COMMISSIONER OF WEALTH TAX Vs. OOLIA KULSUM

JUDGEMENT

(1.) This is an application by the Revenue under section 27(3) of the Wealth-tax Act, 1957 (for short "the Act"), praying this court to direct the Income-tax Appellate Tribunal, Hyderabad Bench "A", to state the case and refer the following questions as referable questions of law to this court : "1. Whether, on the facts and in the circumstances of the case and particularly in view of clauses 5 and 6 of the trust deed which, inter alia, provided for accumulation of income till the date of death of Prince Moazam Jah Bahadur which took place only in September, 1987, the Appellate Tribunal is correct in holding that Smt. Oolia Kulsum was the sole beneficiary as on the valuation date ? 2. Whether, on the facts and in the circumstances of the case, can it be said that the beneficiaries are known and their shares are determinate as on the valuation date relevant to the assessment year 1979-80 so as to hold that the assessment was liable to be made only under section 21(1) and not under section 21(4) of the Wealth-tax Act ?" These questions are said to arise out of the order of the Tribunal in W.T.A. No. 416/Hyd of 1988 dated 26/04/1989, which relates to the assessment year 1979-80. For the said assessment year, a wealth-tax return was filed by the assessee, Sb. Oolia Kulsum Begum, showing the net wealth of Rs. 3,62,637. The Wealth-tax Officer, however, determined the net wealth on the valuation date, March 31, 1979, at Rs. 20,03,818 and taxed the same under section 21(4) of the Act. She filed an appeal before the Commissioner of Wealth-tax (Appeals). The Commissioner held that after the death of Prince Moazam Jah Bahadur, the beneficiary, Smt. Sb. Oolia Kulsum, was entitled to receive the net income of the two share funds and she became the sole beneficiary ; therefore, the funds were liable to be assessed under section 21(1) and not under section 21(4) of the Act. The Revenue went in appeal against the order of the Appellate Commissioner, dated 29/01/1983, before the Income-tax Appellate Tribunal. The Tribunal upheld the order of the Commissioner of Wealth-tax (Appeals) and dismissed the appeal on 26/04/1989. It is from that order the above two questions are said to arise.

(2.) Learned junior standing counsel for income-tax contends that the assessee did not have any interest in the trust as her father was alive on the valuation date, her interest was indeterminate and the net assets were liable to be taxed under section 21(4) of the Act. Sri Murali Krishna, on the other hand, submits that the interest of the petitioner was defined in the trust and she was the only beneficiary ; therefore, it cannot be said that the beneficiaries were indeterminate or unsettled ; so, the Tribunal was right in coming to the conclusion that the assets were taxable under section 21(1) of he Act.

(3.) To appreciate the contentions of learned counsel, it would be appropriate to note the contents of clauses 5 and 6 of the trust deed dated 21/03/1953. Clause 5 provides that the trustees shall hold and stand possessed of the shares specified in the second schedule upon the trusts to accumulate the income thereof up to the death of the said Prince Muazzam Jah Bahadur and on and after the death of the said Prince, to hold and stand possessed of the first share fund including the accumulations of the income thereof and the investments thereof for the following : "(i) to pay the net income of the first shares fund to the Sahebzadi Oolia Kulsum for and during the term of her natural life. (ii) On and after the death of the said Sahebzadi Oolia Kulsum to pay and divide the net income of the first shares fund amongst the children and other issue howsoever remote of the said Sahebzadi Oolia Kulsum per stirpes from generation to generation in the proportion of two shares for every male to one share for every female standing in the same degree of relationship so that no person shall take a share in the net income of the first shares fund as long as his or her parent entitled to a share under this sub-clause shall be alive and so that persons standing in the same degree of relationship shall take between themselves in the proportion mentioned above their respective parent's share and so on from generation to generation. (iii) On the failure of any child or children or other remoter issue of the said Sahebzadi Oolia Kulsum to pay and divide the net income of the first shares fund amongst the other children and other issue howsoever remote of the said Prince Muazzam Jah Bahadur by the said Razia Begum per stirpes from generation to generation in the proportion of two shares for every male to one share for every female standing in the same degree of relationship so that no person shall take a share in the net income of the first shares fund as long as his or her parent entitled to a share under this sub-clause shall be alive and so that persons standing in the same degree of relationship shall take between themselves in the proportion mentioned above their respective parent's share and so on from generation to generation." Clause 6 is in similar terms as clause 5, but relates to the second shares fund. A perusal of clauses 5 and 6 of the trust deed makes it clear that the trustees were to accumulate the income till the death of Prince Muazzam Jah Bahadur which occurred on 14/09/1987, and to pay the same to Sahebzadi Oolia Kulsum only for and during her lifetime and after her death to divide the income of the first shares fund amongst her children and other issue howsoever remote, in accordance with the form prescribed therein. The beneficiary Sahebzadi Oolia Kulsum is named in the trust and is a definite person, therefore, we are of the opinion that the Tribunal is right in coming to the conclusion that Smt. Oolia Kulsum was the sole beneficiary as on the valuation date.