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TMI Blog1984 (3) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... rust Nos. II and III. That, without prejudice to the contention stated above, even assuming that the value of the assets of the aforesaid trusts was includible in the estate, the value of the interest of the deceased in the said trust funds at the time of his death would be zero. 3. That the Appellate Controller erred in confirming the order of the ACED denying the accountable person's claim for deduction from the principal value of the estate, of the amount of estate duty payable. 3. So far as the department's appeal is concerned, the grounds raised are as follows : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in directing the ACED to adopt the value of the immovable property known as 'Petit Hall' at Rs. 2,76,880 as against the value of Rs. 4,74,000 adopted by the Assistant Controller in the assessment on a valid basis. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in directing the ACED to value the shares of the private limited companies as per rule 1D of the Wealth-tax Rules, 1957, instead of upholding the valuation adopted by the ACED in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being alive on 31-3-1987 but a vested interest and, therefore, capable of valuation and should be valued as such'--CWT v. Ashok Kumar Ramanlal [1967] 63 ITR 133 (Guj.). The ACED observed that the aforesaid judgment of the Gujarat High Court has been accepted by the accountable person inasmuch as no appeal to the Supreme Court has been preferred. Accordingly, the ACED included the value of the corpus and accumulations of the aforesaid Trust Nos. II and III in the principal value of the estate of the deceased for the purpose of estate duty assessment. The accountable person challenged this decision before the Appellate Controller with arguments which may be summarised as under : 1. That the interest of the deceased was purely a contingent interest and not a vested interest (according to the relevant clauses of the trust deeds) for, if he died before 31-3-1987, he would have no right to the corpus or the accumulated incomes of these trusts. 2. That in any case, the Gujarat High Court decision was delivered in the context of wealth-tax assessment and it would not apply in the estate duty matters. 3. That since the deceased had already brought into existence children, the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by statute regarding minors. He pointed out that the limitation has to be one attributable to the volition of the settlor and must be one actually forming part of the settlement or disposition. Since no such subsequent limitation subsisted in the present case, the Appellate Controller held that section 23 was also not applicable. He added that since the Gujarat High Court had held that the interest of the wife and that of the husband were the same, there was no question of interest in Trust Nos. II and III forming a separate estate. Accordingly, he upheld the action of the ACED in including in the estate of the deceased the interest of the deceased in the corpus and accumulated incomes of both Trust Nos. II and III. 6.1. It is this decision of the Appellate Controller that is now being challenged before the Tribunal. 7. Shri H.D. Nanavati, the learned counsel for the accountable person, after reiterating the arguments which were advanced by him before the Appellate Controller, laid great stress on the following argument : That the corpus of the two Trust Nos. II and III by virtue of clause 3(c) of the relevant trust deeds was to go to Ashok Kumar Ramanlal Shah absolutely only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the ACED and the Appellate Controller which were based on the judgment of the Gujarat High Court in the case of Ashok Kumar Ramanlal Shah. 8. We have given careful thought to all the aforesaid submissions and arguments, vis-a-vis the facts and circumstances of the case, the relevant clauses of the trust deed in question and in the light of the several judicial decisions on the points at issue, and we have come to the following conclusion : The first and foremost argument of Shri Nanavati, on behalf of the accountable person, has throughout been that the interest of the deceased, Ashok Kumar Ramanlal Shah, was purely a contingent interest and not a vested interest because, according to him, Ashok Kumar Ramanlal Shah, having died before 31-3-1987, he could have no right to the corpus or to the accumulated income of the two trusts in question. His second and alternative argument was that, even if the interest of the deceased was taken to be a vested interest, it had failed or was determined before it became interest in possession and that in view of subsisting subsequent limitations, the provisions of section 23 applied to the case of the deceased. 9. The answer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who was merely entitled to a contingent interest in the corpus. The fact that on the death of the assessee, without exercising the power of appointment, the corpus would go to his heirs according to the law of intestate succession is also a circumstance strongly indicative of the intention that the assessee should have a vested interest.... " Their Lordships have also explained that the direction in clause 3, sub-clause (b) of the trust deeds, satisfied the requirement of the exception of section 21 in the following terms : " ...Clause 3, sub-clause (b), provides that the trustees shall be under an obligation to apply the net income or such portion thereof as they in their absolute discretion think fit for the benefit of the assessee and his wife. Now the assessee would certainly be bound to provide for his wife and a provision for the benefit of the assessee's wife must therefore be regarded as a provision for the benefit of the assessee. It is not as if any part of the income is directed to be applied for the benefit of a third person. The provision is for the benefit of the assessee and his wife, who together constitute a family or a unit, and a provision which requires that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in possession and not an interest in expectancy. " (In coming to this decision, the Supreme Court distinguished on facts the judicial decision in the Irish case reported in Power's case, cited before us by Shri Nanavati). 9.2 This, in our view, goes a step further than the decision of the Gujarat High Court in the case of Ashok Kumar Ramanlal, where the Gujarat High Court had, on interpretation of the relevant clauses of the trust deeds, held that the beneficiary's interest was a vested interest. If that be so, then as decided by the Supreme Court in the case of Mahendra Rambhai Patel, section 23 shall have no application to the present case either. In this view of the matter, the question whether 'subsequent limitation' as envisaged in section 23 subsisted, would not arise for consideration and, consequently, the reference by Shri Nanavati, the learned counsel, to certain observations on pages 25 and 26 of Mahendra Rambhai Patel's case would lose its relevance. On the other hand, it may be pointed out that in the said decision in the case of Mahendra Rambhai Patel's case, the Gujarat High Court has explained what an 'interest in possession' within the meaning of section 23, is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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