2006 (2) TMI 84 - HC - Wealth-tax

Trust - Whether Tribunal was right in law in holding that the assets of the trust by name Tenzing Family Trust could not be included in the net wealth of the assessee-beneficiary and that the same should be considered in the hands of the Trust? - we answer the above question of law in favour of the assessee and against the Revenue

Summary

Issues:
Whether the assets of the trust by name Tenzing Family Trust could be included in the net wealth of the assessee-beneficiary or should be considered in the hands of the Trust.

Analysis:
The matter was referred to the High Court by the Income-tax Appellate Tribunal to determine if the assets of the Tenzing Family Trust should be included in the net wealth of the assessee-beneficiary or in the hands of the Trust. The trust was formed by Sri K.A.A. Sankaralingam with Shri A. Tenzing as the sole beneficiary. The trust deed specified that the corpus and accumulated income would be handed over to the beneficiary after 18 years from the date of execution or upon his marriage. The trustee had discretion over the income distribution until the beneficiary's marriage. The Assessing Officer included the assessee's interest in the trust property in his net wealth, but the Commissioner of Wealth-tax (Appeals) held that since the trust properties were already assessed in the hands of the trustee, they should not be included again in the assessee's wealth. The Income Tax Appellate Tribunal also ruled in favor of the assessee, stating that the beneficiary had no vested interest until the specified events occurred.

The High Court analyzed the trust deed and noted that until the completion of 18 years or the beneficiary's marriage, the corpus would not vest with the beneficiary. The beneficiary did not have a right to income, as it was at the trustee's discretion. The court also considered its previous judgment on a similar matter and found no error in the Tribunal's reasoning. The court upheld its previous decision, stating that the assets of the trust should not be included in the net wealth of the assessee-beneficiary but should be assessed in the hands of the Trust. Thus, the question of law was answered in favor of the assessee and against the Revenue, following the court's earlier ruling.

In conclusion, the High Court ruled that the assets of the Tenzing Family Trust should not be included in the net wealth of the assessee-beneficiary but should be considered in the hands of the Trust, based on the provisions of the trust deed and previous judicial decisions.