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TMI Blog1998 (8) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had no beneficial interest in the entire corpus regarding the shares fund liable to be assessed to wealth-tax under section 21(1)? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the jewellery fund was not liable to be assessed to wealth-tax under section 21(1)? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that it was not open to the Wealth-tax Officer to make an assessment under section 21(1) subsequent to the direct assessment on the beneficiary? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the assessments under section 21(1) were not justified being in the nature of double assessments?" We may indicate here that the conflict of views noticed by the Division Bench is with regard to the second question. In regard to the other questions, there was practically no debate before us. Before we take up for consideration the main and perhaps the only contentious issue which is question No. 2, we shall advert to the facts giving rise to this referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 21(1) although there was a direct assessment on Anwar Begum earlier. On appeal to the Tribunal, the decision of the Appellate Commissioner was reversed and the appeals were allowed. The Tribunal followed the decision of this court in R. C. No. 67 of 1969 dated November 5, 1970, which relates to wealth-tax assessments of the same assessee for the earlier years. The Tribunal held that there is no beneficial interest which can be treated as an asset within the meaning of section 2(e) of the Wealth-tax Act. The Tribunal expressed the view that the decision in CWT v. Trustees of H. E. H. the Nizam's Sahebzadi Anwar Begum Trust [1981] 129 ITR 796 (AP), on which the Appellate Commissioner placed reliance, has no direct application as the issue involved therein was quite different. The Tribunal further held that the Wealth-tax Officer having opted to make direct assessment on the beneficiary and having made a reference to the returns filed by the trustees, it was not open to him to resile from the option and choose to make an assessment again on the trustees. On this view also, the Tribunal felt that the impugned assessments were liable to be set aside. Before we proceed further, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quences resulting from the action of the trustees in allowing the said articles or any of them to be worn or used as aforesaid. (ii) To allow the said Sahebzadi Anwar Begum to wear and use the articles specified in Part-II of the First Schedule hereunder written for her ordinary and every day use without the trustees being in any way liable or held responsible in any manner whatsoever by any person whomsoever for any loss or damage that may be caused to or in respect of any of the said articles specified in Part-II of the First Schedule hereunder written on account or in the course of the same being kept with or worn or used by her as aforesaid or for any other consequences resulting from the action of the trustees in allowing the said articles or any of them to be kept with or worn or used by her as aforesaid : Provided, however, that if at any time before her death or divorce or remarriage as aforesaid, whichever of the three events shall take place first, any part of the jewellery fund be converted into any income yielding investment, then the trustees shall pay the net income of such investment comprised in the jewellery fund to her until her death or divorce or remarriage as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 21(1). The term "assets" is defined in section 2(e) as including "property of every description, movable or immovable"; it does not however include the items of property specifically mentioned therein. The term "net wealth" is defined in section 2(m). The aggregate value of all the assets belonging to the assessee on the valuation date minus the aggregate value of all the debts owed by the assessee constitutes his net wealth. Coming to the core question, it is seen from the terms of the trust deed that the trustees are required to allow Anwar Begum to wear and use the jewels specified in Part-I of the First Schedule on ceremonial or festive occasions and to allow her to retain the jewels specified in Part-II for her "ordinary and every day use". Anwar Begum is allowed to wear and use the jewels in the manner aforesaid until her death, divorce or remarriage. In the event death, divorce or re-marriage, the trustees are enjoined to sell the jewels and invest the sale proceeds and pay the income to the children and other remote issues of Anwar Begum and Prince Muazzam Jah. Provision for devolution in the event of failure of issues is also made. The trustees are empowered to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold or enjoy... There is no reason or justification to give any restricted meaning to the word 'asset' as defined by section 2(e) of the Act when the language employed shows that it was intended to include property of every description." The learned judges who decided in R. C. No. 67 of 1969, also rejected the contention advanced by counsel for the assessee that the test of transferability or marketability should be satisfied. The proposition enunciated by the Division Bench of the Bombay High Court in CWT v. Purshottam N. Amersey [1969] 71 ITR 180 was referred to with approval. In that decision, the learned judges of the Bombay High Court observed that the use of the words "if sold" creates a fictional position which the tax officer has to assume and "the tax officer must assume that there is an open market in which the asset can be sold and proceed to value it on that basis". Having thus far expressed a view against the assessee, the learned judges came to the conclusion that the interest of Anwar Begum in the jewellery fund is not an 'asset' within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether, on the facts and in the circumstances of the case, the jewellery mentioned in Part II of the First Schedule could be excluded in determining the net wealth assessable in the assessee's hands for each of the valuation dates? 3. Whether, on the facts and in the circumstances of the case, jewelleries mentioned in Part I of the First Schedule and shares to the extent of Rs. 3,60,000 out of the share fund be assessed in terms of section 21(1) of the Wealth-tax Act in the assessee's hands in respect of each of the valuation dates? 4. Whether, on the facts and in the circumstances of the case and on a true reading of section 21 of the Wealth-tax Act in so far as it applies to the trustees, the material persons to be held as beneficiaries under the trust on the valuation dates for the assessment years in question are : (i) Smt. Sahebzadi Anwar Begum with a determinate share, as well as...". As far as question No. 2 is concerned, the learned judges were not really concerned with the point whether the right conferred on the beneficiary to make use of Part II jewellery is in the nature of an asset chargeable to wealth-tax. The point considered was whether it was exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it constitutes an asset, is exempt from being charged to wealth-tax." If we may say so with respect, the phrase "though it constitutes an asset" is not an accurate expression and it is used more or less as an equivalent to the expression---"even if it constitutes an asset". Except the analysis of the provisions of the trust deed and the arguments of the Revenue, no conscious finding was reached that the right of personal use of jewellery is an asset. We are, therefore, of the view that nothing laid down in CWT v. Trustees of H. E. H. the Nizam's Sahebzadi Anwar Begum Trust [1981] 129 ITR 796 (AP) conflicts with the view taken in R. C. No. 67 of 1969. As regards Part I jewellery, the learned judges took the view that the beneficial interest therein is liable to be assessed in terms of section 21(1) because section 5(1)(viii) has no application as the jewellery was not meant for every day personal use, but it was meant for use only on ceremonial or festive occasions. Thus, both with regard to Part I and Part II jewellery, the learned judges held that, section 21(1) was applicable, but Part II jewellery was not liable for wealth-tax as the said jewellery was exempt from tax as per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery items specified in Part I are to be deposited in the joint names of the trustees with a company or bank of good repute preferably in Bombay for safe custody thereof. Clause (b) re-emphasises that until the death, divorce or remarriage the trustees will "hold the jewellery fund upon trust". Sub-clause (i) of clause 4(b) empowers the trustees "to allow Sahebzadi Anwar Begum to wear and use the articles specified in Part I or such of them as may be required on and for the purpose of any special ceremonial or festive occasion" and after such ceremonial or festive occasion is over, the trustees are to take charge of such articles from Anwar Begum and re-deposit the same for safe custody in a company or bank as aforementioned. Sub-clause (i) further provides that the trustees shall not be liable or held responsible for any loss or damage that may be caused to the articles specified in Part I in the course of removal or transit of the said articles or for any other consequences resulting from the action of the trustee in allowing the said articles to be worn and used by Anwar Begum. Thus, what is contemplated by the trust deed is nothing more that the occasional entrustment of the jew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r semblance of title is sufficient to attract the charge under the Wealth-tax Act. In that case, the Supreme Court was dealing with the question whether the property in respect of which registered sale deeds had not been executed, but consideration for sale was received and possession was delivered, could be included in the net wealth of the vendor. The contention that such assets cannot be said to "belong" to the assessee was negatived and the question was answered in favour of the Revenue. The connotation of the expression "belonging to" occurring in section 2(m) was discussed. The ultimate conclusion was that the legal title continued to remain with the vendor as the conveyance deed had not been executed and registered, as required by law. It was observed : "The assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk of it". We do not think that the ratio of that decision which construed the expression "belonging to", applies to the instant case as the vendor was not technically divested of his title to the lands sold out and the title in rem still vested in him. He continued to be the real and legal owner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second question vis-a-vis Part II jewellery. Coming to the first question, the point is squarely covered by the decision of this court in R. C. No. 67 of 1969. It was held that the interest of Anwar Begum in the "shares fund" is not an asset within the meaning of section 2(e) of the Act because it is in the nature of a right to receive annuity which cannot, under the terms of the trust deed, be commuted into a lump sum grant and, therefore, falls under the exclusionary clause. Correctness of this decision has not been questioned nor is there any decision which runs contrary to the view expressed by their Lordships in R. C. No. 67 of 1969. We see no reason to take a fresh look into the matter. Question No. 1 is, therefore, answered in favour of the assessee and against the Revenue. As regards the other two questions, i.e., 3 and 4, there is no need to answer them when once it is held that the shares fund and the jewellery fund are not liable to be assessed to wealth-tax at all in the hands of Anwar Begum, as they do not constitute her assets. We, therefore, decline to answer these questions. The R. C. is, accordingly, disposed of. We make no orders as to costs. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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