COMMISSIONER OF WEALTH TAX Vs. ANARKALI SARABHAI

JUDGEMENT

(1.) THIS reference arises out of assessment to wealth tax made on the assessee for the asst. year 1959 60, the relevant valuation date being 31st March, 1956. The assessee is the daughter of one Bharatidevi Sarabhai. She is the beneficiary under two trust deeds, one dt. 3rd Nov., 1956, made by Gautam Sarabhai, a maternal uncle of the assessee and the other dt. 24th April, 1957 made by Vikram Sarabhai, another maternal uncle of the assessee. Both the trust deeds are in identical terms barring only the difference in the name of the settlor and the period of distribution and it would, therefore be sufficient to made a reference only to the terms of one of the trust deeds, namely, that made by Gautam Sarabhai and whatever we say in regard to the terms of that trust deed it must apply equally in regard to the terms of the trust deed made by Vikram Sarabhai. By the trust deed Gautam Sarabhai settled certain shares and investments more particularly described in the schedule on the trusts set out in cl. 2 of the trust deed.

(2.) THE WTO assessing the assessee to wealth tax for the asst. year 1959 60 did not include her interest in the corpus of the trust funds in computing her total wealth assessable to wealth tax. There were, however, certain other determinations made by the WTO in the process of assessment with which the assessee was aggrieved and she, therefore, preferred an appeal to the AAC. Before the AAC the WTO submitted that while making the assessment he had forgotten to include in the net wealth of the assessee the value of her interest in the corpus of the trust funds and the assessment was, therefore, required to be enhanced. This argument was resisted by the assessee who contended that the interest in the corpus of the trust funds possessed by her was merely a spes successionis a mere chance or possibility of acquiring the corpus contingent on her surviving the period of distribution and such an interest being inalienable, its value was nil. The AAC was impressed by this contention of the assessee and he, therefore, refused to add any amount to the net wealth of the assessee in respect of her interest in the corpus of the trust funds. The WTO carried the matter in appeal to the Tribunal but the Tribunal also took the same view and held :

(3.) THE WTO took the view that this clause conferred life interest in the corpus on the assessee and he accordingly valued such life interest and included it in the net wealth of the assessee. The assessee did not dispute that the valuation of the life interest was liable to be included in computing her net wealth but she was aggrieved by the manner in which the valuation was made and she, therefore, appealed against the valuation to the AAC. The AAC partly accepted the contention of the assessee in regard to the valuation and directed the WTO to recompute the value of the life interest. The assessee and the WTO were both dissatisfied with this order and hence both of them preferred appeals to the Tribunal. Before the Tribunal a new contention was advanced on behalf of the assessee, namely, that the interest which the assessee had under the trust deed constituted an "annuity" and was, therefore, exempt from wealth tax under S. 2(e)(iv) of the WT Act, 1957. This contention found favour with the Tribunal and the Tribunal held that the interest of the assessee under the trust deed being an "annuity" exempt form wealth tax, was not includible in the net wealth of the assessee. Hence the third question at the instance of the Commissioner which is in the following terms :