COMMISSIONER OF WEALTH TAX Vs. ASHOKKUMAR RAMANLAL

JUDGEMENT

(1.) THIS reference arises out of an assessment to wealth tax made on the assessee for the asst. yrs. 1958 59 and 1959 60, the relevant valuation dates being 31st March, 1958, and 31st March, 1959. The reference involves a question of construction of two trust deeds dt. 29th March, 1957, one made by the assessee's father, Ramanlal, and the other made by the assessee's mother, Taramati. Both the trust deeds are in identical terms barring only the difference in the names of the settlors and it would therefore be sufficient to make a reference only to the terms of the trust deed made by Ramanlal and whatever we say in regard to the terms of that trust deed must apply equally in regard to the terms of the trust deed made by Taramati. By the trust deed, Ramanlal settled a sum of Rs. 60,000 on the trusts set out in cl. 3 of the trust deed which runs as follows :

(2.) IN the course of the assessment of the assessee to wealth tax for the asst. yrs. 1958 59 and 1959 60, a question arose whether the assessee was taxable on his interest under the trust deeds. The WTO took the view on a construction of cl. 3 of the trust deed that, under the trust deed, the assessee had an interest both in the income and in the corpus of the trust fund and he therefore proceeded to value the interest of the assessee in the income as also in the corpus. The assessee was not married on the relevant valuation dates and his interest in the income was therefore valued by the WTO on the basis of the average marriageable age being 25. There is no dispute about this valuation and we will therefore say no more about it. So far as the interest of the assessee in the corpus was concerned, the WTO was of the view that the interest was a vested interest and he, accordingly, determined the value of the interest on the relevant valuation dates on the basis of its being a vested interest. We are not concerned in this reference with the quantum of the valuation arrived at by the Revenue authorities and it is, therefore, not necessary to mention the actual figures of valuation arrived at by them. The assessee being aggrieved by the orders made by the WTO preferred appeals to the AAC, there being a separate appeal in respect of each assessment year. The AAC took the view that the assessee did not have any vested interest in the income of the trust fund and it could not therefore be said that he had an interest in the income which could be valued for the purpose of wealth tax. So far as the interest in the corpus was concerned, the AAC held that the assessee had a vested interest in the corpus and merely his possession or enjoyment of the corpus was postponed to 31st March, 1987, and his interest in the corpus was, therefore, liable to be taken into account in the computation of his net wealth. The AAC accordingly confirmed the valuation of the assessee's interest in the corpus. The Revenue did not prefer any appeal against the decision of the AAC in so far as it went against it but the assessee preferred appeals against the decision in so far as it decided the question of interest in the corpus against the assessee. The Tribunal examined the provisions of the trust deed and came to the conclusion that the interest of the assessee in the corpus was not a vested interest and that the gift of the corpus to the assessee was contingent on his being alive on 31st March, 1987. The Tribunal then proceeded to hold that, since the gift to the assessee was based on the contingency of the survival of the assessee, it was merely a spes successionis a chance of obtaining the property which was in the nature of a mere possibility of getting something on a future date and was, therefore, incapable of alienation as provided in S. 6(a) of the Transfer of Property Act. This being in the opinion of the Tribunal the true nature or character of the interest of the assessee in regard to the corpus, the Tribunal held that the interest was such as could not be sold and no price could be realised for it and the value of the interest was accordingly nil. The Revenue thereupon applied for a reference and, on the application, the Tribunal drew up a statement of the case and referred the following question for the opinion of the Court : "Whether, on a proper construction of Annexure 'A', the Tribunal's decision that the value of the assessee's interest in the corpus of the trust properties is nil, as it is a spes successionis and contingent on the assessee being alive on 31st March, 1987, is right ?"

(3.) THE first point which arises on these arguments is as to what is the true scope and ambit of the controversy which may properly be raised under the question submitted for our opinion. In order to determine this point, it is necessary to see what are the findings arrived at by the Tribunal in reaching the conclusion that the valuation of the assessee's interest in the corpus is nil. The Tribunal held on a construction of the relevant provisions of the deeds that the interest of the assessee in the corpus was not a vested interest. The Tribunal found that the gift of the corpus to the assessee was contingent on his survival up to 31st March, 1987, and, on the basis of this finding, the Tribunal held that the assessee's interest in the corpus was a spes successionis and since spes successionis is not transferable by virtue of S. 6(a) of the Transfer of Property Act, the assessee's interest in the corpus should be valued at nil. The decision of the Tribunal thus was that the assessee's interest in the corpus was a spes successionis by reason of the gift to the assessee being contingent on his being alive on 31st March, 1987, and the value of the interest was, therefore, nil. This decision was challenged in the question referred to us for our opinion and in the question the impugned decision was stated as follow : "That the value of the assessee's interest in the corpus of the trust properties is nil as it is a spes successionis and contingent on the assessee being alive on 31st March, 1987". The decision obviously comprises two findings : (1) the assessee's interest in the corpus is a spes successionis and, (2) consequently its value is nil and it is, therefore, axiomatic that the challenge to the decision would necessarily carry with it the challenge to both the findings which constitute the decision and not only the final conclusion that the value of the assessee's interest in the corpus is nil but also the premise on which it is based, namely, that the assessee's interest is a spes successionis, would be liable to be challenged under the question as framed. The question is a rolled up one which takes in the challenge to both the findings of the Tribunal and submits both the findings to the Court for testing their correctness. This would becomes still clearer if we consider how the question may be answered if it is to be decided in favour of the Revenue. It may be answered in one of two way : either it may be held that the value of the assessee's interest in the corpus is not nil, though it might be a spes successionis or it may be held that the value of the assessee's interest in the corpus is not nil but it has some value because it is not a spes successionis but is a vested interest or at any rate a contingent interest. The finding of the Tribunal that the assessee's interest in the corpus is a spes successionis being based on the view that the assessee's interest is not a vested interest but is contingent on the assessee being alive on 31st March, 1987, it would be open to the Revenue to contend for the purpose of demolishing the finding of the Tribunal that the assessee's interest is a vested interest and is not contingent on the assessee being alive on 31st March, 1987, and that the finding of the Tribunal is, therefore, incorrect. What is the nature and quality of the interest of the assessee in the corpus must, therefore, directly arise for consideration under the question formulated for our opinion.