1971 (9) TMI 38 - HC - Wealth-tax

Assessee having contingent interest in the corpus of the trust funds under the four trust deeds trustees of the four trust deeds were assessed to wealth-tax in respect of the trust properties and it was therefore not competent to the revenue to include the value of the interest of the assessee in the trust properties in the computation of her net wealth

Issues Involved:
1. Construction of certain trust deeds executed by the assessee's aunt.
2. Interpretation of section 21(4) of the Wealth-tax Act, 1957.
3. Taxability of the assessee's interest in the trust properties under the Wealth-tax Act.

Detailed Analysis:

Issue 1: Construction of Certain Trust Deeds Executed by the Assessee's Aunt

The judgment involves the construction of multiple trust deeds executed by the assessee's aunt, Gira Sarabhai. The primary trust deed dated 12th September 1956, and three other trust deeds dated 12th February 1958 and 21st February 1958, detail the trusts and the conditions under which the properties are held.

Trust Deed Dated 12th September 1956:
- Clause (2)(a): The trustees are to pay the net income of the trust funds to the assessee until she attains the age of thirty years. During her minority, the income can be utilized for her benefit or paid to her mother as her guardian.
- Clause (2)(b): The trustees are to hold the trust funds in trust for the assessee absolutely if and when she attains the age of thirty years.
- Clause (2)(c): If the assessee dies before thirty, the trust funds are to be held for her surviving children, or if none, for other specified relatives.

Trust Deeds Dated 12th February 1958 and 21st February 1958:
- Clause (2): The trustees may either accumulate the net income or utilize it for the maintenance and benefit of the assessee and her sister Shyamali.
- Clause (3): On the expiration of 18, 20, or 22 years, the trust funds are to be held for the assessee and Shyamali in equal shares or for the survivor.
- Clause (4): If neither the assessee nor Shyamali is alive, the trust funds are to be held as appointed by their father, Gautam Sarabhai.

The court concluded that the interest in the corpus conferred on the assessee under these trust deeds was contingent upon her attaining a specified age, making it a contingent interest rather than a vested interest.

Issue 2: Interpretation of Section 21(4) of the Wealth-tax Act, 1957

The court examined whether the assessee's contingent interest in the trust properties should be included in her net wealth for wealth-tax purposes, especially considering that the trustees were already assessed under section 21(4) of the Wealth-tax Act.

Section 21(4) of the Wealth-tax Act:
- This section allows for the assessment of wealth-tax on trustees as if the beneficiaries were an individual when the shares of the beneficiaries are indeterminate or unknown.
- The court emphasized that the assessment on trustees in such cases is in a representative capacity, and once the trustees are assessed, the beneficiaries cannot be assessed again for the same interest.

The court concluded that since the trustees were already assessed under section 21(4), the assessee could not be assessed again for her contingent interest in the trust properties for the same assessment year.

Issue 3: Taxability of the Assessee's Interest in the Trust Properties

The court addressed whether the assessee's interest in the trust properties should be included in her net wealth for the assessment years 1957-58 and 1958-59.

Tribunal's Findings:
- The Tribunal initially held that the assessee had no interest in the corpus of the trust properties on the relevant valuation dates, considering it a mere "spes successionis" (a mere possibility or chance of acquiring an interest).
- The court disagreed, stating that the assessee had a contingent interest, which is different from a "spes successionis" and has value.

Final Judgment:
- The court concluded that the assessee had a contingent interest in the corpus of the trust funds under the four trust deeds.
- However, since the trustees were already assessed under section 21(4) for the assessment year 1958-59, the assessee could not be assessed again for her contingent interest in the trust properties for that year.

Conclusion:
The court answered the first two questions in the negative, stating that the assessee had a contingent interest in the corpus of the trust funds under the trust deeds. The third question was also answered in the negative, indicating that the assessee could not be assessed to wealth-tax for her interest in the trust properties for the assessment year 1958-59, as the trustees were already assessed under section 21(4). There was no order as to the costs of the reference since both parties partly succeeded.

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