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TMI Blog1984 (8) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... 26-7-1950 with one Ram Karan Chothmal Kedia for the purchase of an immovable property at Napean Sea Road, Bombay, and paid earnest money of Rs. 10,000. That amount also was settled on trust so that the total amount settled on trust was Rs. 2,10,000. The trust deed directed that the trustees shall complete the transaction of the purchase of the property of Napean Sea Road and hold it upon trust. That property was, accordingly, purchased on 14-11-1952 in the name of the trustees for a sum of Rs. 2,15,000 and later on 15-10-1959 that property was sold for Rs. 2,53,000 and the amount was deposited in the bank account of the trust. The claim of the assessee before the WTO was that the property settled on trust did not any more belong to him and that it should not be included in his net wealth by reason of the application of section 4(4) of the Wealth-tax Act 1957 ('the Act'). The WTO was, however, of a totally different view. The WTO interpreted the deed of trust as in the nature of a will, that the assessee derived benefit from the trust by taking a huge amount of loan free of interest to pay income-tax, which was more in the nature of a settlement made for the provision for maintenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Amendment) Act, 1964. The Legislature was, thus, very much alive to the distinction that exists in law between irrevocable and revocable transfers, both of which are undoubtedly transfers. However, section 4(4) refers only to 'any such transfer' and Explanation (a) gives a very wide, sweeping and inclusive definition of 'transfer'. I have, therefore, no difficulty to accept the contention raised that even if the transfer to the trust on 15-10-1951 made by the assessee was a revocable transfer, he is entitled to the exemption under section 4(4). " It will be seen from the neat summing up that the Commissioner (Appeals) has considered all the angles and came to the conclusion that the assessee could not have had any intention to pay wealth-tax when he created this trust ; that section 4(4) was introduced only with a view to provide exemption from the operation of the deeming provisions of section 4(1)(a) to militate hardship by the introduction of the Act and that in any case the trust deed did not provide any indication to show that the transfer was revocable transfer. He has given as many as four reasons why the transfer could not be held to be irrevocable transfer. He found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as residence whenever the assessee happened to visit Bombay. The assessee used to reside no doubt in this building with his family in Bombay whenever he visited Bombay from Delhi where he was practising and was also employed as Solicitor General of India, if we are right. The deed of trust nowhere provided any right of residence to the assessee. Therefore, reliance on the mere occasional spells of stay in the property cannot be read as a reserving of a right to the assessee under the deed of trust for residence. If again this argument is used to show that there is a revocable transfer, then again by reason of the provisions of section 4(4) even such a transfer is put beyond the reach of section 4(1)(a). The department's reliance was on clause 15(b) of the deed of trust, which provided that at the request of the settlor during his lifetime, the trustees may allow the whole or any part of the settled premises to be occupied by such persons as the settlor or the said Sushila Chandra Daphtary may direct free of rent or on such rents and on such terms and conditions as they may decide. This does not mean by any stretch of imagination that the settlor by this clause provided for himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlor shall by writing or will 'appoint' and in default of any such 'appiontment' by the settlor to the said persons/survivors of them in equal shares. In my opinion, this clause very clearly identifies the beneficiaries and also specifies their shares at any point of time. The power given to the settlor to vary the shares of the beneficiaries by writing or by will does not, in any manner, render the trust invalid or void. This clause does not also give the assessee any economic control or power to use the income or assets of the trust for his own benefit. " We are in entire agreement with this view expressed by the Commissioner (Appeals) and in fact we may add here that the learned departmental representative was not able to throw any light to support the view of the department that the provisions of clause 3 of the trust deed can be interpreted in a manner different from the way in which they were interpreted by the Commissioner (Appeals), with whom we agree, and that those provisions really meant to confer on the settlor, that is the assessee, the power to vary the shares of the beneficiaries. On the contrary, the shares of the beneficiaries are left in no doubt. They are ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of the assessee and, therefore, there was no transfer. This again is as wrong as advancing the argument that the beneficiaries were not known. In fact this argument is an extension of the earlier argument which we have disposed of. None of these arguments raised by the department can prove its case that there was no transfer at all on 15-10-1951 and that if at all there was any settlement, it was only in the nature of a will. We hold that the trust deed read as a whole coupled with the fact that it was acted upon, the conduct of the parties amply proved that there was a transfer on 15-10-1951 of the trust properties to the trustees and the trustees held the properties thereafter on trust and that even if at the worst it was held that this was a revocable trust, it was fairly governed by the exception provided in section 4(4), which excluded from the operation of section 4(1)(a) the transfers made of any kind before 1-4-1956. We are, therefore, in entire agreement with the Commissioner (Appeals) on this point and hold against the revenue. This is the first common point in all the appeals. 4. In fairness to the learned departmental representative, we may add that he placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue, that there is a revocable transfer but even so section 4(4) excludes all transfers made before 1-4-1956 from the operation of the provisions of section 4(1)(a). This argument is, therefore, in our opinion, not validly taken. 5. The next common ground is whether the prohibition contained in section 2(m)(iii)(b) of the Act applies only to cases in which the order of the assessment was passed and if there was no order of the assessment, whether the amount of tax due could be said to be outstanding for more than 12 months. The amounts outstanding by the assessee towards taxes on various dates is all given in the order of the Commissioner (Appeals) and we do not have to refer to them except to state whether on principle he is justified in holding that the assessee is entitled to deduct that tax on the ground that they are not outstanding for more than 12 months because there was no order of assessment. This point has now been concluded by the decision of the Supreme Court in the case of CWT v. J.K Cotton Mfrs. Ltd. [1984] 146 ITR 552. Since the facts are not in dispute, we hold that the view taken by the Commissioner (Appeals) is absolutely correct and we uphold it. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 3271 (Bom.) of 1980, a copy of which is made available to us forming part of the paper book at pages 227 to 231. Following with respect the assessee's own case, we hold that the view taken by the Commissioner (Appeals) on this point is correct and we affirm it. 10. There is another point common to the assessment years 1964-65 to 1974-75 only relating to the deduction of Rs. 1,10,000 as a liability. That was the loan taken by the assessee on 3-4-1964 from the trust for payment of income-tax liability. The WTO disallowed this liability consistent with his finding that the trust was not a separate entity and that the trust property belonged to the assessee. Since the Commissioner (Appeals) did not agree with this view and held that the trust property was separate and did not belong to the assessee, he held that the liability was allowable as a deduction. It is this decision that is now contested before us. Since we have agreed with the view of the Commissioner (Appeals) that the trust was a valid trust, a separate and distinct entity and that the trust property did not belong to the assessee, we hold that he is eminently justified in allowing as a logical consequence that the liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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