9911796707
TMI Blog1994 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... correct interpretation of the will in question, the Tribunal was right in law in directing the Wealth-tax Officer to value the assessee's life interest on the respective valuation dates in accordance with law and to substitute the same for amounts included in the relevant assessments and in directing the Wealth-tax Officer to pass fresh assessment orders on the limited issue in accordance with law and to allow appropriate relief to the assessee?" The facts as found by the Tribunal are as under: The assessee along with her three sisters, being daughters of the late Aratoon Stephen (hereinafter referred to as "the deceased") had been enjoying certain benefits from several trusts created by the deceased by his will dated August 15, 1925. The deceased settled certain properties in several trusts and appointed three gentlemen as trustees. He appointed his wife as the guardian of his infant children during her lifetime and after death the trustees were to act as guardians of the said children. Particulars of settlement in trust made in favour of the children are set out in paragraphs 7, 8, 9 and 10 of the said will. These very clauses came up for consideration before this court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hildren of their due share. As per clause 9 of the will, the widow of the testator and, in her absence, the trustees could cut off or deprive any of the testator's children of his or her interest in the trust if he or she was found guilty of misbehaviour. Therefore, with the power of appointment vested in her, the deceased assessee in this case, according to the Tribunal, could not have any right to dispose of the trust fund to the detriment of her children. The power of appointment given to the assessee was a limited one inasmuch as she had only the authority to vary the shares of her children in the 1/4th share of the trust fund. Such a power does not give rise to any asset to the assessee. The Tribunal, therefore, held that the power of appointment vested in the assessee under the said will did not enlarge her interest in the trust so as to empower her to assume full ownership of the trust fund. We may, at the outset, set out clause 9 of the will dated August 15, 1925 (at page 588 of 69 ITR) : "9. I direct that my trustees shall hold such equal shares of and in my residuary trust funds upon trust to apply the income or so much thereof as may be necessary of one of such share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share in the general income of a residuary trust fund. Under clause (7) of the will, there was a residuary trust fund established by the testament consisting of his properties, not otherwise 'disposed of' or bequeathed under the will, with direction to the trustees to invest rupees seven lakhs out of that in securities and pay the income therefrom to his widow so long as she did not marry again and thereafter to set aside so much out of the said securities as would yield an income of Rs. 6,000 annually and to pay Rs. 500 per month to her for the remainder of her life. The remainder of the residuary trust fund, including the balance of the securities hereinbefore mentioned, if any, were directed to be held upon trust to divide the same into as many equal shares as the testator had children surviving him so that for the purposes of such division all the children of each deceased child of the testator shall represent and be entitled to one such equal share. There were the following further directions upon the trustees of the fund : (a) to apply the income or so much thereof as may be necessary of one of such shares for the support and maintenance of each of the children of the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointment by her. The remaining fourth life interest holder, Mr. Ripsy Gaulstan, did not exercise the limited power of appointment because she had only one issue. It has, however, been contended on behalf of the Revenue that the decision in CWT v. Mrs. Dorothy Martin [1968] 69 ITR 586 (Cal) is on a different issue. The opinion of the High Court in that case was sought for on fundamentally a different aspect of the matter where the Revenue in its reference application assailed the Tribunal's order as to non-chargeability of the life interest of the assessee therein (a co-beneficiary of the deceased) to wealth-tax by virtue of the exemption under section 2(e)(iv) of the Wealth-tax Act. The Tribunal considered that the assessee's interest under the testament, the same one now under consideration by us, did not constitute a life interest. Her beneficial interest was in the nature of annuity. So, on this limited question of whether the interest under the testament was a life interest or annuity, the court was to give its opinion and the court held that the interest being an aliquot part of the income and not consisting in any right to receive a periodic fixed sum the Tribunal went wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny valuation and the price which it would fetch, if sold in the open market, could not possibly be ascertained. Such an argument was fully examined in the Bombay case (CWT v. Purshottam N. Amersey [1969] 71 ITR 180) in which the High Court referred to the provisions of the English statutes, which were in pari materia as also decisions given by the English courts including the one by the House of Lords in IRC v. Crossman [1937] AC 26. It has been rightly observed by the High Court that when the statute uses the words 'if sold in the open market', it does not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and, on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the tax officer must assume that there is an open market in which the asset can be sold." In any case, a life interest cannot be treated as absolute interest and there is no hypothesis in law to that effect. Even the right to appoint in the sense that the deceased life tenant could vary the interest inter se of such remaindermen cannot be said to be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the assessee though vested with a power of appointment by the will left by the testator could have been assessed only in respect of the value of her life interest in the income of the trust for the purpose of wealth-tax assessment? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the power of appointment vested with the assessee by the will of the testator does not constitute an asset within the meaning of section 2(e) of the Wealth-tax Act? 3. Whether, on the facts and in the circumstances of the case and on a correct interpretation of the will in question, the Tribunal was right in law in directing the Wealth-fax Officer to value the assessee's life interest on the respective valuation dates in accordance with law and to substitute the same for the amounts included in the relevant assessment and in directing the Wealth-tax Officer to pass fresh assessment order on the limited issue in accordance with law and to allow appropriate relief to the assessee? 4. Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering to take the Tribunal's decision in the cases of the beneficiaries to the High Court under section 27(3) of the Act did not accept the contention of the assessee and, accordingly, included the assessee's proportionate share in the value of the assets of the estate in the net wealth of the assessee. The Appellate Assistant Commissioner found that the Wealth-tax Officer rejected the contention of the appellant that the assets of the estate were held by the trustees and the appellant was only the tenant and should be assessed in respect of the capitalised value of the life interest in the estate along with other personal assets on the ground that the decision of the Tribunal in this regard was not accepted by the Department. He also found that the Tribunal in the case correctly held that the appellant had only a life interest in the assets and was not the owner. In view of this, the Appellate Assistant Commissioner directed the Wealth-tax Officer to value the appellant's life interest on the valuation date in accordance with law and to substitute the same for the amount included in the relevant assessment. The Wealth-tax Officer should also, while calculating the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
