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TMI Blog1994 (11) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... 108 ITR 555 matter relating to an assessment should be based on facts only existing as on the relevant date and accordingly he should have held that the beneficiaries in this trust are unknown and that their shares are indeterminate. 3. The facts of the case are as follows : In pursuance of an agreement with Government of India and out of natural love and affection, HEH Nawab Sir Mir Osman Ali Khan, Nizam of Hyderabad, created a trust depositing Rs. 1.82 crores with the Government of India with tax-free interest at the rate of 1 per cent per annum on 8-10-1949 for the benefit of his son Walashan Prince Moazam Jah (hereinafter referred to as " the Prince ") and his daughter-in-law princess Niloufer, wife of the said Prince. As per Clause 2 of Trust Deed, the Trustees are to hold and stand possessed of the Trust Fund upon trust : " (a) To deposit the same forthwith with the Government of India pursuant to the arrangement arrived at with the Government of India as aforesaid and to recover from the Government of India the interest thereon and to pay out of such interest the charges for collection thereof and all other costs, charges, expenses and all other outgoings relating to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses of the said Prince and to set aside and invest the sums so recovered and received in any of the securities authorized by these presents and to add the income thereof to the principal sum so set aside and to pay to the said Prince the corpus of such sums as also the accumulations of the income thereof or such part or parts of the corpus or the income thereof as the Trustees may deem fit from time to time for any urgent necessity or unforeseen circumstances or emergent expenses of the said Prince such as his illness, his tour to Europe or other foreign countries or otherwise for the benefit of the said Prince. The trustees shall be at liberty to invest any of the sum or sums so set aside as aforesaid or the balance thereof in promissory notes, Debentures, stocks or other Securities of the Government of India or of the Hyderabad State or of the United Kingdom or in Fixed Deposits with any Scheduled Bank as the Trustees may in their absolute discretion deem fit with full power to the Trustees in their absolute discretion to alter, vary, or transfer the investments from time to time in such manner as they may think proper into or for others of the same or a like nature without bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id property (including all Municipal, Property and other taxes) during the period the said Princess shall use and occupy the property shall be paid by the Trustees out of the interest of the Trust Fund, if and so long as the same shall be available to the Trustees. (f) On and after the death of the said Prince and if he has left a widow surviving other than the said Princess Niloufer, to pay out of the interest of the then balance (if any) of the corpus of the Trust Fund, as and when recovered from the Government of India as aforesaid, a sum of Rs. 24,000 (Rupees twenty four thousand) free of income-tax, super-tax and all other taxes whatsoever per annum to such widow of the Prince in advance on the first day of October in each and every year, the first of such payments to be made on the first day of October following the date of the death of the said Prince and each of the subsequent payments to be made on the first day of October of each and every year thereafter, until her death or re-marriage whichever event shall occur first PROVIDED however that if the amount of the net interest accrued on the Trust Fund or the balance thereof for the time being in any year be less than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in certain securities and to pay to the Prince from time to time for any urgent necessities/unforeseen circumstances like illness, tour to Europe, or other foreign countries or otherwise. Sub-clause (e) provides for a further receipt of Rs. 20 lakhs in lump sum from the Government of India out of the aforesaid corpus for providing a suitable residence in Bombay to the Prince and allow him for life to use and occupy the said residence with an obligation on the Prince to carry out ordinary repairs and pay Municipal, Property and other taxes and outgoings payable from time to time. Princess Niloufer is given a similar right of residence after the death of the Prince until her death or re-marriage whichever is earlier, with similar obligations regarding repairs and payment of taxes. Sub-clause (f) provides for a right to the lower amount of Rs. 24,000 per annum or the accrued interest from the remaining corpus, if any, to a widow of the recognised marriage of the Prince other than Princess Niloufer, until her death or re-marriage whichever is earlier. Sub-clause (g) provides for a division, transfer and hand-over of the balance corpus amongst and to all the issues of the Prince the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, Prince Shahmat Ali Khan, did not derive any right and even the right to residence from remainderman's angle was illusory and cannot be included in his net wealth. 7. The assessments under section 21(1A) in respect of the residuary value of the corpus were made from assessment year 1980-81 excluding from the value of the entire corpus the value of life interest of the Prince and the value of remainderman's interest of Prince Shahmat Ali Khan. These assessments under section 21(1A) were made on 21-12-1988, at a time when the Tribunal's decision in the case of Pr. Shahmat Ali Khan was not delivered. The present assessments were made on the Trustees proceeding under section 21(4) on the net value of the corpus, i.e., after excluding from the value of the entire corpus the value of life-interest of the Prince. The assessments under section 21(4) were made protectively and on the ground that there was an alleged dispute regarding the beneficiaries raised by the assessee in the assessment of Prince Shahmat Ali Khan before the Commissioner (Appeals) and it is stated in the assessment order as under : " Thus, it is clear that Prince Shahmat Ali Khan is the only remainderman in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in O.S. 92 of 1979 filed by Princess Fatima Fouzia in the City Civil Court that under an oral gift (Hiba) which was acknowledged on 5-3-1971 by the Prince by executing a document, 6 acres of land within the compound wall of Mount Pleasant including the well facing Road No. 3, Banjara Hills, out of 15 acres 28 guntas, was gifted by the Prince, the possession of which was handed over to heron 30-12-1970, the date of the oral gift, by breaking the compound wall for entrance to the land. On the basis of the aforesaid dispute, it appears that a claim was raised vide letter dated 28-5-1987 that they were also entitled to remainderman's interest. The relevant portion of this letter reads as under : " It appears that huge amounts were included in the Wealth-tax assessment of Prince Shahmat Ali Khan relating to Prince Moazam Jah Trust. It is a fact that Prince Shahmat Ali Khan has not derived any benefits from this Trust till date. As per the terms of the Trust Deed, Prince Moazam Jah Bahadur is the only beneficiary as long as he is alive. It is also a fact that Sb. Fatima Fouzia is claiming a portion of the property of Prince Moazam Jah Trust and the matter is pending litigation before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that the premises is provided for the suitable residence of the Prince during his lifetime and in the event of his death, leaving behind Princess Niloufer as his wife surviving him, for her residence until her death or re-marriage whichever is earlier. Sub-clause (g) of clause 2 provides for the remainderman's interest and states that on and after the death of the Prince, the corpus of the trust fund or the balance thereof remaining in the hands of the Trustees shall be divided, transferred and handed over to all the issues of the Prince then living, in accordance with the provisions of the law of succession governing Sunni Muslims as if the Prince had died intestate. 10. Princess Niloufer is stated to have been divorced by the Prince and the only issue of the Prince through Sb. Anwar Begum, wife of the Prince satisfying the qualification laid down in sub-clause (f) of clause 2 of the Trust Deed, is Prince Shahmat Ali Khan. The qualification provided in the said sub-clause (f) is that she should be a person born at the date of the execution of the Trust Deed and a member of a respectable Muslim family of good status and her marriage to the Prince should have been recognis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the trust properties are determinate or not. No such assessment is made in the present case on the Trustees either for the life interest of the Prince or the remainderman's interest of his son Prince Shahmat Ali Khan. Sub-section(2) of section 21 makes it clear that sub-section (1) of section 21 shall not prevent either the direct assessment of the beneficiaries for whose benefit the trust properties are held or the recovery of the wealth-tax in respect of the interest in the trust property which is assessed in his hands. The Revenue has thus two modes of assessment available for assessing the interest of the beneficiaries in the trust property. The latter procedure is adopted by the Revenue in this case, i.e., the life interest of the Prince was assessed directly in his hands and the remainderman's interest of his son Prince Shahmat Ali Khan was attempted to be assessed directly in his hands though it was deleted by the Tribunal in WTA Nos. 208 to 217/Hyd./1988 by stating that his interest in Mount Pleasant was illusory so long as the Prince was alive and, therefore, was not assessable. Paragraph 7 of the order of the Tribunal dated 30-4-1990 in those appeals is as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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