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TMI Blog1968 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... rust deeds, all executed on February 28, 1958, the settlor, who was under an obligation to provide for the expenses of and incidental to the marriage of his two brothers and his sister, settled certain jewellery mentioned in the schedule to each of the three trust deeds on trust for the purposes set out in the three trust deeds ; and the jewellery was settled upon trust with a view to make due provision for the expenses of and incidental to the marriage of the two brothers and the sister of the settlor. In the case of Sangramsinh, the brother, the jewellery settled upon trust was worth Rs. 6,94,804, in the case of Ranjitsinh, the other assessee in Wealth-tax Reference No. 3/1965, the jewellery was worth Rs. 6,93,250 ; and in the case of the sister, who is the assessee in Wealth-tax Reference No. 5 of 1965, the jewellery was worth Rs. 6,99,790. So far as Sangramsinh was concerned, there were two trustees, viz., the settlor and the mother of the settlor and in the case of Ranjitsinh and Lalita Raje, the sister, the trustees were the settlor, the mother of the settlor and one Jaysinhrao Mansinhrao Ghorpade. There was no dispute regarding the validity and the genuineness of the trust d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the trust fund and as the trustees were at liberty to utilize the whole or any part of the corpus on the occasion of the marriage of the assessee, they had a wide discretion in this regard and the amount remaining after meeting the marriage expenses had to go to the wives of the assessees, so far as the two brothers were concerned ; and the Appellate Assistant Commissioner held that the assessees' beneficial interest in the trust was indeterminate and unknown. In the case of the sister, Lalita Raje, the Appellate Assistant Commissioner was of the view that the assets were held by the trustees for the benefit of the assessee as the balance of the corpus which might be unexpended was to be handed over to the assessee and, therefore, he came to the conclusion that the assets were held by the trustees for the benefit of the assessee ; and her share was neither indeterminate nor unknown and the entire value was includible in the net wealth of that particular assessee. As regards the two brothers, the Appellate Assistant Commissioner took the view that the proper course in their case was to apply the provisions of section 21(4) and levy wealth-tax upon the trustees and recover the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raje, was concerned. It is necessary to set out the material clauses of the trust deed. As we have already pointed out above, barring one clause, viz, clause 3(e), the provisions of all the three trust deeds executed on February 28, 1958, concerning each of the three assessees, are identical. In the recitals to the trust deed, it has been mentioned that the settlor was the ruler of Baroda State and as such was under an obligation to provide for expenses of and incidental to the marriage of his brother, Prince Sangramsinh, and in each trust deed the name differs in this recital clause ; and in the recital it has been further mentioned that it was with a view to make due provision for the expenses of and incidental to the marriage of the assessee in question that the settlor had set apart the jewellery described in the schedule to each of the three trust deeds ; and it was further mentioned in this recital clause that the said jewellery had been handed over to the trustees prior to the execution of the trust deeds and that the trustees were to hold them upon trusts mentioned in the deed of trust. Under clause 2 of the deed of trust, the trustees are to hold and stand possessed of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd members of the family according to the custom of the family of the settlor PROVIDED FURTHER that the trustees shall not be liable for any account in respect of the expenses for marriage including feasts and presents incurred by them as aforesaid PROVIDED FURTHER that the trustees shall be at liberty in their absolute discretion to pay to the said Prince Sangramsinh the whole or any part of the corpus of the trust fund for such purposes and in any such event the trustees shall not be liable to see to the application or be responsible for the non-application or mis-application thereof AND IT IS HEREBY AGREED AND DECLARED that notwithstanding anything herein or in general law contained to the contrary any act bona fide done by the trustees or any payment bona fide made or expenses bona fide incurred by the trustees in pursuance of the provisions of this clause shall not be questioned in any court of law or otherwise howsoever by any person whomsoever. (e) If any amount of the same corpus remain unexpended, the same shall be handed over to such wife absolutely. (f) If the said Prince Sangramsinh shall not have married up to the age of 50 years, then on his attaining the age of fif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be applied or enjoyed by him in a particular manner, he shall be entitled to receive and dispose of any such interest as if there was no such direction. Under section 17 of the Transfer of Property Act, where the terms of a transfer of property direct that the income arising from the property shall be accumulated either wholly or in part during a period longer than the life of the transferor, or a period of eighteen years from the date of the transfer, such direction shall, save as provided in the Transfer of Property Act, be void to the extent to which the period during which the accumulation is directed exceeds the longer of the aforesaid periods and at the end of such last-mentioned period the property and the income thereof shall be disposed of as if the period during which the accumulation has been directed to be made had elapsed. In the instant case, the period during which the income from the trust fund is to be accumulated is a period of 10 years, i.e., less than the statutory period mentioned in section 17(b) of the Transfer of Property Act ; and, therefore, the direction contained in clause 3(b) is a valid direction in the eye of the law ; and as regards the interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses for marriage including feasts and presents incurred by the trustees and they are also not to be held liable for seeing that the amounts so handed over to the brother or the sister concerned is or is not applied to the purposes of and incidental to the marriage of the person concerned ; nor are the trustees to be responsible for the non-applicability or the mis-application of the trust fund ; and the action of the trustees in pursuance of clause 3(d) is not to be questioned in any court of law or otherwise howsoever by any person whomsoever. Under clause 3(e) provision is made as to what should be done in the event of any surplus remaining out of the trust fund after all the expenses of and incidental to the marriage have been met and in the case of the two brothers, the wife of the brother concerned is to get absolutely the unexpended balance of the corpus of the trust and such surplus is to be ascertained after the trustees have, in their discretion, spent the said amount as they think prosper in connection with the marriages of the two brothers. In the case of the sister, Lalita Raje, clause 3(e) specifically provides that the unexpended surplus is to belong absolutely to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sister concerned absolutely. Clause 3(g) provides for a situation which may arise when the brother or the sister concerned dies before attaining the age of 50 years but without getting married and in the case of death thus happening, the entire corpus of the trust fund is to be divided amongst the heirs of the brother or the sister concerned, the heirs being determined according to the law of intestate succession applicable to Hindus. It is, therefore, clear that both clauses 3(f) and 3(g) provide for the assessee concerned remaining unmarried and either attaining the age of 50 years or dying. In the event of attaining the age of 50 years without getting married, the corpus is to be handed over to the assessee himself, in the event of the assessee concerned dying before attaining the age of 50 years but without getting married, the corpus of the trust fund is to go to the heirs of the assessee concerned, the heirs being determined in accordance with the law of intestate succession applicable amongst the Hindus. We may also point out that under clause 11 of each of the three trust deeds, the trust deed is to remain irrevocable up to 12 noon of March 15, 1964, and after the expira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent. " It may be pointed out that no reliance was placed on behalf of the revenue on this Exception to section 21. It is clear from the wording of the Exception that the Exception applies only to a case where the interest in the fund is given to any person on his attaining a particular age. If the vesting is to take effect on the happening of any other contingency (in the instant case, it is not only attaining the age of 50 years but also remaining unmarried till that age), the Exception cannot apply, in spite of the fact that till the vesting is to take place on attaining the age of 50 years, the income from the expiry of the period of 10 years, till the attaining of the age of 50 years or marriage or death, is to be handed over to the assessee concerned. In view of the fact that no reliance has been placed on the provisions of the Exception to section 21 of the Transfer of Property Act, it is not necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i, it is clear that there can be no doubt that the question is really one of intention to be gathered from a comprehensive view of all the terms of the document and further that the task of construction has to be approached with a bias in favour of vesting unless the intention against vesting is definite and clear. We have, therefore, to ascertain the intention upon reading all the relevant clauses in the trust deed and find out whether there is a clear and definite intention that the interest of the assessee concerned in the relevant trust deed should be a contingent interest or whether the bias in favour of vesting should operate in each of these three cases. When one turns to clauses 3(f) and (g), it is clear that in each of these two clauses what is dominant in the mind of the settlor, and bearing in mind also the object of the settlor in creating this trust, is that first and foremost the deed of trust has been created in order to provide for expenses of and incidental to the marriage of the assessee concerned. But provision has also to be made for certain eventualities which may or may not happen, viz., the assessee not getting married at all till reaching the age of 50 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (g) can only be a contingent interest and not a vested interest. Though no such vested interest can be said to have been created under clauses 3(f) and 3(g), at the same time we must take note of the fact that under clause 3(d), provision has been made by the settlor for the disposal of the corpus of the entire trust fund and the trustees have been empowered to utilize the whole or such part of the corpus as they in their absolute discretion think fit for defraying the expenses of and incidental to the marriage of the assessee concerned. There is no direction given to the trustees as to what proportion of the entire corpus they should utilize for the purposes of and incidental to the marriage ; and the discretion of the trustees in that behalf is absolute and unfettered. Even though the trustees have been empowered to pay to the assessee concerned the whole or any part of the corpus of the trust fund for the purpose of defraying the marriage expenses, such handing over of the part of the corpus is limited by the purpose for which the trustees can so hand it over, viz., for the purpose of the marriage and, therefore, this power set out in clause 3(d) enabling the trustees to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the assessee to insist that a particular portion out of this property shall be spent in connection with his/her marriage. The case would, therefore, clearly fall under section 21(4) of the Wealth-tax Act since the share of the assessee on whose behalf or for whose benefit the corpus fund is held is indeterminate and the wealth-tax can be levied upon the trustees of the particular deed of settlement, so far as the two brothers at least are concerned. Though each of the assessees under clause 3(d) had a vested interest in the property, it cannot be said as to how much portion, whether whole or part, is being held by trustees on behalf of or for the benefit of the particular assessee. Under these circumstances, section 21(2) of the Wealth-tax Act cannot come into operation and, in our opinion, the Tribunal was in error when it held that the provision of section 21(2) can be invoked in the case of the two brothers. This conclusion of ours regarding the two brothers is based on the fact that under clause 3(e), the unexpended surplus remaining after meeting the marriage expenses is to belong absolutely to the wife of the assessee concerned and hence the interest in the corpus unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. As we have indicated in our judgment, Mr. Kaji had relied upon section 2(e)(v) of the Act and also the decision of the Madras High Court in Commissioner of Wealth-tax v. Srimathi Martinammal Machado, and it is in the context of section 2(e)(v) that this latest decision of the Supreme Court requires consideration. In the case before the Supreme Court, the respondent, Smt. Muthukrishna Ammal, had obtained from the Government of India on lease certain salt-pans by two agreements, dated January 1, 1943, and January 1, 1945, respectively. Each lease was to endure for 25 years unless otherwise determined under the covenants of the relevant indenture. The respondent sub-let the right under the first lease to one K. Nadar in consideration of an annual payment of Rs. 15,000 and she sub-let the right under the second lease to Mettur Chemicals Ltd. in consideration of an annual payment of Rs. 18,000. In the course of wealth-tax proceedings regarding the respondent, the question arose as to whether the leasehold interest in the salt-pans should or should not be included in her wealth. The Wealth-tax Officer brought to tax the value of the salt-pans as part of the assets held by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value will be liable to be included in the net wealth of the assessee. It was contended before the Supreme Court on behalf of the revenue that Parliament had amended section 2(e)(v) of the Act by the Wealth-tax (Amendment) Act, 1964 ; and the words, " from the date the interest vests in the assessee ", added at the end of section 2(e)(v), were an instance of parliamentary exposition of the meaning of the clause as it stood prior to the amendment. The Supreme Court repelled that argument and in the end observed : " We are of the view that interest in property which is available to the taxpayer for a period not exceeding six years from the valuation date is not an asset within the meaning of section 2(e) and the value thereof cannot be included in the net wealth of the assessee for the financial year relevant to the valuation date. " In the instant case, the three relevant trust deeds were all executed on February 28, 1958, and by clause 11 of each of the three trust deeds it has been provided that the trust deed shall remain irrevocable up to 12 noon of March 15, 1964, After the expiration of this period, it would be lawful for the settlor at any time or times by any deed or dee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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