COMMISSIONER OF WEALTH TAX Vs. ARUNDHATI BALKRISHNA MRS

JUDGEMENT

(1.) IN this reference under S. 27(1) of the WT Act, 1957, the following four questions have been referred for the opinion of the High Court :

(2.) THE assessee is an individual and the questions have arisen in respect of her assessment for wealth tax for asst. yrs. 1957 58 and 1958 59, the corresponding valuation dates being 31st Dec., 1956, and 31st Dec., 1957. By a deed of settlement, dt. 7th Sept., 1945, the father of the assessee settled certain shares of the estimated value of Rs. 5,50,325 of certain Indian companies upon the trusts mentioned in the deed of settlement. The trusts were for the benefit of his two sons, Arvind and Yogendra, and his daughter, the assessee. By another deed of settlement, dt. 12th Oct., 1945, the father of the assessee settled certain other shares upon trusts and the language of this second deed of trust is identical with the language of the first deed of trust, dt. 7th Sept., 1945. On the record of this case, these two deeds of settlement are referred to as "Bombay Trusts". By a deed of settlement, dt. 30th Dec., 1945, the mother in law of the assessee settled upon certain trusts a sum of Rs. 3,88,931 and certain shares of the aggregate market value of Rs. 11,81,670. The assessee is one of the beneficiaries named in the deed of settlement executed by her mother in law. On the records of this case, this deed of settlement created by the mother in law is referred to as "Ahmedabad Trust".

(3.) REGARDING all these three deeds of settlement, the contention of the assessee before the WTO was that the interest which she had under each of these three deeds of settlement was an annuity which was not commutable and was, therefore, exempted under the provisions of S. 2(e)(iv) of the WT Act. As regards the ornaments and jewellery, the contention of the assessee before the WTO was that these ornaments and articles of jewellery were articles of personal use and, therefore, the ornaments and jewellery valued by her at Rs. 80,030 were exempt under the provisions of S. 5(1) (viii) of the WT Act. The WTO rejected all the contentions of the assessee. He held that the interest of the assessee in the two Bombay trusts and in the Ahmedabad trust was not entitled to exemption under S. 2(e)(iv) of the Act ; and as regards the ornaments, he held that under S. 5(1) (xv) of the Act as then in force, the assessee was entitled only to exemption up to the extent of Rs. 25,000 ; and he, therefore, included the sum of Rs. 55,030 under the head "Ornaments & Jewellery" in her total wealth. Against this decision of the WTO, there was an appeal and the AAC rejected all the contentions urged on behalf of the assessee. The AAC held that the interest which the assessee had got under the two Bombay trusts and the Ahmedabad trust was not entitled to exemption under S. 2(e)(iv) of the WT Act ; and as regards the ornaments, he confirmed the decision of the WTO. In the further appeals before the Tribunal, the same contentions were urged on behalf of the assessee as had been urged before the WTO and the AAC. The Tribunal came to the conclusion that the interest of the assessee in the Ahmedabad trust was a right to on annuity, the terms and conditions relating to which precluded the commutation of any portion thereof into a lump sum grant and hence was entitled to exemption under S. 2(e)(iv) of the Act. As regards the two Bombay trusts, the Tribunal came to the conclusion that under the different clauses of the two deeds of settlement pertaining to the two Bombay trusts, the assessee was entitled to withdraw from the trusts, at her own discretion after she attained majority and after she gave birth to one child, corpus to the extent of one half of the entire corpus covered by each of these two Bombay trusts and to the extent of one half, therefore, commutation was possible under the terms and conditions relating to her interest in the two Bombay trusts. The Tribunal, therefore, held that to the extent of one half under the two Bombay trusts, the assessee was not entitled to exemption under S. 2(e)(iv) of the Act but was entitled to exemption as to the other half. As regards the claim in connection with the ornaments, the Tribunal rejected the contention of the assessee and confirmed the conclusions of the WTO and the AAC and held that she was not entitled to exemption in respect of jewellery and ornaments to the extent of Rs. 55,030. We may mention at this stage that in question No. 4, as formulated by the Tribunal, there is a typographical error ; and the exemption is claimed under S. 5(1)(viii) not in respect of ornaments worth Rs. 55,003 but in respect of ornaments worth Rs. 55,030. Thereafter, at the instance of the CIT, the first three questions have been referred to us by the Tribunal ; and the fourth question has been referred to us by the Tribunal at the instance of the assessee.