COMMISSIONER OF WEALTH TAX Vs. S S SANKARALINGAM

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Madras, at the instance of the Revenue, referred the following question of law under Section 27(1) of the Wealth-tax Act, 1.957.

(2.) THE assessee in the instant case is a minor. For the assessment year 1976-77, the assessment of wealth-tax, in the case of the assessee, was made on his father and natural guardian, the respondent herein, in his representative capacity. THE father of the assessee claimed exemption before the Wealth-tax Officer under Section 5(1)(xxxii) of the Act in respect of the interest of the assessee in the firm, amounting to Rs. 57,317. THE Wealth-tax Officer denied the exemption on the ground that the minor assessee was not a partner of the firm, although his father was a partner in a representative capacity. On appeal, the Appellate Assistant Commissioner held that the assessment was made on the trustee in a representative capacity by virtue of Section 21 of the Act and on the basis of a statutory fiction, created by Section 21 of the Act, the assets are held by the beneficiary in his beneficial ownership and, therefore, the assessee was entitled to exemption under Section 5(1)(xxxii) read with Section 5(1A) of the Act. THE Revenue carried the matter in appeal before the Income-tax Appellate Tribunal. THE Income-tax Appellate Tribunal also affirmed the view of the Appellate Assistant Commissioner and held that the right of a beneficiary to the benefits of the exempted provision would be the same as that of the trustee and irrespective of a question whether the assessment was made directly on the beneficiary or on the trustee in a representative capacity, the assessee would be entitled to exemption under Section 5(1)(xxxi) of the Act.

(3.) THE decision of the Supreme Court makes it clear that where the trust properties are held by the trustee for the benefit of the beneficiary, the wealth-tax can be levied on the trustee in respect of the interest of the beneficiary in the trust properties in the same manner and to the same extent as it would have been leviable on the beneficiary and in respect of such interest in the trust properties, the trustee would be assessed in a representative capacity as representing the beneficiary. No doubt, it is true that the Wealth-tax Officer can make a direct assessment on the beneficiary on the ground that the trust properties belong to the assessee. On the position of law is that the trust property belongs to him and is recognised in Section 21 of the Wealth-tax Act, it cannot be said that the assessee is not entitled to exemption under Section 5(1)(xxxi) of the Act.