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TMI Blog1986 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the Tribunal is right in holding that the life interest of the assessee in the testamentary trust estate of the late C. H. Kinnison is not an annuity which is exempt under section 2(e)(iv) of the Wealth-tax Act ? " Heilgers and Co., were managing agents of Kinnison jute Mills Co. Ltd. and Naihati jute Mills Co. Ltd., both Indian companies, for several years. Heilgers and Co. entered into a sub-partnership from time to time with James Alexander Kinnison under which the two shared equally the emoluments from the managing agency. The last of such sub-partnership agreements was entered into on December 16, 1907. Kinnison died on April 13, 1916, leaving a will dated June 2,1916 (sic), under which he gave all his property to his wife, Helen. Helen Kinnison executed two deeds of assignment dated December 12, 1927, assigning her share of the emoluments under the sub-partnership in favour of her son, Clive Hastings Kinnison. Thereafter, the son began to receive the half share of the emoluments from the managing agency. On February 25, 1935, Clive Hastings Kinnison executed a will appointing his wife, Olive Kinnison, and one William John Collyer, a solicitor, as executors and trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uated outside India, and being a non-resident, she was not taxable thereon. Alternatively, she urged that she was entitled to exemption under sub-clause (iv) of clause (e) of section 2 of the Wealth-tax Act. The Appellate Tribunal did not accept either contention and dismissed the appeals. At the instance of the assessee, the Appellate Tribunal referred the two questions of law set out earlier to the High Court of Calcutta for each of the six assessment years. By its judgment dated February 16, 1973, the High Court answered the first question in favour of the assessee and against the Revenue and the second question in favour of the Revenue and against the assessee. Thereafter, the Revenue obtained a certificate under section 29 of the Wealth-tax Act to enable it to prefer an appeal to this court against the judgment of the High Court on the first question. In this appeal, we are concerned solely with the question whether the assessee is entitled to the benefit of clause (i) of section 6 of the Wealth-tax Act. Clause (i) of section 6 provides: " 6. In computing the net wealth of an individual who is not citizen of India or of an individual or a Hindu undivided family not resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trustees would pay the income of the residuary trust fund to the assessee during her life. After the death of the assessee, the trustees would stand possessed of the residuary trust fund in trust for the benefit of the testator's children in accordance with the further provisions of the will. The trustees were also empowered to exercise the power of appropriation conferred upon personal representative by section 41 of the Administration of Estate Act, 1925. They were also empowered to determine what articles would pass under any specific bequest contained in the will and to determine whether any monies were to be considered as capital or income, and whether and in what manner any expenses or other payments ought to be borne or paid out of capital or income or apportioned between capital and income and how valuations were to be made for any purpose of hotch-pot advancement or appropriation or otherwise. The High Court observed that ordinarily, as the shares and managing agency were both located in India, the right of the assessee to receive income out of such trust property from the trustees would have constituted an asset located in India for the purposes of the Wealth-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee must be regarded as foreign assets and, therefore, not located in India. In conclusion, the High Court held that the assessee was entitled to the benefit of clause (i) of section 6 of the Wealth-tax Act. It will be evident from a perusal of the judgment under appeal that in reaching its conclusions, the High Court relied principally on Attorney General v. Johnson [1907] 2 KB 885. In that case, the testator, who at the time of his death, was entitled to a certain tea estate situate in Upper Assam, executed a will appointing two executors and trustees, and after bequeathing certain legacies, he left the residue of his real and personal estate to the trustees upon trust to sell the residuary estate (as did not already consist of money) and, after paying the legacies enumerated in the will, to invest the residue of the net moneys in the investments mentioned in the will. The trustees were directed to apply the annual income arising from the residuary estate and investments thereof to the payment of life annuities to certain persons, including one Marie Graf. The remainder, if any, of the annual income was to be distributed between a number of persons, including Henry Jam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal estate invested as they found it at the time of the testator's death unless they considered it proper to change any investment. By a codicil, he revoked the gift to his brother and gave that share to his wife absolutely. The testator was domiciled in England and upon his death, the will and codicil were proved in England by his executors who were themselves domiciled in England but the testator's estate included mortgages on real estate in New Zealand. The wife died in 1893, and her will likewise was proved in England by her executors (the appellants), two of whom were also her husband's executors. In estimating the probate duty payable upon her one-fourth share of her husband's residuary personal estate, the appellants excluded the value of the New Zealand mortgages. The Attorney-General claimed that one-fourth of the value of the New Zealand mortgages ought to have been included for the purposes of probate duty. In resisting the claim, the appellants stated that at the time of the wife's death, her husband's personal estate had not been fully administered and was in the course of administration, that one legacy given by the will then remained unpaid, and that the amount of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impossible to say of what assets the residuary estate will consist; we do not know how much the amount of the debt remaining unpaid was in the present case, and there was only one legacy unpaid... In truth, the right she had was to require the executors of her husband to administer his estate completely, and she had an interest to the extent of one-fourth in what should prove to be the residuary estate of the testator, Algernon Tollemache. Well, where was that situate? It seems to me that it can only be said to have been situate in this country." Lord Macnaghten and Lord Shand were of the same opinion. Lord Davey pointed out that at the time of the lady's death, the testator's personal estate had not been fully administered and the amount of the clear residue had not been ascertained, and that the lady " at the time of her death had no right of property in or right to claim any part of the mortgages in specie, and that the appellants, her executors, acquired only a right to have the estate duly administered and to enforce that right by an action for the purpose ". In Philipson-Stow v. IRC [1961] AC 727, the House of Lords doubted the correctness of Attorney-General v. Johnson [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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