1990 (3) TMI 93 - AT - Wealth-tax

Beneficiaries in Family Trust Entitled to Full Deductions under Wealth Tax Act

The Appellate Assistant Commissioner (AAC) upheld the decision to allow full deductions under section 5(1)(iv) of the Wealth Tax Act, 1957 to the ... Lease Rent, Previous Year, Revenue Expenditure Issues:1. Whether exemption u/s. 5(1)(iv) of the Wealth Tax Act, 1957 is available to the beneficiaries in respect of their interest in the immovable properties of the relevant trusts.Detailed Analysis:The judgment involved a common question regarding the availability of exemption u/s. 5(1)(iv) of the Wealth Tax Act, 1957 to the beneficiaries in relation to their interest in the immovable properties of the trusts. The assessee respondents were two beneficiaries in a family trust with a 1/4th share each in the trust's corpus. The trust owned more than twenty buildings, and the value of these buildings ranged between Rs. 19 lakhs to 20 lakhs for the assessment years 1975-76 to 1978-79. The Wealth Tax Officer (WTO) had allowed exemption u/s. 5(1)(iv) to the assessee respondents in respect of their shares in only one building, resulting in an exemption of Rs. 16,000 each for the two years. The assessee respondents appealed this decision before the Appellate Tribunal (ITAT).The Appellate Assistant Commissioner (AAC) accepted the contention of the assessee respondents based on the Supreme Court decision in CIT v. H.E.H. Mir Osman Ali Bahadur [1966] 59 ITR 666. The AAC held that the beneficiaries were entitled to a deduction of Rs. 1 lakh each u/s. 5(1)(iv) as the assessments should be made on the appellant as per the provisions of section 21(1) of the Act. The AAC directed the WTO to allow full deductions u/s. 5(1)(iv) to the appellant for both years under appeal, emphasizing that exemptions, deductions, and allowances should be decided in favor of the subject unless there is a clear finding that they are not allowable.The controversy was resolved by interpreting section 21(1) of the Act, which clarified that wealth tax could be levied upon a trustee and recovered from the trustee as if it were leviable upon the beneficiary. The judgment highlighted that in cases of specific or determinate trusts with known beneficiaries and shares, the beneficiaries become assesses in their own right. Therefore, the full benefit of section 5(1) should be available to each beneficiary, and deductions should be allowed in full. The judgment emphasized that the provisions of section 5(1) should be followed for each beneficiary in cases where the trust has multiple beneficiaries and properties falling under section 5(1).The judgment distinguished a previous Calcutta High Court case where the trustees were denied exemption u/s. 5(1)(iv) based on different facts. The judgment concluded that the AAC had correctly decided the issue in accordance with established legal principles. It dismissed the appeals and upheld the decision to allow full deductions u/s. 5(1)(iv) to the assessee respondents for both years under appeal.