Contingent trust interest under survivorship clause may be treated as property and an asset for wealth-tax purposes.

A trust settlement that makes the beneficiary's entitlement depend on surviving the settlor creates a contingent interest in the corpus, not a vested interest. The article explains that a mere spes successionis is only a chance of succession and is not property, but a contingent interest is a recognised form of property capable of transfer and valuation. On that reasoning, such an interest can fall within the meaning of an asset under the Wealth-tax Act. The note also states that the rule favouring vested interests cannot override the clear language of the trust deed where survivorship is a condition precedent to vesting.

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Issues: (i) Whether the assessee's interest under the trust deed was merely a spes successionis or an interest capable of being treated as an asset within the meaning of section 2(e) of the Wealth-tax Act; (ii) If the assessee had an interest in the corpus, whether it was a vested interest or a contingent interest.

Issue (i): Whether the assessee's interest under the trust deed was merely a spes successionis or an interest capable of being treated as an asset within the meaning of section 2(e) of the Wealth-tax Act.

Analysis: A mere chance of succession is non-transferable and not property, but an interest in the corpus created under a settlement, even if dependent on an uncertain event, is a contingent interest and not a spes successionis. A contingent interest is a recognised form of property, capable of transfer and capable of being valued.

Conclusion: The assessee's interest was not a spes successionis; it was an interest capable of being regarded as an asset within the meaning of section 2(e) of the Wealth-tax Act. This issue is answered against the assessee.

Issue (ii): If the assessee had an interest in the corpus, whether it was a vested interest or a contingent interest.

Analysis: On the terms of the trust deed, the corpus was to vest in the assessee only if he survived the settlor. The survivorship requirement was a condition precedent to vesting, and the instrument as a whole showed that the settlor intended the gift to take effect only on that contingency. The rule favouring vested interests could not override the clear language of the settlement, and the English rule in Phipps v. Ackers was not applicable so as to convert the contingent gift into a vested one.

Conclusion: The assessee had a contingent interest and not a vested interest in the corpus. This issue is answered against the assessee.

Final Conclusion: The reference was decided by holding that the assessee's interest under the trust deed was a contingent interest which constituted an asset and was liable to be included in wealth.

Ratio Decidendi: Where a settlement makes vesting of the corpus dependent on the beneficiary surviving the settlor, the beneficiary acquires a contingent interest, not a vested interest or a mere spes successionis, and such contingent interest is property capable of valuation for wealth-tax purposes.

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