1990 (6) TMI 109 - AT - Wealth-tax

Central Government, Discretionary Trust, His Net Wealth, Registered Valuer, Tax Liability, Valuation Report

Summary

Issues Involved:
1. Valuation of jewellery
2. Principles of assessment
3. Applicability of section 21(1A) of the Wealth-tax Act, 1957
4. Allowability of fictional Estate duty liability
5. Exemption under section 5(1)(xii) of the Wealth-tax Act, 1957

Detailed Analysis:

1. Valuation of Jewellery:
The primary issue revolved around the valuation of jewellery held by the trust. The assessee argued for adjustments on account of uncertainties, hazards, and risks of litigation, while the revenue contended that the valuation by Shri Jayant N. Chowlera already considered these factors. The Tribunal found that the Valuation Officer did not adequately account for these factors and upheld the adjustment made by the CWT(A) to reduce the valuation by 50%.

2. Principles of Assessment:
The Tribunal addressed whether the Settlor could constitute several trusts by a single document and the applicability of section 21(1A) of the Wealth-tax Act. It was held that the Settlor created separate and distinct trusts through a single document for the sake of convenience, as affirmed by the Supreme Court in CIT v. Trustees of H.E.H. Nizam's Family Trust [1986] 162 ITR 286. The Tribunal also discussed the principles of assessment, emphasizing that it is the beneficial interest, not the corpus of the trust, that is taxable.

3. Applicability of Section 21(1A) of the Wealth-tax Act:
The Tribunal held that section 21(1A) applies to assessments made under section 21(1) but not to those made under section 21(4). The provision was introduced to tax the balance of the value of the corpus of the trust property that would otherwise escape liability. The Tribunal clarified that the scope of section 21(1A) is not wide enough to cover assessments completed under section 21(4).

4. Allowability of Fictional Estate Duty Liability:
The Tribunal followed its earlier decisions and allowed the deduction of fictional Estate duty liability from the remaindermen's interest, despite the department's argument citing the Madras High Court decision in R.R. Roberts v. CWT [1963] 48 ITR 959. The Tribunal distinguished the present case from the cited decision, noting that the earlier orders of the Tribunal allowed such deductions.

5. Exemption under Section 5(1)(xii) of the Wealth-tax Act:
The Tribunal directed the Wealth-tax Officer to grant exemption under section 5(1)(xii) for seven items declared as "art treasures." It was held that these items qualify for exemption as they were not intended for sale, aligning with the statutory restrictions on their sale.

Conclusion:
The Tribunal partly allowed the appeals, upholding the adjustments for valuation due to uncertainties, hazards, and risks of litigation, confirming the creation of multiple trusts through a single document, and directing the exemption for "art treasures" under section 5(1)(xii). The applicability of section 21(1A) was limited to assessments under section 21(1), and the fictional Estate duty liability was allowed as a deduction.