9911796707
TMI Blog1984 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... he wealth-tax assessment for the assessment year 1971-72, the WTO reopened the proceedings under section 17 of the Wealth-tax Act, 1957 ('the Act') on the ground that the settlor had specifically mentioned that the trust would terminate on the assessee's attaining the age of 21 years. Although the sole trustee in the case had filed the wealth-tax return of the trust but the fact that the sole beneficiary of the trust was having separate assets other than the trust asset, was not disclosed by him. Moreover, the assessee had attained majority on 3-8-1970 and the return of wealth had been filed for the first time signed by him in relation to the assessment year 1970-71. In this return again the assessee bad not disclosed wealth held by the trust which was solely for his benefit. In these proceedings the assessee's contention was that the assessment had already been made on the trust in relation to the income and wealth of this property and the same income/wealth could not be reassessed in the hands of the present assessee. The WTO, however, rejected the assessee's contention because, according to him, the assessment on the trust could be made only if the shares of the beneficiary or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1970-71 in which again he had not disclosed the income from the said trust. Therefore, it was a fit case for reopening the earlier assessments. The assessee's contention in these proceedings was again the same, that is, since the income had already been assessed in the hands of the trust, it could not again be added in the assessee's personal income. For exactly similar reasons, the ITO overruled the assessee's contention and added back the income from this property to the income already assessed. The assessee similarly filed appeals before the AAC and relied upon some instructions of the Board. Reliance was also placed on some authorities on the subject. The AAC was of the opinion that although the department had exercised the option of assessing the trust but in this particular case the assessee was the sole beneficiary and, therefore, he was liable to show the income of the trust in his hands. The argument of the representative of the assessee that the trust was already being separately assessed was of no value because he had not shown the income of this trust, in his individual return. The right procedure was that the income of the trust should have been taken in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, the beneficiary or the trustee. Reference was also made to another Circular F. No. 45/78/66-ITJ(5), dated 24-2-1967--Taxmann's Direct Taxes Circulars, Vol. 1, 1980 edn., p. 564--where the Board had itself pointed out an interesting case, in which the assessee was one of the beneficiaries of the trust and the shares of the beneficiaries were known and determinate. The ITO raised an assessment on the trustees taxing the income of the trust in their hands at the appropriate rate and to the amount which would have been recoverable in the hands of the beneficiaries. While dealing with the case of one of the beneficiaries the ITO again included the share income from the trust for the rate purpose. The reason advanced by him was that the amount of tax leviable should be the same whether the income from the trust was assessed in the hands of the trustee or in the hands of the beneficiary. The Board, however, advised that section 41 of the 1922 Act corresponding to section 166 of the 1961 Act gave an option to the department to tax either the representative assessee or the beneficial owner of the income. Once the choice was made by the department, it was no longer open for it to go b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore that the assessee had not become the legal owner of the property, which as such could not be included in his net wealth, nor the income thereof could be added to his income. It was contended that before the property could be included for the purpose of wealth-tax, the assets should belong to the assessee on the relevant valuation date. According to the deed of the trust, the asset had to be actually transferred to the assessee by the trustees which had not been actually done till 15-12-1975. For income-tax purposes, reliance was placed upon a decision of the Calcutta High Court in the case of CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 which lays down that beneficial ownership is not known to Indian law and the annual value of property would have to be included only in the hands of the person who is the legal owner thereof. We are afraid this argument of the assessee's representative has not impressed us. The word 'belonging' has to be taken in its usual sense. Clause 7 of the trust deed reads as under : " . . . On his attaining the age of 21 years by the said Sneh Kumar Gadhaiya the trust created by these presents shall come to an end and the trust property will absolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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