3 of the Wealth-tax Act as an "individual." The term "individual" in section 3 is broad enough to include a group of persons forming a unit. This interpretation aligns with previous case law, such as Suhashini Karuri v. Wealth-tax Officer, which concluded that joint trustees could be assessed to wealth-tax in the status of an individual in respect of the value of the properties held by them as trustees.

Issue 2: Applicability of Section 21 of the Wealth-tax Act
The High Court determined that section 3 of the Wealth-tax Act is subject to section 21. Section 21 mandates that wealth-tax on assets held by trustees must be levied in the same manner and to the same extent as it would be on the beneficiaries. This interpretation was supported by the Supreme Court, which emphasized that assessment on trustees must be made in accordance with section 21, and not independently under section 3. The Court clarified that section 21 is not merely optional but mandatory, and it governs the assessment of trustees in a representative capacity.

Issue 3: Refusal to Admit Additional Grounds by the Appellate Tribunal
The Tribunal had refused to admit additional grounds filed by the department except to support the existing assessments. The High Court did not find it necessary to address this issue separately, given the answers provided to the other questions.

Issue 4: Determination of Whether a Single Trust or Multiple Trusts Were Created
The High Court concluded that the deed of trust created several distinct and separate trusts in favor of the relatives specified in the II schedule and their descendants. This was contrary to the Tribunal's finding that the trust deed constituted a single trust. The High Court's decision was based on the detailed provisions in the trust deed, which indicated separate allocations and specific devolution of units for each beneficiary.

Issue 5: Application of Section 21(4) to Assess Remainder Wealth
The High Court held that section 21(4) was not applicable because the beneficiaries and their shares in the remainder wealth were determinate and known on the relevant valuation date. The Court emphasized that the applicability of section 21(1) or section 21(4) should be determined with reference to the relevant valuation date, and not based on potential future changes in beneficiaries.

Issue 6: Applicability of Section 21(4) in the Context of the Case
The High Court found that section 21(4) did not apply because it was possible to ascertain the beneficiaries and their shares on the relevant valuation date. The Court noted that the trust deed provided detailed and specific provisions for the devolution of units, making it clear who the beneficiaries were and what their shares would be. The Supreme Court agreed with this interpretation, confirming that the assessment should be made under section 21(1) and not section 21(4).

Conclusion:
The Supreme Court upheld the High Court's judgment, agreeing that trustees are assessable under section 3 as individuals but must be assessed in accordance with section 21. The Court confirmed that the trust deed created several distinct trusts and that section 21(4) was not applicable since the beneficiaries and their shares were determinate and known on the relevant valuation date. The appeals were dismissed, and the Commissioner was ordered to pay the costs to the assessees.

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