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TMI Blog1987 (4) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... rda where the fact of the creation of the oral trust was placed on record and the provisions of the trust specified orally were also recorded. According to the oral directions recorded in the minutes of the first meeting of the trustees held on 23rd March, 1977, as already described, the trustees were to hold the trust fund and the future income thereof upon trust for the benefit of the assessee's wife, Mrs. Aban Keki Gharda, in the event of there being any difference of opinion at any time between the trustees or in the event of a tie between them, the matter was to be decided by the casting vote of the senior-most amongst them in age, the gift of 2,000 equity shares in M/s. Gharda Chemicals Pvt. Ltd. was revocable and the assessee reserved to himself the absolute right to transfer the shares or the assets to which they stood converted back to him for his absolute use and benefit at any time after one year, i.e., 21-3-1978, etc. It was also placed on record that on 21-3-1977 along with the oral declaration of trust by the assessee, the assessee also handed over 2,000 equity shares in. M/s. Gharda Chemicals Pvt. Ltd. to the trustee in the presence of M/s. J. P. Somaiya and P.A. Pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemicals Pvt. Ltd., in the name of the assessee's wife and continued to be in the name of the assessee's wife on the valuation dates relevant to the assessment years 1981-82 to 1983-84. This amount of Rs. 1,20,000 was also, therefore, included in the assessee's net wealth for the assessment years 1981-82 to 1983-84. 4. When the matter went up in appeal, the Commissioner of Wealth-tax (Appeals) held that the value of 2.000 bonus shares received on the 2,000 equity shares of Gharda Chemicals Pvt. Ltd. transferred by the assesses to an oral revocable trust for the benefit of the assessee's wife, could not be included in the assessee's net wealth for all the four assessment years under appeal before us. 5. He further held while dealing with the appeals for the assessment years 1981-82 to 1983-84 that the fixed deposit of Rs. 1,20,000 in the company, M/s. Gharda Chemicals Pvt. Ltd. out of dividends on shares transferred by the assessee to the oral revocable trust as well as on the bonus shares also could not be included in the net wealth of the assessee. The Commissioner of Wealth-tax (Appeals), however, made an observation in paragraph 8 of his order that for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Raju, cited before us the rulings of the Hon'ble Supreme Court in the cases of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 and Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 in support of the contention that it is the duty of the Court not to give judicial benediction to colourable devices and it is the duty of the Court to go behind the smoke screen and discover the true state of affairs. Reference was then made by him to another ruling of the Hon'ble Supreme Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 wherein their Lordships laid down that where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals and the tax authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Viewed in this context, according to Shri Raju, the 2,000 equity shares in Gharda Chemicals Pvt. Ltd. even though claimed to have been transferred to an oral revocable trust on 21-3-1977 remained in the name of the assessee, the bonus shares declared on these equity shares were also in the name of the assessee and the dividends o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be in absolute control and the whole thing was a facade or smoke screen. Similar, according to Shri Raju, was clause 8, which showed that any time after 21-3-1978, i.e., one year after the so called creation of the oral revocable trust the assessee could direct for transfer back to him of these shares or the assets into which they stood converted for his own absolute use and benefit at any time, which the trustees shall be bound to do. It was submitted by him that in the first place the so called trust was by an oral declaration and even according to the minutes of the meeting of the trustees held on 23-3-1977 there were only two trustees, i.e., the assessee and his wife of whom the assessee being senior in age was to have a casting vote. The cumulative effect of all these facts and circumstances, according to Shri Raju, was that there was in effect no transfer of the shares, the whole thing was a smoke screen and it is the duty of the Tribunal to find out the real facts and not give judicial benediction to a colourable device by the assessee. On this basis, Shri Raju submitted that the inclusion of the value of the 2,000 bonus shares of Gharda Chemicals Pvt. Ltd. in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal in the case of First WTO v. S.B. Garware, HUF [1986] 15 ITD 711 (Bom.), wherein it was held that the mere fact of reduction in the tax liability does not affect the genuineness or the legality of the transfer. 10. On the same parity of reasoning Shri Doshi submitted that the fixed deposit of Rs. 1,20,000 in the company, Gharda Chemicals Pvt. Ltd., out of dividends on equity shares in the company transferred to the trust and bonus shares received on those shares could not be included in the assessee's net wealth. 11. Coming to the assessee's appeals, Shri Doshi submitted that the issue of whether the advance payment of tax, which was excluded from the assets, should be deducted from the tax payable with reference to the book profits in accordance with the law applicable thereto for the purpose of determining whether the amount representing the provision for taxation was in excess and, if so, to what extent while valuing the shares under rule 1D of the Wealth-tax Rules, 1957, also cropped up in the assessee's wealth-tax appeal for the assessment year 1979-80 before the Appellate Tribunal (WTA No. 586/ Bom/1985) and the facts relevant to the issue as well as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . that it is the duty of the authorities not to be satisfied with the form alone and it is their duty to get behind the smoke screen and discover the true state of affairs and where there is a colourable device, it should not receive judicial benediction. Viewed in this context, it is found in the present case that the trust is said to have been created by an oral declaration on 21-3-1977 to which 2,000 equity shares in M/s. Gharda Chemicals Pvt. Ltd. were handed over. According to the minutes of the first meeting of the trustees who happened to be none other than the assessee and his wife held on 23-3-1977, the trust was revocable and at any time after 21-3-1978 the assessee had the right to get the shares or the assets into which they stood converted/transferred back to him, even during that one year in the event of any difference of opinion at any time and there being a tie between the trustees who, it is necessary here to point out, were the assessee and his wife, the senior in age was to have a casting vote in addition to his own and this meant that the assessee who was senior in age would always have an absolute control over the so-called trust. It is further necessary to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth for all the four assessment years under consideration before us was justified and was wrongly excluded by the CWT (Appeals). 15. We further hold that for the assessment years 1981-82 to 1983-84 the inclusion of the fixed deposit of Rs. 1,20,000 in the assessee's net wealth was justified and the CWT (Appeals) wrongly directed that this amount should be excluded from the assessee's net wealth. We, however, direct the Wealth-tax Officer to verify whether for the assessment years 1981-82 and 1982-83 there has been a double addition of this amount while making the assessment once when this amount was included in the assessee's working and another time when this amount was added while making the assessment and, if that is so, to make the necessary rectification. 16. Following, with respect, the order of the Appellate Tribunal in the wealth-tax appeal for the assessment year 1979-80, we uphold the order of the CWT (Appeals) that advance payment of tax should be deducted from the tax payable with reference to the book profits in accordance with the law applicable thereto for the purpose of determining whether and, if so, to what extent the amount representing the provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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