Court rules shares held for minors under charitable trust not included in wealth tax

Commissioner Of Wealth-Tax, Mysore Versus HH. Yeshwant Rao Ghorpade

Commissioner Of Wealth-Tax, Mysore Versus HH. Yeshwant Rao Ghorpade - [1978] 115 ITR 232, 10 CTR 42 Issues: Interpretation of section 4(1)(a)(iii) of the Wealth-tax Act, 1957 post-amendment

Analysis:
The judgment pertains to a reference made by the Income-tax Appellate Tribunal regarding the inclusion of the value of certain shares in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act for the assessment year 1965-66. The assessee had transferred shares to a trust for the benefit of minors, but the trustees were holding the shares for the benefit of a charitable trust until the minors attained majority. The Supreme Court had previously ruled that during the minority of the beneficiaries, the shares were not held for their benefit. The amendment to section 4(1)(a)(iii) introduced the requirement that the assets must be held for the immediate or deferred benefit of the individual, spouse, or minor child. The Wealth-tax Officer included the shares in the assessee's wealth, arguing that the amendment changed the legal position to the detriment of the assessee. However, the Tribunal, affirming the decision of the Appellate Assistant Commissioner, held that the shares were not held for the benefit of the minors during the assessment year, thus not falling under the amended clause (iii) of section 4(1)(a).

The court analyzed the pre-amendment and post-amendment provisions of section 4(1)(a)(iii) of the Act. It concluded that even after the amendment, for the property to be included in the wealth computation, it must be held for the immediate or deferred benefit of the specified individuals. Since the shares were not held for the benefit of the minors during their minority, the question of immediate or deferred benefit did not arise. The critical aspect was whether the property was held for the benefit of the minors, which was not the case in this scenario. Therefore, the court held that the shares in question were not held for the benefit of the minors during the assessment year, and thus, section 4(1)(a)(iii) did not apply, upholding the Tribunal's decision.

In conclusion, the court determined that there was no substantial difference between the legal position before and after the amendment to section 4(1)(a)(iii). The critical factor remained whether the property was held for the benefit of the specified individuals, and in this case, it was held for the charitable trust until the minors attained majority. Consequently, the court upheld the Tribunal's decision and answered the reference in favor of the assessee.