COMMISSIONER OF WEALTH TAX Vs. KALI D CAWASJI

JUDGEMENT

(1.) THE assessee is the son of one Shri Dinshaw Cawasji. Dinshaw Cawasji had executed a trust deed dt. 19th Nov., 1941, and he had created another trust by his will dt. 30th May, 1938. The relevant clauses with which the WTO was concerned while computing the net wealth of the assessee are to be found in the trust deed and in the will. Under cl. 2 of the trust deed, it was provided as follows :

(2.) THE relevant clauses under the will provided for a monthly payment of Rs. 400 to be paid to the wife of the settlor during her lifetime or widow hood for her own maintenance and so far as the assessee was concerned the accumulated income of the residual movable estate was to be paid to the assessee and all other children of Dinshaw Cawasji. It may, however, be noted that the assessee was the only son of the settlor but there is one other clause in the will which required certain payments to be made to the guardian of the assessee during his minority. The relevant portion of this cl. 8 read as follows :

(3.) WITH reference to these different provisions in the will and in the trust deed dt. 19th Nov., 1941, the question before the WTO in the wealth tax proceedings in respect of the wealth of the assessee, Kali Dinshaw Cawasji, and his mother, Mrs. Allu Dinshaw Cawasji, was whether the life interests of the assessee for which provision was made in the two trusts can be excluded from their respective net wealth under the provisions of S. 2(e)(iv) of the W. T. Act. Under S. 2(e)(iv), it was provided that assets included property of every description, movable or immovable, but does not include "a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant". The WTO included the value of the life interest in each of the assessee's net wealth. The appeal filed by the assessee was also rejected by the AAC. However, in the appeal filed by the assessee to the Tribunal, the Tribunal took the view that under the trust deed dt. 19th Nov., 1941, the assessee had only life interest simpliciter and there were provisions for the disposal of the income and corpus after the death of the assessee, depending on different contingencies, but it was clear that the assessee had no right on corpus. Same was the position, according to the Tribunal, under the trust created by the will because after the death of the assessee, the income and the corpus were to be held for the benefit of the assessee's children. The Tribunal, therefore, took the view that the terms and conditions under which the assessee was entitled to the income from the trust funds precluded commutation of these income or any part thereof into a lump sum grant and any payment of a lump sum grant would have been against the provisions of the trust deed and would have resulted in a breach of the trust. The Tribunal, therefore, took the view that the income flowing from the trust clearly fell within the category of "annuity" which was classified as an exempted asset under S. 2(e)(iv). On these facts, the following question has been referred at the instance of the Revenue :