Irrevocable trust transfers excluded from net wealth where revocable-transfer provision could not apply

Amounts transferred to the trusts were excluded from the assessee's net wealth because the trusts had already been construed on their terms as irrevocable. That characterisation, reached in earlier income-tax proceedings, was treated as equally applicable under the Wealth-tax Act. Once the trusts were held irrevocable, the deeming provision for inclusion of transferred assets as revocable transfers under section 4(1)(a)(iv) could not apply. The referred question was answered in favour of the assessee and against the Revenue.

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Issues: Whether amounts transferred by the assessee to the trusts were liable to be included in net wealth under section 4(1)(a)(iv) of the Wealth-tax Act, 1957, on the footing that the trusts were revocable trusts.

Analysis: The trusts had already been construed on their terms as irrevocable trusts. That conclusion, though reached in proceedings under the Income-tax Act, was held equally applicable for deciding the corresponding question under the Wealth-tax Act. Once the trusts were found to be irrevocable, the statutory provision for inclusion of the transferred amounts as revocable transfers could not be invoked.

Conclusion: The contributions made to the trusts were not includible in the assessee's net wealth, and the answer to the referred question was in favour of the assessee and against the Revenue.

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