COMMISSIONER OF WEALTH TAX Vs. M A JAN

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 27(1) of the Wealth-tax Act, 1957"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that section 4(1)(a)(iii) of the Wealth-tax Act, 1957, could not be applied as no benefit accrued to the minors during their minority ?"The assessment years involved in these tax cases are 1974-75 to 1976-77. The assessee by a trust deed called Ameerjan Trust executed on March 26, 1974, settled certain immovable properties on his seven children of whom six were minors at the time of execution of the trust deed. The assessee did not include these properties in his return of net wealth. Section 4(1)(a)(iii) of the Wealth-tax Act provides that in computing the net wealth of an individual, there shall be included, as belonging to that individual, the value of the assets which on the valuation date are held by a person or an association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both. So the Wealth-tax Officer on the basis of this provision was of the view that these properties should be included in the net wealth of the assesseeThe trust deed is dated March 26, 1974. The properties are settled on seven children of the assessee. One of them was a major even at the time of execution of document. Her share is 10 per cent. So, for all these assessment years her share had been excluded from net wealth. Only the balance has been included in the reassessments. Another minor with 17 1/2 per cent. share became major earlier to April 1, 1975. So that also has been excluded for the assessment years 1975-76 and 1976-77. Other minors became major only after the assessment year 1976-77.

(2.) THE trust is to last for a period of ten years. Clause IV of the document provides that each of the minors shall be deemed to be a beneficiary only after the respective minor has attained majority, i.e., he has completed eighteen years. Clause VI of the document provides for accrual of the net profit for each year and as to how the same has to be shared by the beneficiaries. As per this clause, no minor gets any benefit in the income of the property during his or her minority. THE net profit of a particular year is seen allotted only to such of those majors who are specified in the clause as the recipients of the net profit for that particular year. In like manner that clause VI specifies the recipients of the income for each of the ten years and all such recipients are only majors. Clause XIV provides for extinction of the trust.

(3.) THE provisions of section 4(1)(a)(iii) of the Wealth-tax Act would not be applicable to the facts of this case. As per clause VII of the trust deed, if a major beneficiary dies, his or her share would devolve upon his or her legal heirs.