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TMI Blog1974 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... o 1964-65, in the case of Arundhati Balkrishna Trust, and also to assessment years 1959-60 and 1960-61. Reference No. 3 of 1973 is in respect of Arundhati Balkrishna Trust for the assessment years 1959-60 and 1960-61 and Wealth-tax Reference No. 5 of 1973, in respect of the same trust but for the four subsequent assessment years, assessment years 1961-62 to 1964-65. Wealth-tax Reference No. 4 of 1973 is for the assessment years 1963-64 a nd 1964-65, and is in connection with Virmati Ramkrishna Trust, Ahmedabad. Wealth-tax Reference No. 6 of 1973 is in respect of the trust created for the third daughter-in-law of Mahalaxmi, namely, Padmavati Jaykrishna, and is for the assessment year 1963-64. As we have stated earlier, all these references raise identical questions and it would be convenient only to refer to the facts of only one out of these four references and for the sake of convenience, we will deal with the facts arising in Wealth-tax Reference No. 3 of 1973. In this reference the assessment years are 1959-60 and 1960-61 and the trust deed was executed by Mrs. Mahalaxmi Harivallabhdas Kalidas on December 30, 1945. By this trust deed an amount of Rs. 3,28,831 and shares and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and not section 21(4) of the Wealth-tax Act and it was contended that in the light of the decision of this High Court in Padmavati Jaykrishna Trust v. Commissioner of Wealth-tax, where one of the assessees in the present group of references was before the court, this High Court had held that the case of Padmavati Jaykrishna Trust, the assessee in Wealth-tax Reference No. 6 of 1973, fell under section 21(1) and not section 21(4) of the Act. It was contended that since the life interest of Arundhati Balkrishna was assessed in her own individual assessment, wealth-tax could not be taxed again in the hands of the trustees. The Tribunal held that the trust could be assessed only to the extent of the value of the interest of the reversioners as arrived at by the valuers. The Tribunal had appointed two valuers as contemplated by the provisions of section 24(6) of the Wealth-tax Act as it stood till 1972, and in the light of the report of the valuers, the Tribunal directed that the trust could be assessed only to the extent of the present value of the interest of the reversioner or remainderman as arrived at by the valuers. The Tribunal held that in the case of this particular trust, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having fallen short of the net wealth of the trust, the balance is liable to be taxed to wealth-tax in the hands of the trust under section 21(4) of the Wealth-tax Act, 1957 ?" Before proceeding to discuss the law points involved in this case, it is better to refer to the precise terms of the trust deed in so far as it is material for the purposes of this case. The trust deed directs that the trustees shall stand possessed of the different assets of the trust upon the trusts following, that is to say : " (a) In Trust to pay the income thereof unto Arundhati, wife of Balkrishna Harivallabhdas, during her lifetime for her role and separate use ; (b) After the death of the said Arundhati, wife of Balkrishna Harivallabhdas, in trust for the male child or children of the said Balkrishna Harivallabhdas for their own use and benefit absolutely in equal shares to the intent and effect that the share of each such male child shall be a vested and transmissible interest in such male child so that the representative of the male child dying before the said Arundhati, wife of Balkrishna Harivallabhdas, shall take the share which such male child would have taken had he been alive to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open market on the valuation date. Thus, section 7 emphasises the concept of the present value as fixed on the basis of the hypothetical market value of any asset which is to be included in the total wealth of an assessee. Section 24 deals with appeals to the Appellate Tribunal from orders of the Appellate Assistant Commissioners. Prior to the deletion of sub-section (6) by the Taxation Laws Amendment Act, 1972, sub-section (6) of section 24 was in these terms : " (6) Where the appellant objects to the valuation of any property, the Appellate Tribunal may, and if the appellant so requires shall, refer the question of the disputed value to the arbitration of two valuers, one of whom shall be nominated by the appellant and the other by the respondent, and the Tribunal shall, so far as that question is concerned, pass its orders under sub-section (5) conformably to the decision of the valuers : Provided that if there is a difference of opinion between the two valuers, the matter shall be referred to a third valuer nominated by agreement, or failing agreement, by the Appellate Tribunal, and the decision of that valuer on the question of valuation shall be final." It is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust deed in Wealth-tax References Nos. 3/73, 4/73 and 5/73 is and the very trust deed in Wealth-tax Reference No. 6 of 1973 is before us. On an interpretation of the terms of the trust deed and in the light of the scheme of the provisions of section 21, the Division Bench held that the number of beneficiaries was definite and their shares were also known. There was no question of their shares being indeterminate or unknown and, consequently, the provisions of sub-section (1) and not of sub-section (4) of section 21 would apply. The Division Bench explained the scheme of section 21 in this manner : " The crucial point of time for determining the net wealth of an assessee is, therefore, the relevant valuation date." and under section 7, the value has to be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. The Division Bench observed : " The object of sub-section (1) is thus to enable the Wealth-tax Officer to levy and recover the tax from a trustee not as a taxable unit or as an individual but in the like manner and to the same extend as the person on whose behalf he holds the assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons on whose behalf the trust assets are held during the assessment year are determinate or known. If they are, the Wealth-tax Officer has to apply the provisions, of sub-section (1) and assess accordingly." As we have already observed earlier, on construing the provisions of the trust deed, the Division Bench in Padmavati Jaykrishna Trust's case held that as, on the relevant date, the number of beneficiaries was defined and their shares were equal, there was no question of their shares being indeterminate or unknown and, consequently, the provisions of sub-section (1) and not sub-section (4) of section 21 would apply. It is clear, therefore, that in each of these four cases before us, the Tribunal was right in the light of this decision in Padmavati Jaykrishna Trust's case that each of the four cases was governed by section 21(1) of the Act and not section 21(4). The result would, therefore, be that the interest of the remainderman being determinate and known, would have to be assessed in the hands of the trustees under section 21 on the basis of the valuation arrived at after following the procedure for valuation laid down in the Act and the valuation would be on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) or assess it directly in the hands of the beneficiary by including it in the net wealth of the beneficiary. These two modes of assessment are clearly alternative to each other." It was printed out that the revenue can adopt either one course or the other but not both, because whether the assessment is made on the trustees or on the beneficiary, it is the same asset which is assessed to wealth-tax, namely, the interest of the beneficiary in the trust properties and the revenue cannot seek to assess the same asset twice. It was pointed out by the Division Bench that the answer to the question as to what is to happen where there are more beneficiaries than one, and their individual shares are indeterminate or unknown, is provided by sub-section (4) of section 2l. It was pointed out : " Since the interest of the beneficiaries in the trust properties in such a case would be indeterminate or unknown, it would not be possible to make direct assessment on any beneficiary in respect of his interest in the trust properties nor would it be possible to levy wealth-tax on the trustees in respect of the interest of any beneficiary in the trust properties 'in the like manner and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well-settled principles that this amount of the present value of the remainderman's interest was determined by the valuers, and it is to be borne in mind that under section 21(1) the trustees can be assessed to the same extent and in the same manner as the beneficiaries and not on any other footing. If the remainderman were sought to be assessed in his own assessment to wealth-tax, he would be assessed not on the basis of Rs. 27 lakhs and odd and Rs. 36 lakhs and odd as the Wealth-tax Officer sought to do in Wealth-tax Reference No. 3 of 1973, but he could be assessed only on the footing of Rs. 1,90,889 and Rs. 2,28,352 for the relevant assessment years because what is to be brought to tax is the present value of the asset of the beneficiary, namely, so far as the remainderman is concerned, the present value of his right to receive the corpus on the death of Arundhati. Under these circumstances the conclusions of the Tribunal : (i) that apart from the life-tenant and the remainderman there was no other beneficiary ; and (ii) the consequential conclusion that once the present value of the interest of the life-tenant and the remainderman were brought to tax under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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