9911796707
TMI Blog1977 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... the late Nizam transferred a corpus of Rs. 9 crores in Government securities to the trustees constituted by him. The corpus was to be notionally divided into 175 equal units. Five of the units were to constitute a fund called the " reserve fund " and 3 1/2 units were to constitute a " Family trust expenses fund ". The remaining 1661 units were allotted to the relatives mentioned in the II schedule in the manner specified in the schedule, the number of units allocated to each individual relative being mentioned there. The II schedule was divided into two parts. In part I of the II schedule were mentioned his wife, Laila Begum, her five sons and two daughters and his another wife, Jani Begum, and her minor son. In part II of the II schedule were mentioned the other wives, sons, daughters, daughters-in-law, sons-in-law would be sons-in-law and certain ladies of rank. None of the beneficiaries mentioned in the II schedule, whether in part I or part II, was to be entitled to the corpus of the units allotted to him or her. Each was entitled to be paid the income from the units allocated to him or her and provision was made for the manner in which the units were to devolve after his or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ren or remoter issue per stirpes and on the basis that every male child has to get 2 shares to 1 share for every female standing in the same degree of relationship. If the son dies without leaving any child or remoter issue, the units allocated to him should be divided into sub-parts and added to the units allocated to the other surviving sons and daughters of Laila Begum by the settlor and the issue of any deceased son or daughter of Laila Begum, again on the basis that each male was to receive 2 parts to 4 allocated to every female. The parts thus added were to be added to the unit of corpus allocated to the specified beneficiaries to be held on the same trusts as the basic unit allocated to them. Any parts which were thus allocated to sons and daughters of Laila Begum who were born after the date of the trust deed were to be taken by them absolutely. Sub-clause (c) of clause 2 made similar provisions regarding the units allocated to the daughters of Laila Begum. Likewise, sub-clause (d) and sub-clause (e) dealt with the units allocated to Jani Begum and her minor son. Briefly then the provision contained in clause 4 was that the income from certain portions of the trust fund wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the death of any one of the relatives specified in part II of the second schedule, the corpus of the unit allocated to him or her was to be divided and distributed, subject to some restrictions, amongst the children and remoter issue per stirpes and in the ratio of 2 : 1 as between males and females. On the death of any of the relatives without leaving behind any child or remoter issue, his share in the corpus was to be divided among the other relatives of the settlor, but in accordance with certain rules. Sub-clause (d) made a special provision in respect of Dulhan Pasha Begum. On her death, the 5 units allocated to her were to be added to the units allocated to her daughter, Shahzadi Begum, and after the death of Shahzadi Begum it was to be divided among her heirs as specified in the trust deed. Broadly again, the relatives mentioned in the second schedule were to be entitled to the income of the units allocated to each of them and the corpus was to vest only in the next or subsequent generation. (e) Clause 6 of the trust deed directed the trustees to hold 5 equal units out of the corpus of the trust fund as and by way of a reserve fund. This reserve fund was mainly intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and the expenses account fund and the clauses creating a trust in favour of the future sons-in-law were to be treated as three: separate trusts and that they should accordingly be assessed separately. In this reference we are not concerned with the assessments made on the trustees in respect of the reserve fund and the expenses account fund. In the appeals preferred by the beneficiaries against their assessments the Assistant Commissioner held that inasmuch as the beneficiaries were entitled only to the income from their units during their lives they could be assessed to wealth-tax only on the respective values of their life interests in the units and not on the value of the corpus. He, therefore, set aside the several individual assessments made on the beneficiaries with a direction to the Wealth-tax Officer to assess them afresh on the basis of the value of their life interests. The Wealth-tax Officer, accordingly, valued the several life interests of the assessee and assessed them on the basis of such value. He was then faced with the fact that the value of the " remainder wealth " in respect of 16-16 1/2 units escaped tax. He was of the view that the beneficiaries in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve given the computation of wealth assessable in this case, in the hands of the trustees." The Tribunal ordered that they would permit the additional grounds to be raised only for the purpose of supporting the assessments already made but not for the purpose of enhancing the assessments. It was argued before the Tribunal by the department that the trustees were liable to be assessed under section 3 of the Wealth-tax Act and that the procedure prescribed by section 21 was only optional and could not override section 3. This contention was rejected by the Tribunal who held that sections 2 and 21 had to be read together and that the assessees could not be taxed under section 3 to the exclusion of section 21. Turning to section 21 of the Act the Tribunal rejected the contention of the assessees that section 21(4) was not attracted as the beneficiaries could not be said to be unknown and their shares could not be said to be indeterminate. The Tribunal accepted the contention of the department that the trust was a single trust and not several trusts. But, all the same, the Tribunal held that on a proper construction of section 21(4) assessment on the trustees should be made separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, section 21 was inapplicable to the present case as it could not be said that the trustees were holding the fund on behalf of the beneficiaries. He pointed out that at the relevant time section 21 referred only to persons holding on behalf of others, but not to persons holding on behalf of or for the benefit of others. He invited our attention to the fact that the words " for the benefit of " were introduced into section 21 at a later point of time. Sri Anantha Babu also urged that the Tribunal having permitted the department to raise additional grounds was not justified in restricting their scope to merely supporting the assessments already made. He also submitted that, on a plain reading of section 21(4) of the Act, the whole of the remainder wealth had to be necessarily taxed in entirety in the hands of the trustees and not separately in respect of the several units or groups of units allocated to the beneficiaries. Sri Y. V. Anjaneyulu, learned counsel for the assessee, submitted that the trustees could not be assessed to wealth-tax as their status could not be said to be that of an " individual " specified in section 3 of the Act. He also submitted that the Tribunal was wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re held by a court of wards or an administrator-general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a valid deed of wakf), the wealth-tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, receiver, manager or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held, and the provisions of this Act shall apply accordingly. (2) Nothing contained in sub-section (1) shall prevent either the direct assessment of the person on whose behalf the assets above referred to are held, or the recovery from such person of the tax payable in respect of such assets. (3) Where the guardian or trustee of any person being a minor, lunatic or idiot (all of which persons are hereinafter in this sub-section included in the term " beneficiary ") holds any assets on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the observations made were not quite correct if they were intended to convey the meaning that the provisions of section 41 were not mandatory but those provisions may or may not be followed at the option of the department. To the extent that the judgment decided what it did, Mr. Palkhivala for the assessee does not find any fault. To the extent that the observations are obiter and were unnecessary for the decision of the case, Mr. Palkhivala says that in the interests of the assessee we must make it clear that we should not have conveyed to the department the impression that it was open to them to increase the burden of the assessee to pay tax. Mr. Palkhivala is right that any such interpretation would be opposed to well-known principles of taxation law. If the legislature lays down that in a certain case the burden of taxation upon a particular type of assessee should be a particular burden and not a larger or a higher burden, then it cannot possibly be left to the taxing department at its option to increase the burden; and we are quite satisfied that the provisions of section 41 are clear and explicit, and in the case of a trustee the burden of tax is limited to what is clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income-tax by each person on the agricultural income derived from such land and received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same." It will be noticed at once that while the definition of " person " in section 2(11) included a trustee, section 11(1) did not refer to a trustee at all. The question arose whether the trustees under a will should be assessed in accordance with section 11(1). Their Lordships of the Supreme Court held that in order that section 11(1) might apply two conditions had to be satisfied: (1) that a person should hold the agricultural land as a common manager, receiver, administrator or the like " on behalf of " other persons, and (2) such other person should be jointly interested in such a land or the income derived therefrom and that in the case before them, the trustees who were the legal owners of the land did not hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion " or the like " holding lands on behalf of persons jointly interested in such lands. Their Lordships of the Supreme Court held that a trustee would not be a common manager, receiver, administrator or the like holding lands on behalf of other persons. It is in that context that the observations of their Lordships of the Supreme Court should be understood. It is a well-settled rule of construction that there is no presumption that a word or expression has the same meaning when used in different enactments. Even when used in different parts of the same enactment the presumption that the word or expression carries the same meaning is very slight. If there is sufficient reason that can be assigned an expression in one part of an Act can be construed in a different sense from that which it bears in another part of an Act. (Vide Shamrao Vishnu Parulekar v. District Magistrate, Thana AIR 1957 SC 23). We are of the opinion that there is good reason for construing the expression " on behalf of " occurring in section 21 of the Wealth-tax Act as meaning something different from the meaning which was given to the expression by their Lordships of the Supreme Court in Holdsworth v. State of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they function legally or factually for others : they manage the property for the benefit of others. That the technical doctrine of vesting is not imported in the section is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him. In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section. A reasonable interpretation of the section is that all the categories of persons mentioned therein are deemed to receive the income on behalf of another person or persons or manage the same for his or their benefit. None of them has any beneficial interest in the income; he collects the income for the benefit of others. In this view even if the nattamaigars were trustees in whom the properties' of the Durgha vested, they should be deemed to have received the income only on behalf of the kasupangudars in definite shares. " It is clear from the judgment of their Lordships that they did not consider the question of vesting as germane to the issue to be decided and thought that it should not be imported into the construction of section 41 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of the deed of trust when the time arrived for the taking of the Corpus after the death of the holders of life interests. It was, therefore, argued that the shares of the persons on whose behalf the assets were held were indeterminate or unknown and section 21(4) was thus attracted to the facts of the case. The first answer of the learned counsel for the assessee was that section 21(4) was not attracted to the facts of the present. case since it could not be said that the shares of the persons on whose behalf the assets were held were indeterminate or unknown on the valuation date. He invited our attention to section 3 of the Act which prescribes that tax shall be charged in respect of the net wealth of an assessee on the valuation date. " Net wealth " is defined in section 2(a) as meaning the aggregate value of all the assets belonging to the assessee on the valuation date less certain debts. Valuation date is defined in section 2(q) of the Act as follows: " ' Valuation date ', in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in clause (11) of section 2 of the Income-tax Act if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f beneficiaries was not known because a son might die leaving several grandsons and, therefore, the shares of persons on whose behalf the assets were held were indeterminate or unknown. The Calcutta High Court did not accept this contention. It was observed : " The share of a beneficiary can, be said to be indeterminate if at the relevant time the share cannot be determined. Merely because the number of, beneficiaries varies from time to time, one cannot say that it is indeterminate ............ In the present case, there seems to be no difficulty in determining the share of the beneficiaries during the relevant account period. The will clearly lays down as to who would be entitled to the income and it is a mere matter of calculation as to how many sons and grandsons were in existence at the relevant date and to calculate, according to their respective shares, as provided under the testamentary trust." In Padmavati Jaykrishna Trust v. Commissioner of Wealth-tax [1966] 61 ITR 66 (Guj), the question was discussed at some length by Shelat C.J. and Bhagwati J. The facts were that one Mahalaxmibai executed two deeds of trust under which the income from the properties of the trust wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets. " Referring to the distinction sought to be made by the learned Advocate-General that in the Calcutta case the settlor had eight sons who were mentioned in the will and each one of them was given a share and, therefore, there was no question of variation in the number of beneficiaries by reason of the birth in future of grandson or grandsons, the learned judges observed : " That, in a way, is true. The share of each of the eight sons was definite and, the sons being only eight, the number of the beneficiaries also was certain and determinate. Since the assets were to be distributed amongst the eight sons only and not amongst the grandsons, there was no question of any variation in the number of beneficiaries. But the learned judge was dealing with the contention urged before him, namely, that in the event of birth of a grandson in future there was a likelihood of indefiniteness in the number of the beneficiaries and the ratio of the decision was in the answer given by him, namely, that in order to ascertain whether the shares of beneficiaries and their numbers were determinate or not, the Wealth-tax Officer has to ascertain the facts as they prevailed on the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settlor. But there was a proviso which said that the share of a predeceased child should, in respect of one moiety, go to his or her widow or widower and the other moiety to his child or children equally, with the difference that the widow or widower got only an interest in the income for life while the settlor's grand-child or grand-children would get the corpus itself. It was further provided that on the death of any child of the settlor after the death of the settlor, half income from the share of such child should be paid to the widow or widower of the child until the death or remarriage of such widow or widower and that the remaining half of the corpus should be divided in equal shares amongst each of the children of such widow or widower. It was urged by the department that the shares of the grand-children who were to finally get the corpus of the estate were liable to alteration or fluctuation and that it could not be said that those shares were determinate. The argument was rejected by the learned judges in these words--See [1967] 66 ITR 653, 660 (Bom): " Such a contention cannot be sustained because, so far as the incidence of the wealth-tax is concerned, it is the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te or unknown so as to attract the provisions of section 21(4) of the Wealth-tax Act. The second answer of the learned counsel for the assessee to the submission made on behalf of the department was that the indeterminateness, if there was any, would be confined only to the shares in the particular units represented by a particular holder of a life estate. The children and the remoter issue of the holder of the life estate would take the corpus of the units whose income was enjoyed by the holder of the life estate and even if the provisions of section 21(4) applied, the children and the remoter issue of a particular holder of life estate alone should be treated as an individual and assessed separately. The remainder estates corresponding to the several holders of life estates should not be clubbed together. This was the view which was accepted by the Income-tax Appellate Tribunal and there seems to be some force in the submission of the learned counsel for the assessee. We do not, however, want to rest our conclusion on this submission only. The learned counsel for the assessee also submitted that the Tribunal was not right in holding that the trust was single and indivisible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative. That being so, I fail to see how the non-execution of separate trust deeds can mitigate against the principle underlying the matter. In this view of the matter, I hold that by a single deed of trust dated May 10, 1950, the settlor had created a separate trust in favour of each of the relatives mentioned in the second schedule." The Income-tax Appellate Tribunal took a different view and said: " We shall proceed to examine these contentions starting with that as to the proper interpretation of the trust deed. The question is whether the trust deed dated May 10, 1950, creates a single trust or a number of separate trusts. It is common ground before us and, indeed, there cannot be much doubt about it in view of the decision of the Supreme Court in Commissioner of Income-tax v. Manilal Dhanji [1962] 44 ITR 876 (SC) that there could be a number of trusts incorporated in a single deed. The question is whether, as a matter of construction, the present trust deed is a composite one or creates separate trusts. The matter is one of some difficulty. The trust document itself contains rather equivocal indications which can equally plausibly be made to support a construction ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding administration. We will be reading something into the document which is not there if we were to say that the trustees are holding 31 units for bearing the expenses proportionately to the several units or that the reserve fund is being similarly held. After a careful consideration we have come to the conclusion that the proper construction of the settlement deed would be that it constitutes a single trust with a number of beneficiaries and not as many trusts as there are ' units or beneficiaries '." We are inclined to agree with the conclusion and the reasons of the Appellate Assistant Commissioner rather than with the conclusions and reasons of the Income-tax Appellate Tribunal. The learned counsel for the department submitted that the proper test to determine the question would be whether the settlor could have created separate trusts in respect of each of the relatives mentioned in the II schedule and their issue. We do not find any difficulty in holding that he could have created separate trusts. It is true that there was a common expenses account fund and a common reserve fund. The settlor could have created separate trusts in respect of the reserve fund and the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g rise to these appeals. In the year 1950, the late Nawab Sir Mir Osman Ali Khan Bahadur, the Nizam of Hyderabad and Berar, created several trusts out of which we are concerned in these appeals with the trust known as the " family trust ". The Nizam, by a deed of trust, dated 16th May, 1950, created the family trust by transferring a corpus of Rs. 9 crores in Government securities to the trustees constituted by him. The corpus was notionally divided into 175 equal units, out of which five units constituted a fund called the " reserve fund ", 3 1/2 units constituted a " family trust expenses fund " and the remaining 166 1/2 units were allocated amongst the relatives mentioned in the first column of the second schedule in the manner specified in that schedule, the number of units allocated to each individual relative being that mentioned in the second column. The second schedule was divided into two parts. Part I specified the names of the Nizam's wife, Laila Begum, her five sons and two daughters and his another wife, Jani Begum and her minor son as beneficiaries and in part II were mentioned the names of the other wives, sons, daughters, daughters-in-law, sons-in-law, would be so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n surviving of any predeceased son and one equal sub-part each to each of the then surviving daughters of Laila Begum by the settlor and the issue then surviving of any predeceased daughter. The parts of such surviving sons and daughters of Laila Begum as are specified in the second schedule were to be added to and amalgamated with the basic units, four or two as the case may be, allocated to them and they were to be held on the same trusts as those declared in respect of such basic units. So far as concerns the sub-parts allocated to the surviving sons and daughters of Laila Begum who were born after the date of the trust deed, it was directed that such sub-parts would be taken by them absolutely and so also the sub-parts allocated to the issue of any predeceased son or daughter of Laila Begum were to be divided between them absolutely per stirpes in the proportion of two shares for every male child to one share for every female child standing in same degree of relationship. Sub-clause (c) of clause 4 made similar provisions with regard to the two units allocated to each of the two daughters of Laila Begum. The income of the two units together with the subsequently added parts out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who would be the beneficiaries entitled to the corpus, if the owner of the life interest were to die at that point of time. The remaining 136 1/2 units left after the allocation of 30 units as set out in clause 4 were dealt with in clause 5 of the trust deed. These 136 1/2 units were allocated to the respective relatives of the settlor specified in part II of the second schedule in the respective proportions set out against their names. Sub-clause (a) of clause 5 provided that the income of the respective unit or units or fraction thereof allocated to the respective relative shall be paid to them respectively for life. But so far as the 15 daughters of the settlor were concerned, to each of whom three units were allocated, it was provided that out of the income of such three units, each daughter was to be paid only 2/3rds part of the income and the remaining 1/3rd part was to be set apart by way of a reserve fund. Such reserve fund was to be utilised for any special, unusual, unforeseen or emergency expenses relating to the particular daughter from whose income the reserve fund was created and, on her death, the reserve fund or the unutilised portion thereof was to be amalgamate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divided and distributed, subject to some restrictions, amongst the children and remoter issue per stirpes in the ratio of 2: 1 as between male and female children standing in the same degree of relationship. The contingency of any of these relatives dying without leaving any child or remoter issue him or her surviving was dealt with in sub-clause (c) of clause 5 which provided that in that event the unit or units or the fraction thereof allocated to such relative should be divided amongst the other relatives of the settlor but in accordance with certain specified rules. Sub-clause (d) of clause 5 made a special provision in regard to Dulhan Pasha Begum, namely, that on her death, the five units allocated to her should be added to and amalgamated with the four units allocated to her daughter, Shahzadi Begum, to be held upon the same trusts as those declared in respect of such four units. It will thus be seen that according to the scheme envisaged in clause 5, each of the relatives specified in part II of the second schedule was given life interest in the unit or units or fraction thereof allocated to him or her and on his or her death, subject to certain special provisions in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees (hereinafter referred to as " the assessees ") to wealth-tax for the assessment year 1957-58, a question arose as to how the assessment to wealth-tax should be made. The Wealth-tax Officer assessed the assessees to wealth-tax on the value of 13 1/2 units of the trust fund comprising 5 units allocated to the reserve fund, 3 1/2 units allocated to the family trust expenses account and 5 units representing the units allocated to the future husbands of the then unmarried daughters of the settlor. The wealth corresponding to the remaining 161 1/2 units was assessed in the hands of the several beneficiaries specified in the second schedule, who were assessed to wealth-tax on the value of the respective units allocated to them under the trust deed. Similar assessments were also made for the assessment year 1958-59 with this difference that by the time these assessments came to be made, one other daughter was also married and the Wealth-tax Officer, therefore, assessed the assessees to wealth-tax only in respect of the value of 13 units of the trust fund and the values of the other units were assessed in the hands of the respective beneficiaries to whom they were allocated as specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it or units allocated to him or her and made assessment to wealth-tax by including the value of such life interest. But the result of making assessments on this basis on the several beneficiaries was that the value of the " remainder wealth " in respect of 1661 units escaped tax. The Wealth-tax Officer was of the view that the beneficiaries in respect of the several remainder estates after the lives of the immediate beneficiaries mentioned in the second schedule were unknown and their shares indeterminate and the assessees were, therefore, liable to be assessed in respect of the remainder wealth under section 21, sub-section (4), of the Wealth-tax Act. The Wealth-tax Officer accordingly reopened the assessments made on the assessees for the assessment years 1957-58 to 1960-61 and made fresh assessments on the assessees in respect of the " remainder wealth by applying the provisions of section 21, sub-section (4). He arrived at the value of the remainder wealth by taking the value of the entire original corpus and deducting therefrom the value of 5 units allocated to the reserve fund, the value of 3 1/2 units allocated to the family trust expenses account and the aggregate of the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the revenue in regard to this contention was that the assessees were liable to be assessed as an " individual " under section 3 in respect of the entire corpus of the trust fund and section 21, sub-section (4), being merely a machinery section did not have the effect of overriding the charge imposed on the assessees under section 3. The Tribunal allowed the revenue to raise this new contention, but made it clear that it would be only " for the purpose of supporting the assessments already made and not for the purpose of enhancing the assessments ". The answer given by the assessees to this contention was that section 3 had no application at all, because the assessees as trustees would be an " association of persons " and under the Wealth-tax Act an " association of persons " is not an assessable entity and they went on further to say that they could not be assessed even under sub-section (1) or sub-section (4) of section 21, since in respect of the remainder estate after the death of each relative, the beneficiaries were unknown. The assessees also contended that, in any event, even if section 3 were applicable, the assessment on the assessee could be made only in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Wealth-tax Act in the status of an ' individual ' ? (ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 3 of the Wealth-tax Act should not be considered as subject to the provisions of section 21 of the above Act ? (iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in refusing to admit the additional ground filed on behalf of the department (in W.T.As. Nos. 690 to 694 of 1963-64), except to the extent of supporting the assessment as made ? (iv) Whether, on a proper, construction of the trust deed in question, the Tribunal was correct in holding that the settlor had created only one trust in favour of several beneficiaries and not separate and independent trusts in favour of several beneficiaries or groups of beneficiaries ? (v) Whether, having held that a single trust was created by the trust deeds, the Tribunal was correct in law in holding that under section 21(4) of the Act the remainder wealth could be assessed in respect of each of the several units or groups of units allocated in favour of the beneficiaries specified under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as that is concerned, the High Court-took the view that it was not necessary to consider it in view of the answers given to the other questions. It is this decision of the High Court on the various questions referred by the Tribunal which is impugned in the present appeals preferred by special leave. Before we take up the questions of law that arise for consideration in these appeals, we may clear the ground at the outset by pointing out that though before the High Court, it was contended on behalf of the assessees that they were not liable to be assessed to wealth under section 3 since, unlike the charging section in the Income-tax Act, section 3 did not provide for levy of wealth-tax on " association of persons ", this contention was not pressed before us and it was conceded, and in our opinion rightly, that the assessees constituted an assessable unit and were liable to be assessed to wealth-tax as " individual " under section 3. This position indeed could not be disputed after the decision of this court in Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax [1973] 88 ITR 47 (SC). But the question is whether assessment could be made on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon it, since there is an alternative argument advanced on behalf of the assessees which is quite substantial and leaves no room for judicial doubt or hesitation. Let us assume that the trustee of a trust would be assessable in respect of the trust properties under section 3, even in the absence of section 21. But section 3 imposes the charge of wealth-tax " subject to the other provisions " of the Act and these other provisions include section 21. Section 3 is, therefore, made expressly subject to section 21 and it must yield to that section in so far as the latter makes special provision for assessment of a trustee of a trust. Section 21 is mandatory in its terms and as it stood at the material time, it provided as follows: " 21. (1) In the case of assets chargeable to tax under this Act, which are held by a court of wards or an administrator-general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 21. Every case of assessment on a trustee must necessarily fall under section 21 and he cannot be assessed apart from and without reference to the provisions of that section. To take a contrary view giving option to the revenue to assess the trustee under section 3 without following the provisions of section 21 would be to refuse to give effect to the words " subject to the other provisions of this Act " in section 3, to ignore the maxim generalia specialibus non derogant and to deny mandatory force and effect to the provisions enacted in section 2l. It may be noted that, while interpreting the corresponding provisions in section 41 of the Indian Income-tax Act, 1922, and section 161 of the Income-tax Act, 1961, this court in C. R. Nagappa v. Commissioner of Income-tax [1969] 73 ITR 626, 632, 633 (SC) approved the following observations made by Chagla C.J. in regard to the scheme of section 41 of the Indian Income-tax Act, 1922, in Commissioner of Income-tax v. Balwantrai Jethalal Vaidya [1958] 34 ITR 187, 194 (Bom) : " If the assessment is upon a trustee, the tax has to be levied and recovered in the manner provided in section 41. The only option that the legislature gives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question arising for decision in this case." It must, therefore, be held to be incontrovertible that whenever a trustee is sought to be assessed, the assessment must be made in accordance with the provisions of section 21. It must also be noted that the assessment which is contemplated to be made on the trustee under sub-section (1) or sub-section (4) of section 21 is assessment in a representative capacity. It is really the beneficiaries who are sought to be assessed in respect of their interest in the trust properties through the trustee. Sub-section (1) provides that in respect of trust properties held by a trustee, wealth-tax shall be levied upon him " in the like manner and to the same extent " as it would be leviable on the beneficiary for whose benefit the trust properties are held. This provision obviously can apply only where the trust properties are held by the trustee for the benefit of a single beneficiary or, where there are more beneficiaries than one, the individual shares of the beneficiaries in the trust properties are determinate and known. Where such is the case, wealth-tax can be levied on the trustee in respect of the interest of any particular benefici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch fictional beneficiary. It will, therefore, be seen that in this case too, it is the beneficial interest which is assessed to wealth-tax in the hands of the trustee and not the corpus of the trust properties. This position becomes abundantly clear if if we look at sub-section (5) which clearly postulates that where a trustee is assessed under sub-section (1) or sub-section (4), the assessment is made on him " in respect of the net wealth ", of the beneficiary, that is, the beneficial interest belonging to him. Now, wherever there is a trust, it is obvious there must be beneficiaries under the trust, because the very concept of a trust connotes that though the legal title vests in the trustee, he does not own or hold the trust properties for his personal benefit but he holds the same for the benefit of others, whether individuals or purposes. It must follow inevitably from this premise that since under sub-sections (1) and (4) of section 21 it is the beneficial interests which are taxable in the bands of the trustee in a representative capacity and the liability of the trustee cannot be greater than the aggregate liability of the beneficiaries, no part of the corpus of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuarial valuations of the remaindermen's interests of B and C, which may be, to take again an ad hoc figure, say, Rs. 2 lakhs each. But, as pointed out above, the revenue may, instead of assessing the trustee, proceed to make direct assessment on each of the three beneficiaries A, B and C and in that case, Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs would be included in the net wealth of A, B and C, respectively. The result would be that though the value of the corpus of the trust property is Rs. 10 lakhs, the assessments, whether made on the trustee or on each of the three beneficiaries, would be only in respect of Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs and the balance of Rs. 1 lakh would not be subject to taxation. In fact, in most cases, if not all, the aggregate of the values of the life interest and the remaindermen's interest would be less than the value of the total corpus of the trust property, since the value of the remaindermen's interest would be the present value of his right to receive the corpus of the trust property at an uncertain future date and this would almost invariably be less than the value of the corpus of the trust property after deducting the value of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here being no other beneficiary apart from A: and such of the children of A as the trustee might think fit, the balance of the value of the corpus cannot be brought to tax in the hands of the trustee under sub-section (1) or (4) of section 21. It is, therefore, obvious that no part of the corpus of the trust funds could be assessed in the hands of the assessees, but the assessment could be made on the assessees only in respect of the beneficial interests of the beneficiaries in the trust funds under sub-sections (1) and (4) of section 21. Now, so far as the beneficiaries specified in the second schedule are concerned, each of them had a life interest in the unit or units allocated to him or her and the assessees were liable under sub-section (1) of section 21 to be assessed in respect of such life interest " in the same manner and to the same extent " as the respective beneficiaries. But the question is as to how the beneficial interest in the remainder in respect of each set of unit or units was liable to be taxed in the hands of the assessees. The argument of the revenue was that it could not be said on the relevant valuation date as to who would be the beneficiaries entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustee 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 individual. This immediately takes us to the question as to which of the two sub-sections, (1) or (4), of section 21 applied for the purpose of assessing the assessees to wealth-tax in respect of the beneficial interest in the remainder qua each set of unit or units allocated to the relatives specified in the second schedule. Now, it is clear from the language of section 3 that the charge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Wealth-tax v. Trustees of Mrs. Hansabai Tribhuwandas Trust [1968] 69 ITR 527 (Bom) and the Gujarat High Court in Padmavati Jaykrishna Trust v. Commissioner of Wealth-tax [1966] 61 ITR 66 (Guj). The Calcutta High Court pointed out in Suhashini Karuri's case [1962] 46 ITR 953, 963 (Cal) : " The share of a beneficiary can be said to be indeterminate if at the relevant time the share cannot be determined, but merely because the number of beneficiaries varies from time to time, one cannot say that it is indeterminate." The same proposition was formulated in slightly different language by the Bombay High Court in Trustees of Putlibai R. F. Mulla Trust's case [1967] 66 ITR 653, 660, 661 (Bom): " The question whether the shares of the beneficiaries are determinate or known has to be judged as on the relevant date in each respective year of taxation. Therefore, whatever may be the position ...... as to any future date, so far as the relevant date in each year is concerned, it is upon the terms of the trust deed always possible to determine who are the sharers and what their shares respectively are. " The Gujarat High Court also observed in Padmavati Jaykrishna Trust's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, sub-section (1), " in the same manner and to the same extent " as each beneficiary in respect of his determinate and known share in such remainder. That plainly excluded the applicability of sub-section (4) of section 21 in the assessment of the remainder. The High Court also examined the question whether the trust deed created one single indivisible trust or several distinct and separate trusts and, disagreeing with the view taken by the Tribunal, came to the conclusion that " the deed of trust created several trusts in favour of the relatives specified in the second schedule and their issues ". But, on the view taken by us that it is sub. section (1) of section 21 and not sub-section (4) of that section which applies in the assessment of the remainder in respect of each set of unit or units in the hands of the assessees, it is unnecessary to pursue this question and decide whether the trust deed created one single indivisible trust or as many trusts as the number of beneficiaries specified in the second schedule. We, accordingly, agree with the High Court that question No. (i) should be answered in favour of the revenue and questions Nos. (ii), (v) and (vi) should be answere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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