COMMISSIONER OF WEALTH TAX Vs. ARVIND NAROTTAM

JUDGEMENT

(1.) THIS reference arises out of the assessment orders for assessment years 1962 -63, 1963 -64 and 1964 -65, passed by the Wealth -tax Officer, Group Circle II (1), Ahmedabad, assessing the assessee -respondent herein for the entire value of the assets held by the trustees under three discretionary trusts and created by the father of the assessee on the ground that he was the sole beneficiary at the valuation date of the aforesaid respective assessment years. The Wealth -tax Officer has passed the said orders under section 21(2) of the Wealth -tax Act for the said respective assessment years on February 16, 1963, July 25, 1964, and March 5, 1965, respectively, including Rs. 24,15,641, Rs. 19,64,352 and Rs. 19,25,655, being the valuation of the entire trust estate in the net wealth of the respondent -assessee. These orders, it is so claimed by the revenue, were made by the Wealth -tax Officer in the nature of protective assessment, though the assets of the three discretionary trusts were assessed to wealth -tax in the hands of the trustees as association of persons under section 21(4) of the said Act. The Appellate Assistant Commissioner, however, in appeals preferred by the respondent -assessee, was of the opinion that the respondent -assessee could be assessed only for the minimum amounts payable under the said three discretionary trusts to him for his maintenance, namely, Rs. 250, Rs. 150 and Rs. 250, respectively, per year and he, therefore, included the capitalised value thereof in the net wealth of the assessee. In appeal by the Wealth -tax Officer before the Appellate Tribunal, the Tribunal, having regard to the fact that the interest of the assessee in the assets held by the trustees on his behalf was indeterminate and unknown, held that only the capitalised value of the minimum amounts payable as aforesaid was liable to be included in his net wealth. The Tribunal, in that view of the matter, did not consider the grievance of the assessee that the Wealth -tax Officer was incompetent to assess the same assets twice. It is, therefore, at the instance of the Commissioner that the following question has been referred to us for our opinion :

(2.) ON behalf of the respondent -assessee it was urged before us that on the true construction of the relevant clauses of the trust deeds which are in effect and substance discretionary trusts, the assessee had no interest other than that of minimum payments as aforesaid in the income and a fortiori in the corpus of the trust assets and the Tribunal was, therefore, justified in including merely the capitalised value of the said payment in the net wealth of the assessee.

(3.) IT is common ground that only the minimum payment as indicated in paragraph 7 of the respective trust deeds was to be made to the respondent -assessee, who was a bachelor at all the relevant times of these assessment years. It is also an admitted position that the trustees have complete discretion regarding the remaining income of the trust assets for purposes of accumulation and also in respect of distribution of corpus at the end of 30 years or at an earlier period as may be advanced by the trustees within their discretion as empowered under clause 8 of the said deeds.