1994 (11) TMI 182 - AT - Wealth-tax

Summary

Issues Involved:
1. Applicability of Section 21(4) of the Wealth-tax Act (W.T. Act).
2. Determination of beneficiaries and their shares under the trust.
3. Validity of the assessments made under Section 21(4) of the W.T. Act.
4. Inclusion of remainderman's interest in the assessments.
5. Validity of reopening assessments under Section 17 of the W.T. Act.

Detailed Analysis:

1. Applicability of Section 21(4) of the Wealth-tax Act:
The central issue in these appeals was whether the provisions of Section 21(4) of the W.T. Act were applicable. The Revenue argued that due to disputes among the children of Prince Moazam Jah, the beneficiaries of the trust were unknown and their shares indeterminate. However, the Tribunal found that the trust deed clearly specified the beneficiaries and their shares, thus Section 21(4) was not applicable.

2. Determination of Beneficiaries and Their Shares:
The trust was created by Nawab Sir Mir Osman Ali Khan for the benefit of Prince Moazam Jah and his family. The trust deed outlined specific provisions for the distribution of the trust fund, including:
- Payment of Rs. 5,00,000 per annum to the Prince during his lifetime.
- Additional sums for unforeseen expenses and a suitable residence.
- After the Prince's death, the corpus was to be divided among his surviving issues according to Sunni Muslim law.

The Tribunal noted that the trust deed provided clear and determinate shares to the beneficiaries, including specific provisions for the Prince's widow and children.

3. Validity of the Assessments Made Under Section 21(4):
The assessments under Section 21(4) were made on the assumption that there was a dispute regarding the beneficiaries, rendering their shares indeterminate. The Tribunal found this assumption to be incorrect. The trust deed clearly identified the beneficiaries and their respective shares, making the application of Section 21(4) inappropriate. The Tribunal upheld the CWT (Appeals) decision to cancel these assessments.

4. Inclusion of Remainderman's Interest in the Assessments:
The Revenue had reopened assessments to include the remainderman's interest, specifically that of Prince Shahmat Ali Khan. The Tribunal had previously ruled that so long as the Prince was alive, his son's interest was remote and contingent. The Tribunal reiterated that the remainderman's interest could not be included in the assessments as it was illusory and did not vest in the son during the Prince's lifetime.

5. Validity of Reopening Assessments Under Section 17:
The assessments were reopened under Section 17 on the grounds that the beneficiaries' shares were indeterminate due to disputes. The Tribunal found that the reopening was based on an erroneous understanding of the trust deed and the nature of the beneficiaries' interests. The CWT (Appeals) had correctly held that the reopening was invalid as the shares were determinate and specific.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming that the provisions of Section 21(4) were not applicable as the trust deed clearly specified the beneficiaries and their shares. The assessments made under Section 21(4) were rightly cancelled by the CWT (Appeals). The Tribunal also confirmed that the remainderman's interest of Prince Shahmat Ali Khan was not includible in the assessments during the lifetime of Prince Moazam Jah.