TaxTMI 
TaxTMI 
1998 (3) TMI 11
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....te Tribunal is correct in holding that the probable estate duty payable on the death of the life tenant has to be taken into account and the value of the property will be diminished by that for charge of wealth-tax in the hands of the remaindermen? 2. Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal is justified in holding that the rate of interest adopted by the assessee's actuary is correct? 3. Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal is justified in holding that the rate of interest as given in the Wealth-tax Rules for valuation of life interest is applicable to the present case where the corpus is jewellery which is appreciable asset?....
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....uation made by the assessees' valuer was incorrect for three reasons, namely, (i) that the estate duty payable on the death of the life tenant was wrongly deducted; (ii) that no adjustment has been made for appreciation in the value of the property; and (iii) that the interest rate was wrongly taken at 6 1/2 percent for the purpose of actual valuation. The Tribunal rejected these three grounds on finding that the accepted method of valuing the remaindermen's interest included a deduction of the estate duty, that the value had been taken on the basis of the Department, valuer's report and so did not call for appreciation and that the interest rate adopted was given in the table annexed to the Wealth-tax Rules itself. At the instance of....
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.... since the property does not devolve on the remainderman till the life-time of the life tenant, they will not be liable to any tax at all. But the Supreme Court in CWT v. Trustees of H. E. H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555 held that: "The consequences of the provisions in section 21(1) that the trustee is assessable 'in the like manner and to the same extent' as the beneficiary are three-fold. In the first place, there would have to be as many assessments on the trustee as there are beneficiaries with determinate and known shares, though for the sake of convenience, there may be only one assessment order specifying separately the tax due in respect of the wealth of each beneficiary. Secondly, the assessment of....
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....as diminished by the estate duty because under section 74 of the Estate Duty Act, the estate duty is a first charge on the property. Learned standing counsel for the Revenue submitted that such an inference should not be drawn in making a notional valuation because where a formula has already been adopted, there is no need to add to that. He also explained the formula for valuing the remainderman's interest with the assistance of the valuer. But that is only with reference to the interest of the remainderman and not with reference to the asset that would be available for transfer by the remainderman when the interest falls into his possession. Learned counsel for the standing counsel for the Revenue relied on the decision of the Supreme ....
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....ny way from the application of the principle enunciated by the Supreme Court to the facts of the present case. Here, the valuation itself is only on the basis that the life tenant had died on the valuation date and we are trying to ascertain the market value with reference to what a willing buyer will pay for the asset which falls into the possession of the remainderman. The asset can be sold by the remainderman only after it falls into his possession and he cannot get it without paying the estate duty or having it charged on the property. The willing buyer will necessarily take that into account in giving his offer. This is the reason why even in the Estate Duty Act where the interest in expectancy is to be valued, rule 14(7) lays down the....