9911796707
TMI Blog1996 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... be included, as belonging to that individual, the value of the assets which on the valuation date are held by a person or an association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both. So the Wealth-tax Officer on the basis of this provision was of the view that these properties should be included in the net wealth of the assessee. The trust deed is dated March 26, 1974. The properties are settled on seven children of the assessee. One of them was a major even at the time of execution of document. Her share is 10 per cent. So, for all these assessment years her share had been excluded from net wealth. Only the balance has been included in the reassessments. Another minor with 17 1/2 per cent. share became major earlier to April 1, 1975. So that also has been excluded for the assessment years 1975-76 and 1976-77. Other minors became major only after the assessment year 1976-77. The trust is to last for a period of ten years. Clause IV of the document provides that ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would arise in that a substantial portion of the immovable property would belong to no one and that, therefore, the real intention of the transferor in creating the trust is that in such an event all the seven inclusive of the minors should get the ownership in the property and that, therefore, the minors will get a benefit even during their minority by way of ownership in the property. That is how the Departmental representative attempted to distinguish these two High Court judgments. But the Tribunal rejected that argument. The Tribunal found that first of all there is no vacuum created because if after five years the trust is extinguished, what clause XIV provides is that the majors alone will take it according to the ratio of the beneficial interest of the beneficiaries. The Tribunal further held that in any event as laid down by the two High Courts the accrual of interest on the minors in the manner suggested by the Departmental representative is only a contingent interest and not a vested interest. Therefore, the submission of the Department that a benefit is created in the minor even during the period of minority was not accepted by the Tribunal. Accordingly, the Tribunal al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e distributed in accordance with the amounts standing to the credit in the accounts of the beneficiaries. This clause would not lead to the conclusion that the minors were also having beneficial interest in the trust during their minority. It was, therefore, submitted that the Tribunal was correct in holding that section 4(1)(a)(iii) of the Wealth-tax Act would not be applicable to the facts of these cases. We have heard the submissions made by learned standing counsel for the Department as well as learned counsel for the assessee. The fact remains that a trust was created by the assessee by executing a trust deed on March 26, 1974. The properties were settled on seven children of the assessee. One of them was a major even at the time of the execution of the document. Her share is 10 per cent. So far as these three assessment years are concerned, her share had been excluded from the net wealth. Only the balance has been included in the reassessment. Another minor with a 17 1/2 per cent. share became major earlier to April 1, 1975. That minor's share was also excluded for the assessment years 1975-76 and 1976-77. Other minors became majors only after the assessment year 1976-77. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets of the trust shall be distributed in accordance with the shares held by the beneficiaries. This does not mean that the minors were also provided the beneficial interest during their minority. If the trust came to an end before the appointed day, if the beneficiaries are minors they would get nothing. In view of this factual position it is not correct to state that the deferred interest of the minors is includible in the hands of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act. A similar question came up before the Supreme Court of India in the case of CIT v. M. R. Doshi [1995] 211 ITR 1. According to the facts arising in that case, the assessee as an individual had executed two deeds of trust and a supplementary deed, the cumulative effect of which was that the income from the trusts was to be accumulated until the attainment of majority by his three sons and the accumulated income was then to be divided into three equal shares and the respective one-third share of each son was to be paid to him. The question was whether the income from the trusts could be included in the total income of the assessee under section 64(v) of the Income-tax Act, 1961, for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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