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TMI Blog1987 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ties as well as the Tribunal. It is referred to as "Sri A. V. Reddy Trust for Mrs. Margaret Anne Reddy", whereas the trust deed would indicate that the trust was created in favour of Dexter Anand Sear, the settlor's daughter's son. Another trust was created on October 3, 1970, for the benefit of the settlor's grandson, Harish Reddy, and the trust was known as "Sri. A. V. Reddy Trust for B. V. Harish Reddy". The trust is the subject-matter of consideration in R. C. No. 38 of 1983. third trust was created on October 2, 1970, for the benefit of the settlor's grandson, B. V. Satish Reddy. This trust is described as "Sri A. V. Reddy Trust for B. V. Satish Reddy" and is the subject-matter of consideration in R. C. No. 39 of 1983. A fourth trust was created on July 6, 1971, for the benefit of the settlor's second daughter, Mrs. Lalitha Anderson. This trust is described as "Sri A. V. Reddy Trust for Mrs. Lalitha Anderson", and is the subject-matter of consideration in R. C. No. 40 of 1983. In R. C. No. 37 of 1983, which relates to the wealth-tax assessment years 1975-76 to 1978-79, the following question is referred by the Tribunal for the consideration of this court: "Whether, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses in each trust deed which determined the character of the trusts. We will extract those clauses from R. C. No. 37 of 1983 as they are identical in the remaining trusts. "18. The trustee for the time being may, at his discretion, apply the whole or any portion of the income of the trust fund for the maintenance, education or advancement in life of the beneficiary and shall accumulate all the residue by investing the same in the aforesaid manner. 20. On the beneficiary completing the age of 25 years, the trustee shall transfer and make over to the beneficiary all the trust funds and on so transferring, this trust deed shall stand cancelled and be of no effect. 21. If the object for which the trust has been created fails and cannot be fulfilled, the trustee for the time being shall be at liberty to apply the trust property to the benefit of the other sons, daughters of my last daughter, Mrs. Margaret Anne Reddy Sear, in the proportion of one share for a son and half-share for a daughter." In the trust created for the benefit of the settlor's (laughter, Mrs. Lalitha Anderson (R. C, No. 40 of 1983), the provisions are identical except clause 20 of the trust deed under wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue, inter alia, urged before the Tribunal that the Appellate Assistant Commissioner was in error in directing the assessment of the beneficial interest of the beneficiary. The Revenue claimed that the assessments made by the Officer on the entire value of the trust fund in the hands of the trustee were in accordance with law and that the Appellate Assistant Commissioner of Wealth-tax ought not to have entertained the plea that only the beneficial interest has to be taxed and not the entire trust fund. The Tribunal, after consideration, upheld the Appellate Assistant Commissioner's directions. The finding of the Tribunal is expressed in the following terms in the concluding portion of its order: "....The interest in the present case, looking to the ratio of the later Gujarat decision, would, therefore, be only a contingent interest in the corpus of the trust till the beneficiary attained the stipulated age. Hence, what could be included in the hands of the assessee would be the interest of the beneficiary in terms of the trust deed and not the corpus of the trust itself Therefore, the appeals of the Revenue, on this point, fail." Aggrieved by the aforesaid decision of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in the trust fund, it cannot be said that the interest of such beneficiary in the trust fund is either indeterminate or unknown so that the provisions of section 21(4) of the Act could be applied. Learned counsel urged that the share of the beneficiary which extended to the whole of the trust fund cannot be held to be indeterminate or unknown. Learned counsel, therefore, urged that, if anything, the officer could have assessed the value of the contingent interest possessed by each beneficiary in the trust fund on the corresponding valuation dates and that the assessment of the entire trust fund is improper. Learned counsel relied on certain judicial pronouncements in support of his contentions to which we shall make reference a little later. We have carefully considered the arguments of learned counsel and we have also gone through the record. It does not appear that there was any misapprehension in the mind of the trustee when he filed the wealth-tax return for the purpose of assessment in each case. In the returns filed, the trustee declared the value of the entire trust fund. The return was not filed by the trustee on behalf of the beneficiary nor was there any claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 555 at pages 591 and 592 "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 ... 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 section 21." The above observations of the Supreme Court make it clear at once that whenever a trustee is sought to be assessed for purposes of wealthtax, an assessment has to be made keeping in mind the provisions of section 21 (1) and section 21 (4) of the Wealth -tax Act. The scheme of section 21 is succinctly explained by the Supreme Court in Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust's case [1977] 108 ITR 555, at pages 593 and 594. It is useful to refer to the following, observations of the Supreme Court: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht against the trustee to utilise the whole or any portion of the trust fund for his or her benefit. The rights of the beneficiaries come into existence at a future date when the condition regarding their survival is fulfilled. In view of these terms, learned counsel for the assessee contended before us that the interest of the beneficiary is contingent upon survival and on the relevant valuation dates, it is only a contingent interest. Learned counsel urged that if an assessment of the beneficial interest can be made at all, it can only be in respect of such a contingent interest We have no difficulty in accepting this part of the contention of learned counsel for the respondent-assessee. It is not necessary to refer to a number of cases bearing on this point. We would prefer to refer to the decision of the Bombay High Court in CWT v. Master Jehangir H. C. Jehangir [1982] 137 ITR 48. That was case where the settlor created a trust for the benefit of his grandson. Clause 6(c) of the trust deed provided that during the lifetime of the beneficiary and until he attains the age of 27 years, the trustees shall pay to the beneficiary or expend or utilise on his behalf or for his benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth of the beneficiary as he had only a contingent interest. We may point out that the decision of the Gujarat High Court in CWT V. Kum. Manna G. Sarabhai [1972] 86 ITR 153 and the decision of the Bombay High Court in Maharani Shri Vijaykunverba Saheb of Morvi V. CIT [1975] 99 ITR 162 and the Full Bench judgment of the Gujarat High Court in CIT v. Kamalini Khatau [1978] 112 ITR 652 support the above principle. Sri Venkatarama Reddy, however, argues that even if the beneficiary had no enforceable right against the trust fund on the valuation date, still it must be regarded that the share of the beneficiary in the trust fund is determinate and known and consequently assessment can be made only under section 21(1) of the Act. If no assessment can be made on the beneficiary because the interest of the beneficiary in the trust fund on the valuation date is a contingent interest which is not an asset, an assessment cannot also be made in the hands of the trustee as section 21 ( 1 ) provides for an assessment in the hands of the trustee in the like manner and to the same extent as it would be leviable on the beneficiary for whose benefit the trust property is held. According to learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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