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TMI Blog1984 (3) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... al representative strongly urged that the trust was the owner of the shares. What was valued and included in the wealth-tax assessments is the right to income of the beneficiaries. Hence, the assessee is not entitled for the exemption under section 5. He placed reliance on a decision in W.O. Holdsworth v. State of Uttar Pradesh [1958] 33 ITR 472 (SC). The learned counsel for the assessee strongly urged that the trust held shares in some companies for the benefit of the beneficiaries. The respondent-assessees who are beneficiaries were entitled to the income from the trust. Hence, the assessee is entitled for the exemption under section 5 as the shares were held for the benefit of the respondent-assessees. 5. We have considered the rival submissions. The shares in some companies were held by the trusts. The respondent-assessees are the beneficiaries under the trust and are entitled to the income from trust. Section 3 of the Act which is the charging section levies the charge of wealth-tax on the net wealth of the assessee on the relevant valuation date. 'Net wealth' is defined in section 2(m) of the Act to mean the amount by which the aggregate value computed in accordance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the hands of the beneficiary by including it in the net wealth of the beneficiary. In CWT v. Harshad Rambhai Patel [1964] 54 ITR 740 the Gujarat High Court held that for the purpose of computation of net wealth it would not matter whether the property in question stands in the assessee's name or stands in the name of another person so long as the beneficial ownership therein vests in the assessee. In the above decisions, reference has been made to Heritable Reversionary Co. Ltd. v. Millar [1892] AC 598 (HL) wherein it was observed that the beneficiaries were the true owners all along. In CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 the Supreme Court held that section 3 is subject to section 21 and it must yield to that section insofar as the latter makes special provision for assessment of trustee of a trust. It was further held that the assessment made on the trustee is in a representative capacity. It is really the beneficiaries who are sought to be assessed in respect of their interest in the trust properties under the trust deed. What is taxed is the interest of the beneficiaries in the trust properties and not the corpus of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 21 to be assessed in respect of such life interest 'in the same manner and to the same extent', as the respective beneficiaries...." In the illustration referred to in the above case, A had only life interest in the income of the trust. It was held therein that the trustees can be taxed only in respect of beneficial interest, there being no other beneficiary apart from A and such of the children of A as the trustee might think fit, the balance of the value of the corpus cannot be brought to tax in the hands of the trustee. In the case before the Supreme Court, the beneficiaries had life interest. The Supreme Court held that the assessees were liable under sub-section (1) of section 21 to be assessed in respect of such life interest 'in the same manner and to the same extent' as the respective beneficiaries. In CWT v. Kripashankar Dayashankar Worah [1971] 81 ITR 763 the Supreme Court held that the Parliament while enacting section 21(2) proceeded on the basis that for the purposes of the Act the trustee is holding the trust property on behalf of the beneficiaries. In this decision, the Supreme Court referred to its decision in W.O. Holdsworth's case and pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be assets belonging to the trustee so as to be includible in his net wealth as they are the property of the beneficiaries and the beneficiaries are assessable to wealth-tax in respect of interest in the trust properties belonging to them. The assessment contemplated under sub-sections (1) and (4) of section 21 on the trustees is an assessment in a representative capacity. The revenue can make an assessment either on the trustee in a representative capacity or on the beneficiary directly in respect of interest in the trust property. In Addl. CWT v. Smt. Kamalabai [TR Case No. 10 of 1976] under a will the assessee had life interest in the house property, the value of which was included in the net wealth. The assessee claimed exemption under section 5(1)(iv). On the above facts, the Karnataka High Court held that the house property though limited to the life interest of the assessee, is an asset and is the wealth belonging to the assessee and, consequently, for the purposes of section 5(1)(iv) it must be held that the house in respect of which life interest is created in favour of the assessee belong to that extent to the assessee during her lifetime and as the value of life ..... X X X X Extracts X X X X X X X X Extracts X X X X
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