1992 (3) TMI 148 - AT - Income Tax

Summary

Issues:
Interpretation of a will regarding the ownership of property and capital gains tax liability.

Detailed Analysis:
The case involves an appeal against the order of the CIT (A) relating to the assessment year 1983-84. The issue revolves around the interpretation of a will left by S.A. Pereira, which bequeathed movable and immovable properties to family members. The specific focus is on the Quilon property, which was sold by the assessee, and the question of who should be liable for the capital gains tax arising from the sale.

The Assessing Officer initially held that the assessee had absolute rights over the Quilon property, making her liable for the capital gains tax. However, the assessee contended that as per the terms of the will, her four daughters were the true beneficiaries of the property. The CIT (A) agreed with the assessee's interpretation, ruling that the capital gain should be chargeable to tax only in the hands of the four daughters.

The Tribunal analyzed the terms of the will in detail to determine the true intentions of the testator. It concluded that the four daughters of the assessee were cestui que trust, possessing an equitable right to the property, while the legal estate vested in the mother (the assessee) as the trustee. The Tribunal emphasized that the assessee only received the shell of the property, with the substance passing to her daughters.

Furthermore, the Tribunal discussed the applicability of Section 88 of the Indian Succession Act, which deals with gifts of income without a limited duration, indicating a gift of the corpus. It highlighted legal principles from relevant cases to support its interpretation of the will and the consequent tax liability.

Ultimately, the Tribunal dismissed the appeal, affirming that the assessee's role was that of a trustee, and the true legatees of the Quilon property were her four daughters. The provision in the will allowing the daughter to take any balance was deemed illusory, considering the obligations to educate and marry off the daughters. The decision upheld the CIT (A)'s ruling and declined to interfere in the matter, thereby confirming the tax liability position.