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TMI Blog2015 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... sment must be under Section 21 (1) of the Act. The expression where the shares of the beneficiaries are indeterminate or unknown carried with it, by necessary implication, a situation where the beneficiaries themselves are indeterminate or unknown. Such, for example, would be the case in the modified illustration given above. There, the beneficiaries are such of the children of A as the trustee might think fit and the beneficiaries themselves would, therefore, be indeterminate and unknown and yet sub-section (4) of Section 21 would apply in their case. To take any other view would be to deny full meaning and effect to the words where the shares of the beneficiaries are indeterminate or unknown and to create a lacuna where, even though the beneficial interest in the remainder is disposed of under the trust deed, such beneficial interest would escape assessment. The correct interpretation of sub-section (4) of Section 21 must, therefore, be that even where the beneficiaries of the remainder are indeterminate or unknown, the trustee can be assessed to wealth-tax in respect of the totality of the beneficial interest in the remainder, treating the beneficiaries fictionally as an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough a common order, dated 23.12.1994. An effort made by the Revenue to get certain questions referred to this Court did not fructify. Therefore, the Revenue approached this Court seeking references. An order was passed directing the Tribunal to refer the following questions: R.C.No.236 of 1996: (1) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the children of the two ladies namely Sb.Fatima Fouzia and Sb.Amina Marzia get accelerated interest in the trust properties in spite of the clauses in the Trust Deed that they acquire interest in the trust property only after the life time of the ladies namely, Sb.Fatima Fouzia and Sb.Amina Marzia? (2) Whether, on the facts and in the circumstances of the case, the ITAT is correct in law in reversing the decision of the CIT (Appeals) who held that the interest of the beneficiaries in the Trust property was assessable under Section 164 of the Act? R.C.No.245 of 1996: (1) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in holding that the right to wear the jewellery is not an asset in spite of the decision of the A.P. High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth Tax Officer was reflected in the proceedings under the Income Tax Act and the Assessees i.e. the beneficiaries were sought to be levied a higher rate of tax by applying the concept referable to Section 21 (4) of the Act. That, in turn, resulted in R.C.No.65 of 1995 at the instance of the Assessees and the following questions are referred to this Court: R.A.Nos.360 and 363/Hyd/94: (1) Whether on the facts and circumstances of the case, the Tribunal was correct in law in holding that the question of succession opens only on the death of Sb.Amina Merzia (Sb.Fatima Fouzia in R.A.No.363/Hyd/94), the life time beneficiary after having held that her interest in the Trust ceased on the sale of the jewellery? (2) Whether on the facts and circumstances of the case, the Tribunal was correct in law in holding that the capital gain is a notional or deemed income under Section 45 of the Income Tax Act, 1961 for the purpose of taxation and thereby making differentiation between other income and capital gains? (3) Whether on the facts and circumstances of the case, the Tribunal was correct in holding that the capital gain if any got merged with the corpus and formed part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat though the Trust Deed provided for the succession of the jewellery to the children of the two women named in the Trust Deed, that event would arise only after the death of the ladies and the question of there being any beneficiaries during the life time of those ladies does not arise. He submits that the Commissioner and the Tribunal ignored certain undisputed facts and refused to apply the specific provisions of the Act. Sri Ravindra Chenji, learned counsel for the Assessees, on the other hand, submits that the dispute is no longer res integra and it is covered by the judgment of the Honble Supreme Court in COMMISSIONER OF WEALTH TAX A.P., Vs. TRUSTEES OF H.E.H. NIZAMS FAMILY (REMAINDER WEALTH) TRUST (1977) 108 ITR 555. He contends that in identical circumstances, the Honble Supreme Court took the view that even where a Trust Deed provides for a vested remainder in favour of some persons and no life estate as such is created, the authority under the relevant provisions of the Act has to be guided by the contents of the Trust Deed. He submits that once the Trust Deed has provided for devolution of the property to the children of the two women, the beneficiaries, are clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he key expression that plays a pivotal role in attracting Section 21 (4) is Indeterminate or unknown beneficiaries. In other words, if the beneficiaries under the Trust are either unknown or it is difficult to determine them, the assessment must be made under that provision. For this purpose, one has invariably to look into the contents of the Trust Deed itself, and no other course is permissible. In the instant case, the terms of the Trust Deed are very clear and unambiguous. Even while conferring a limited privilege of wearing the ornaments in favour of the named women, the Trust Deed has clearly mentioned that on the death of the two women, the jewellery shall devolve upon their children. It is true that during the life time of the two women, it is difficult to treat any particular individual as the immediate beneficiary, particularly when the right was restricted only to the one of wearing and returning the jewels. However, in law, what becomes necessary is whether there are any beneficiaries at all. It is immaterial whether they are the beneficiaries at present or in future. Once the Deed has stipulated that on the death of the two women, their children would become the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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