COMMISSIONER OF WEALTH TAX Vs. J H CAMA

JUDGEMENT

(1.) THE question that has been referred to us by the Tribunal under S. 27(1) of the WT Act, 1957, at the instance of the CWT, Bombay City II, Bombay, runs thus :

(2.) THE question raised is common to the assessments of the trustees of two trusts J.H. Cama Trust and K.H. Cama Trust and the assessment related to the asst. yr. 1960-61 so far as the former Trust is concerned and to the asst. yrs. 1957-58 to 1960-61 so far as the latter Trust is concerned. The corresponding valuation date so far as the assessment of the former trust is concerned is 31st March, 1960 while the corresponding valuation dates so far as the assessment of the latter trust is concerned are 31st March, 1957, 31st March, 1958, 31st March, 1959 and 31st March, 1960 respectively and the question arises under these circumstances :

(3.) THE WTO for the aforesaid relevant years assessed the trustees as 'individual' but holding the office of trustees. He further took the view that the provisions of S. 21(4) of the Act applied and the present beneficiary being only a life beneficiary and a reading of the clauses especially sub-cl. (e) making it abundantly clear that the trustees of the trust settlement held the corpus on behalf of the beneficiaries whose number or interest in the corpus was indeterminate, he assessed the value of the trust property in the hands of the trustees. The assessee preferred appeals to the AAC and it was contended, inter alia, that the provisions of S. 21(4) were not attracted in this case and therefore there being no provision of the WT Act which could reach the assessee, the assessments made were illegal and therefore, unsupportable. AAC took the view that the sons had only a life interest and the corpus of the trust was held on behalf of several persons whose number or interest in the corpus was indeterminate and as such the provisions of S. 21(4) were clearly attracted and the assessments made were valid. However, he accepted the alternative contention that the life interest of these sons having been charged separately in the hands of the two beneficiaries that should be deducted from the capital value of the trust property. He accordingly directed the WTO to allow the deduction of the value of the life interest of the two sons from the total value of the trust property taken. The assessee trustees preferred appeals to the Tribunal and before the Tribunal the self-same contention was urged that the provisions of S. 21(4) were not attracted. It was pointed out that sub-s. (4) of S. 21 would apply only in cases where the shares of the persons on whose behalf any such assets were held were indeterminate or unknown and the provisions would not apply to a case where the beneficiaries themselves were unknown or indeterminate. It was contended further that the provisions of S. 21 being mandatory, in assessing the trustees and there being no provision of Act which could reach the trustees as in the instant case, the assessment made were unsustainable and therefore were liable to be set aside. On behalf of the Department it was urged that the shares are indeterminate or unknown because the beneficiaries themselves were indeterminate or unknown and therefore this was clearly a case where the provisions of the S. 21(4) were attracted. In the alternative it was contended that if S. 21(4) did not apply, the assessee would be caught within the mischief of S. 3 which was the charging section. Comparing the provisions of S. 21(4) with the first proviso to S. 41 of the IT Act the Tribunal took the view that the Legislature had made deliberate departure while enacting S. 21(4) and therefore, the clause where the shares of the person of whose behalf any such assets are held are "indeterminate or unknown" occurring in S. 21(4) would not cover a situation like the present one where the beneficiaries themselves were not known and therefore the provisions of S. 21(4) were not applicable to the facts the case. The Tribunal was of the view that on a reading of the relevant clauses of the deeds it appeared to it that there were two trusts contemplated by the deeds, one in respect of life interest of the two sons and the other which would come into being only on the death of the sons viz. a trust which would come into operation as regards the children of the two sons. The Tribunal further took the view that during the period under consideration there was only one trust viz. the trust for the benefit of the two sons who were entitled to receive only the income and that only on their death another trust was to come into operation, namely a trust for the benefit of minor children then existing. In other words, the interest of minor children of the two sons were absolutely contingent upon they being alive and there being an appointment made by Will or Codicil as contemplated under sub-cl. (d) of cl. 15. In that view of the matter the Tribunal held that both on the reading of the trust deed and the provisions of S. 21(4) the assessment made were not sustainable. At the instance of the CWT, Bombay City II, Bombay the question set out at the commencement of the judgment has been referred to us for our determination.