Contingent trust interest and representative wealth-tax assessment bar direct double taxation of the same trust assets.

A contingent interest in trust corpus arises where the trust deed makes vesting dependent on a future uncertain event, such as attaining a stated age or surviving a fixed period; a mere bare possibility of succession is only a spes successionis. On the wording of the settlements, the beneficiary's interest was treated as contingent proprietary interest rather than a mere expectancy. For wealth-tax, once the trust property had been assessed in the hands of trustees under section 21(4) in a representative capacity, the same assets could not again be directly assessed in the hands of the beneficiary for the same year. The representative assessment exhausted the charge on that trust property.

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Issues: (i) Whether the assessee's interest under the trust deeds was a contingent interest in the corpus or merely a spes successionis. (ii) Whether, after assessment of the trustees under section 21(4) of the Wealth-tax Act, 1957, the assessee could again be directly assessed to wealth-tax in respect of the same trust property.

Issue (i): Whether the assessee's interest under the trust deeds was a contingent interest in the corpus or merely a spes successionis.

Analysis: A bare possibility of succeeding to property is not property capable of valuation, but where a transfer creates an interest in corpus dependent on the happening of a future uncertain event, the donee acquires a contingent interest. In construing the trust deeds, the operative words required the assessee to attain the specified age or survive the stipulated period before any corpus could vest in her. The instruments, read as a whole, showed a clear intention that vesting would occur only on fulfilment of the stated contingency, and the provisions relating to income or discretionary user of corpus did not alter that result. The exception to section 21 of the Transfer of Property Act could not override the plain language of the settlements.

Conclusion: The assessee had a contingent interest in the corpus and not a mere spes successionis.

Issue (ii): Whether, after assessment of the trustees under section 21(4) of the Wealth-tax Act, 1957, the assessee could again be directly assessed to wealth-tax in respect of the same trust property.

Analysis: Wealth-tax is charged on net wealth consisting of assets belonging to the assessee, and assets held in trust belong beneficially to the beneficiaries rather than to the trustees. Section 21 provides a representative mode of assessment where trustees may be assessed on behalf of beneficiaries, and sub-section (4) applies where beneficiaries' shares are indeterminate or unknown by creating a fiction for assessment through the trustees. Once the trust property has been assessed in the hands of the trustees in that representative capacity, the same asset cannot be taxed again directly in the hands of the beneficiary.

Conclusion: The assessee could not be directly assessed in respect of the trust property for the relevant year once the trustees had already been assessed under section 21(4).

Final Conclusion: The assessee's interest in the trust corpus was held to be a contingent proprietary interest, but the direct assessment on her for the relevant year was barred because the trustees had already suffered representative assessment on the same trust assets.

Ratio Decidendi: A contingent interest in trust corpus is property capable of valuation, but where trust assets have already been assessed to wealth-tax in the hands of trustees under section 21(4) in a representative capacity, the same assets cannot be subjected to direct assessment again in the hands of the beneficiary.

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