COMMISSIONER OF WEALTH TAX VS SUHASBHAI VADILAL
1996 P T D 478
[206 I T R 316]
[Gujarat High Court (India)]
Before G. T. Nanavati and Y. B. Bhatt, JJ
COMMISSIONER OF WEALTH TAX
Versus
SUHASBHAI VADILAL
Wealth Tax References Nos.29, 29-A and 29-B of 1980, decided on 09/06/1993.
Wealth tax---
----Asset---Settlement---Provision indeed for paying residue of income to daughters of settlor in the assessment years 1964-65 to 1967-68 and subject to it, to pay the residue to the assessee so long as he remained unmarried---Amounts paid to daughters of settlor---Assessee had no reversionary interest in the assessment years 1965-66 to 1967-68.
Two trusts were created by V, where under certain specific shares of a specific value were transferred to the trustees to be dealt with in accordance with the terms of the trust. Clause 3-A(a) of the first trust laid an obligation on the trustees in respect of the assessment years 1960-61 to 1963-64. Under clause 3-A(b), the trustees were obliged to pay the residue of the income for each. of the two financial years, viz. assessment years 1964-65 and 1965-66, to I, daughter of the settlor, absolutely at the end of each financial year. Similarly, clause 3-A(c) of the indenture obliged the trustees to pay the residue of the income in respect of the assessment years 1966-67 and 1967-68 to J, daughter of the settlor, absolutely at the end of each financial year. Clause 3-A(d) of the said indenture dealt with the provisions in relation to the assessee as under:--
"(d) Subject thereto, to pay the residue of such income to S at the end of each financial year so long as and during the time that S remains unmarried". There was a similar provision in the second trust. The Tribunal held that the assessee S had absolutely no reversionary interest in the facts of the case in either trust. On a reference:--
Held, that there was no reversionary interest of the assessee in respect of the assessment years 1965-66 to 1967-68 which could be taxed under the Wealth Tax Act.
C.W.T. v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (1977) 108 ITR 555 (SC) ref.
B.J. Shelat for R.P. Bhatt & Co. for the Commissioner.
JUDGMENT
Y.B. BHATT, J.--The assessee-respondent was assessed by the Wealth Tax Officer for the assessment years 1965-66 to 1967-68; from which he preferred three separate appeals. These three appeals were disposed of by the Appellate Assistant Commissioner of Wealth tax by a common judgment, dated March 16, 1977. The assessee again challenged the aforesaid decision by three appeals filed before the Appellate Tribunal being Wealth Tax Appeals Nos.68 to 70/(Ahmd.) of 1977-78. It is from these appeals that the present reference has arisen.
In fact, three separate reference numbers ought to have been given to these proceedings. We, accordingly, direct that they shall be numbered as Wealth Tax References Nos.29, 29-A and 29-B of 1980, which are now being decided by the present common judgment and order.
We are concerned with two trusts created by the settlor, Shri Vadilal Lallubhai Mehta. The first indenture is dated March 16, 1959, where under certain specific shares of a specific value were transferred to the trustees to be dealt with according to the terms of the trust.
Clause 3-A(a) of the indenture lays down the obligation on the trustees in respect of the assessment years 1960-61 to 1963-64. Under clause 3-A(b), the trustees were obliged to pay the residue of the income for each of the two financial years, viz., assessment year 1964-65 and assessment year 1965-66 to Ilaben, daughter of the settlor, absolutely at the end of each financial year Similarly clause 3-A(c) of the indenture obliges the trustees to pay the residue -of the income in respect of the assessment years 1966-67 and 1967-68 to Jayshree, daughter of the settlor, absolutely at the end of each financial year Clause 3-A(d) of the said indenture deals with the provision m relation to the assessee as under:--
"(d) Subject thereto, to pay the residue of such income to Suhas at the end of each financial year so long as and during the time that Suhas remains unmarried. "
As regards the second indenture of trust dated December 7, 1959, the same settlor assigned and transferred to the trustees certain lands which were required to be held in the manner laid down in the indenture of trust. Clause 3-A(b) of this indenture lays down the manner of payment or application of the residue of the income of the two assessment years, viz. 1964-65 and 1965-66 to Ilaben, daughter of the settlor, absolutely at the end of each financial year. Similarly, clause 3-A(c) directs the trustees to pay the residue of the income for each of the two financial years 1965-66 and 1966-67 (i.e. assessment years 1966-67 and 1967-68) to Jayshree, daughter of the settlor, absolutely at the end of each financial year. Clause 3-A(d) which deals with the assessee reads as under:
"Subject thereto, to pay the residue of such income to Suhas at the end of each financial year so long as and during the time that Suhas remains unmarried. "
The Tribunal, while dealing' with the contention taken before the Appellate Assistant Commissioner, appreciated that the assessee has absolutely no reversionary interest in the facts of the case either in trust No. 1 or trust No.2. It was contended that the assessee was a minor and has no interest what-so-ever the trust under the respective clause 3-A(d) and in respect of the relevant assessment years. The Tribunal rightly came to the conclusion that it was an assumption on the part of the Appellate Assistant Commissioner to hold that the residue of the income was payable to the assessee so long as he remains unmarried and obviously the Appellate Assistant Commissioner had overlooked the fact that, even if the assessee had remained unmarried, he was not entitled to any amount from the trust fund and/or the income of the fund during the assessment years 1966-67 to 1968-69.
Reliance was sought to be placed on the decision of the Supreme Court in the case of C.W.T. v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (1977) 108 ITR 555. In our opinion, this decision has no direct application to the facts of the case since that was a case where a beneficiary was not entitled to any amount whatsoever in the assessment year in question. The question was, therefore, whether such a beneficiary (as an assessee) would have any remainder-man's interest in that year or not. It appears to be an admitted fact that Ilaben was alive during the assessment years in question and that she had not declined to accept the income from the trust during the relevant years. The same is the case in the case of Jayshree, the other daughter of the settlor. It, therefore, appears to us that the Tribunal was correct in arriving at the conclusion that the assessee had absolutely no interest whatsoever in the trust funds so far as the assessment years 1966-67 and 1967-68 are concerned. The question, therefore, of valuation of any interest of the assessee either by way of a life interest or a Remainder-man's interest cannot and does not arise at least so far as these assessment years are concerned.
The Tribunal has rightly observed to the effect that the valuation report valuing the interest of the assessee as on March 31, 1958, is based on the assumption that the income would be payable to the assessee until his marriage. In fact, in view of the correct interpretation of the relevant clauses made hereinabove, it is obvious that the assessee would not be entitled to any amount in respect of the assessment years 1965-66 to 1967-68, even if he remains unmarried. Thus, it would not be correct to observe that the assessee would be entitled to some benefit from the trust even after his marriage. We are not concerned with other clauses or provisions made in the said indenture of trust, if any, contemplating a situation where the wife and children of the assessee do not survive. It cannot, therefore, be said that, if the assessee got married, it would be a case of absolute reversion. The Tribunal is, therefore, correct in holding that there was no reversionary interest of the assessee whatsoever and it was further correct in deleting the inclusion of the relevant amounts made in the assessment years in question.
In view of our aforesaid findings, question No. 1 is required to be answered in the negative and in favour of the assessee, i.e. there was no reversionary interest of the assessee in respect of the assessment years in question which could have been brought to wealth-tax by the Wealth Tax Officer. As regards question No.2, we are required to hold in the negative in favour of the assessee, i.e. the Appellate Tribunal did not err in law in holding that there was no reversionary interest of the assessee in respect of the trusts in question. As regards question No.3, we are required to hold in the affirmative and in favour of the assessee, viz., that the Appellate Tribunal was right in deleting the additions specified in its order on the ground that there was no reversionary interest of the assessee in the trust in question for the relevant assessment years and that the order of -the Appellate Tribunal is accordingly sustainable.
We may observe in passing that the three questions which we have referred to hereinabove are identical to questions Nos. 4, 5 and 6 in R.A. No. 237/(Ahd.) of 1979 and are also identical to questions Nos.7, 8 and 9 in R.A. No.238/(Ahd.) of 1979. The same questions have already been answered by us by way of answer to questions Nos. l, 2 and 3 hereinabove.
These references are, accordingly, disposed of with no order as to costs
M.B.A./423/T.FReferences disposed accordingly