9911796707
TMI Blog1987 (2) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,200 per annum and the grand-daughters at Rs. 7,200 each per annum. The balance amount due to them was directed to be accumulated and be paid to them after a period of 18 years from the date of the creation of the trust. The Wealth-tax Officer, in the first instance, for the assessment years 1970-71 and 1971-72 under the Wealthtax Act, 1957 (27 of 1957) for short, " the Act ", assessed, on May 30, 1972, under section 21(2) of the Act, the tax on the beneficiaries directly. Subsequently, he made assessment on September 25, 1972, under sub-section (1) of section 21 on the trustees representing the beneficiaries. Against this later order, the assessee carried the matter in appeal. The Appellate Assistant Commissioner while upholding the assessment made by the Wealth-tax Officer held that to the extent that property, the beneficial interest of which was already assessed under section 21(2) is valid and directed that on capitalisation basis, the residue and the corpus should be assessed and the wealth-tax has to be collected on that basis. Aggrieved against that order, the assessee carried the matter in second appeal to the Income-tax Appellate Tribunal which, by its order dated July 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3 of the Act is the charging section which adumbrates that subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I. When assets are held by court of wards, administrators-general, receivers, managers or any trustees, etc., the computation of net wealth is adumbrated in section 21. Section 21(1), prior to the insertion of " subject to the provisions of sub-section (1A)" (by the Finance (No. 2) Act of 1980 with effect from April 1, 1980) which is not relevant for the purpose of this case, excluding the irrelevant, is as follows : In the case of assets chargeable to tax under this Act, which are held by a court of wards........... or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise.......... the wealth-tax shall be levied upon and recoverable from the......... or trustee, as the, case may be, in the like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets have been held by the trustee, then to the extent so assessed, the corresponding power given to the assessing authority under sub-section (1) of section 21, by necessary implication "in the like manner and to the same extent," is taken away, since what is exigible to wealth-tax is the interest in the assets held by the beneficiary. The trustee is only representative in character for the benefit of the ultimate beneficiary. In a case where the beneficiaries are unknown or the right of the beneficiary is undetermined, then recourse to sub-section (4) of section 21 can be had. In a case where the beneficiaries are known and their interest is specified in the indenture of the deed of trust and their rights also are declared thereunder, then sub-section (4) need not be resorted to. Obviously, in this case, the assessing authority, viz., the Wealth-tax Officer in the first instance, admittedly has taken recourse to sub-section (2) of section 21 and made assessment for the relevant year directly on the beneficiaries on May 30, 1982. Thereafter, he ceased to have any power to take recourse to section 21(1) in respect of the same beneficial interest held by the beneficiaries to bring it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the trustee, proceed to make direct assessment on each of the three beneficiaries A, B and C and in that case, Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs would be included in the net wealth of A, B and C, respectively. The result would be that though the value of the corpus of the trust property is Rs. 10 lakhs, the assessments, whether made on the trustee or on each of the three beneficiaries, would be only in respect of Rs. 5 lakhs, Rs. 2 lakhs and Rs. 2 lakhs and the balance of Rs. 1 lakh would not be subject to taxation. In fact, in most cases, if not all, the aggregate of the values of the life interest and the remaindermen's interest would be less than the value of the total corpus of the trust property, since the value of the remaindermen's interest would be the present value of his right to receive the corpus of the trust property at an uncertain future date and this would almost invariably be less than the value of the corpus of the trust property after deducting the value of the preceding life interest. The balance of the value of the corpus of the trust property would not, in the result, be subjected to assessment to wealth-tax. But that is the logical and inevitable e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
