COMMISSIONER OF WEALTH TAX VS K. SITALAKSHMI
2001 P T D 944
[242 I T R 500]
[Madras High Court (India)]
Before N. V. Balasubramanian and Thangavel, JJ
COMMISSIONER OF WEALTH TAX
Versus
K. SITALAKSHMI
Tax Case No. 666 of 1989 (Reference No. 326 of 1989), decided on 10/11/1997.
Wealth tax‑‑‑
‑‑‑‑Charge of tax‑‑‑Minor‑‑‑Trust created for benefit of minor‑‑‑Income of trust to be accumulated and handed over to minor on her attaining majority‑‑ Income from trust held not to be assessable in the hands of minor in income tax proceedings‑‑‑Interest of minor in trust was contingent‑‑‑Capital of trust was not includible in her net wealth‑‑‑Indian Wealth Tax Act, 1957.
The assessee was an individual and she was the beneficiary of a trust known as "Baby Sitalakshmi Trust". As per the terms of the trust, the income was to be accumulated year after year and should be handed over to the beneficiary only on her attaining the age of 18. She became a major only in June, 1983. For the assessment year 1979‑80 it was contended on behalf of the assessee that the amount standing to the credit of the trust, could not be treated as part of net wealth of the assessee. The Wealth Tax Officer, held that only the enjoyment was postponed, but there was a vested interest in favour of the assessee. Therefore, he included the capital of Baby Sitalakshmi Trust in the net wealth of the assessee. The Tribunal, however, held that the amount was not includible in her net wealth. On a reference:
Held, that the Court in the case of the same trust in CIT v. Sitalakshmi (minor) (1996) 217 ITR 595 (Mad.), held that till the assessee attained the age of 18 years, the trust income would not be taxed in her hands. This decision would apply to this case under the Wealth Tax Act, as the interest of the assessee in the trust was only a contingent interest. The Appellate Tribunal was right in law in holding that the capital of the Baby Sitalakshmi Trust should not be included in the net wealth of the assessee.
CIT v. Sitalakshmi (minor) (1996) 217 ITR 595 (Mad.) applied.
C.V. Rajan for the Commissioner.
R. Meenakshisundararri for the Assessee.
JUDGMENT
N. V. BALASUBRAMANIAN, J.‑‑‑At the instance of the Commissioner of Wealth Tax, Madurai, the Income‑tax Appellate Tribunal,
Madras Bench "D", has stated a case and referred the following question of law for the assessment year 1979‑80 under section 27(1) of the Wealth Tax Act, 1957, for our consideration:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the capital of the Baby Sitalakshmi Trust should not be included in the net wealth of the assessee minor?"
The assessee is an individual and she is the beneficiary of a trust known as "Baby Sitalakshmi Trust". As per the terms of the trust, the income was to be accumulated year after year and should be handed over to the beneficiary only on her attaining the age of 18. She became a major only in June, 1983. It is contended on behalf of the assessee that the annual accretion to the trust cannot be treated as the income of the assessee, and the amount standing to the credit of the trust, cannot be treated as part of the net wealth of the assessee. The Wealth Tax Officer, however, held that only the enjoyment was postponed, but there was a vested interest in favour of the assessee. Therefore, he included the capital of Baby Sitalakshmi Trust in the net wealth of the assessee.
The assessee preferred an appeal before the Commissioner of Wealth Tax (Appeals), who held that part of the trust cannot be included as net wealth of the assessee for the reason that the assessee was entitled only to contingent interest. The appeal filed before the Appellate Tribunal has also failed on the same reasoning.
The Revenue challenged the finding of the Appellate Tribunal and sought for a reference and the Appellate Tribunal has referred the question of law set out above.
Mr. R. Meenakshisundaram, learned counsel has undertaking to file a vakalatnama on behalf of the respondent. Mr. C.V. Rajan, learned counsel for the Revenue, has fairly brought to our notice that this Court, in the case of the same trust in CIT v. Sitalakshmi (minor) (1996) 217 ITR 595, held that till the assessee attained the age of 18 years, the trust income would not be taxed in her hands.
We are of the opinion that the decision of this Court cited supra would equally apply to this case under the Wealth Tax Act, as the interest of the assessee in trust is only a contingent interest. Following the said decision of this Court cited supra we answer the question of law referred to us in the affirmative and against the Revenue. However, there will be no order as to costs.
M.B.A./408/FCReference answered.