TaxTMI 
TaxTMI 
2004 (11) TMI 90
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....e Supreme Court in the assessee's own case holding that the beneficial interest was held by him as individual and the assessee was not competent to throw his beneficial interest to common hotchpotch of the Hindu undivided family by executing an unequivocal declaration on October 19, 1964? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in construing clause 4 of the trust deed limiting the beneficial interest of the beneficiary so as to debar him from disposing of his beneficial interest during his lifetime?" In order to answer the questions referred supra, it is necessary to take note of the facts stated in the statements of case and decided cases arising out of this very controversy. The assessee is an individual. For the assessment years 1984-85 to 1989-90, he filed his wealth-tax returns, in which he declared his net wealth as follows: Assessment year Date of filing the return Net wealth declared (Rs.) 1984-85 30-9-1985 6,11,298 1985-86 31-12-1985 4,32,180 1986-87 31-3-1987 7,76,382 1987-88 30-7-1987 10,49,948 1988-89 29-7-1988 96,965 1989-90 4-10-1989 ....
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.... of the family. The family carried on various businesses and owned extensive properties. Prior to March 31, 1950, Sir Hukumchand and the members of his family constituted a Hindu undivided family. By a deed of partition dated March 31, 1950, various family properties were partitioned between Sir Hukumchand, his wife, Lady Kanchanbai, executed two trust deeds on the same date, i.e., March 21, 1952, purporting to constitute trust of the properties respectively belonging to them. The trust deeds contained identical terms and conditions. The trustees in each case were Sir Hukum Chand, Lady Kanchanbai, their son, Raj Kumar Singh and his wife, Prem Kumari Devi, and the eldest grandson, Raja Bahadur Singh. The beneficiaries named in the trust deeds were Rajkumar Singh and his sons, Raja Bahadur Singh, Maharaja Bahadur Singh, Jambukumar Singh, Chandra Kumar Singh and Yesh Kumar Singh. With the passage of time and in accordance with the terms and conditions of the trust deeds, the beneficiaries came into possession of their respective shares of the properties. Originally, the income from those properties was returned by them for the purpose of their income-tax assessments in their individua....
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....ed by the settlors that the beneficiaries should receive the properties in their individual capacity or in a representative capacity as kartas of their respective Hindu undivided families. It is not necessary to refer to all the provisions of the trust deeds because, the parties are in common agreement, that the principal provisions calling for consideration are clauses 1, 3 and 4 of the trust deeds. Clause 1 empowers the trustees to apply the income from the trust properties to the rent, rates, taxes and other liabilities in respect of the trust properties, including the cost of maintenance and thereafter to divide the balance left over in equal shares among the beneficiaries, so that each beneficiary received one-sixth of the balance. In the event of a beneficiary being a minor, his share of income was payable to his natural guardian for being applied towards his education, maintenance and advancement in life, marriage and other expenses. It was also provided that in the event of a beneficiary dying before the time of distribution of the properties between the beneficiaries under clause 4, the share of the beneficiary so dying would be used to support and maintain his widow and h....
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....e beneficiary would have taken had he been alive, and such share would be divided equally between the widow and the sons. The proviso declares that if at the time of the division and distribution, any beneficiary should have died without leaving any son but leaving only a widow, the widow would get half of the share of that beneficiary while the other half would be distributed among the remaining beneficiaries and the heirs of the beneficiaries entitled to distribution. A further provision declares that if at the time of division and distribution, any beneficiary should have died without leaving a widow or a son, his share would, subject to such adequate provision made for the maintenance and education until marriage and the marriage expenses of the daughter or daughters of such beneficiary as the trustees may in their discretion think fit, be distributed among the remaining beneficiaries and the heirs of the beneficiaries entitled to distribution. The assessees filed a declaration dated October 19, 1964, that on and from Diwali 1959, the income accruing to them as beneficiaries from the two trust deeds should be regarded as income belonging to their Hindu undivided families. Th....
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.... their respective Hindu undivided families. There is clear indication in the trust deeds which bears this out. In the first place, had it been intended that the beneficiary should receive the property as karta of his Hindu undivided family, the document would not have empowered the trustees, in clause 1, to exercise an absolute and uncontrolled discretion on the death of a beneficiary to apply his share to the maintenance of his widow and his male issue and to accumulate the surplus to the account of the said beneficiary for distribution. On the contrary, the trustees would have been under an obligation to entrust the income falling to the share of the deceased beneficiary to the members of his Hindu undivided family and no discretion would have been permissible in regard to the disposal or otherwise of any part thereof. Secondly, the document would not have provided that if before the time of division and distribution, a beneficiary died leaving only a widow, the widow would get a half of the share belonging to the deceased beneficiary while the other half would be liable to distribution among the remaining beneficiaries and the heirs of other deceased beneficiaries. These two con....
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....ctober 19, 1964, referred to supra and hence the same cannot be included in his individual net wealth. This is how this issue again came up before the taxing authorities in this litigation as to whether the stand of the assessee is legally sustainable or not. As noted supra, all the taxing authorities have negativated the stand of the assessee and now it is before this court in this reference at the instance of the assessee. Heard Shri P.M. Choudhary, learned counsel for the applicant, and Shri R.L. Jain, learned senior advocate with Ms. Veena Mandlik, learned counsel for the respondent. The submission of learned counsel for the assessee was firstly the issue involved in this case is not or/and cannot be held concluded or/and decided by the decision rendered by the Supreme Court in the earlier litigation in CIT v. Maharaja Bahadur Singh [1986] 162 ITR 343. According to learned counsel, the question involved in the earlier litigation and which though eventually decided against the assessee by the Supreme Court was about the status of the assessee in holding 1/6th share of the trust-individual or karta. Secondly, once this issue was answered against the assessee, he had every r....
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....show that the settlors have provided the manner of its utilization by the beneficiaries in the event of particular happening or contingencies specified in the clauses in the trust deed. This clearly indicates that the settlors did not intend to confer power upon the beneficiary to completely divest themselves of their interest in the 1/6th share by blending it in their respective Hindu undivided family. Indeed, what the assessee failed to achieve in the earlier litigation, he could not be allowed to achieve in this manner to get over the view taken by the Supreme Court, in the earlier case. In other words, it was a clear case where, the assessee failed in his attempt in the earlier litigation to seek a declaration in his favour in regard to his status and hence, he cannot subsequently by taking recourse to the declaration on October 19, 1964, be allowed to change the nature of the property held by him in his capacity as beneficiary of the trust property. In any event, on a plain language of the clauses of the trust deeds (1, 3 18 and 4), the intention of the settlors seems to be not to destroy the corpus of the trust nor to confer upon the beneficiary a right to dispose of or/an....