TaxTMI 
TaxTMI 
1994 (10) TMI 24
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....e allowed to reside in the properties free of rent are not beneficiaries of the trust? " The trust in question is one created by one M. George Joseph by a deed of trust dated May 22, 1972 (a copy of which is annexure "D" to the statement of the case), in respect of certain immovable properties owned by him. Therein George Joseph stated that he was getting old and was desirous of imparting education "as high as possible" to his three grandchildren, namely, Pradeep George Joseph, Promod John Joseph and Praveena Elizabeth Joseph, who were aged 7 years, 5 years and 1 year, respectively, on the date of annexure "D". The object with which the trust was created was to enable these children to receive the education by giving them "all facilities and training". The eldest son of the author of the trust, Dr. David Joseph was appointed as the trustee for the proper and due execution of the trust. He was to keep possession of the properties, manage them, collect the income and apply the net income for the education of the three named grandchildren, till the youngest of them Praveena Elizabeth Joseph attained the age of 21. The deed further stipulated that if there was any surplus, that shal....
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....their shares were not determinate, the assessment could only be under sub-section (4) of section 21. The Tribunal did not accept this plea. It held that the mere provision for the continued residence of the family members on the same terms and conditions as on the date of creation of the trust, would not make them beneficiaries for the purpose of section 21. Before us, learned counsel for the Revenue repeated this contention to attract sub-section (4) to the case. He urged further that the income of the trust accruing year after year had to be utilised for the education of the three grandchildren which necessarily had to be unequal, varying from person to person, depending on the type of education, the place of education and the like. This again, according to him, rendered the shares of the admitted beneficiaries indeterminate, attracting sub-section (4). The answer to the question turns essentially on the terms of the deed of trust. Sub-section (1) of section 21 states that where assets are held in trust declared by a duly executed instrument in writing, wealth-tax shall be levied upon and be recoverable from the trustee, in the like manner and to the same extent as it would....
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.... The Supreme Court has thus explained the difference between an assessment under sub-section (1) and one under sub-section (4). The court then held that the question in regard to the applicability of sub-section (1) or sub-section (4) has to be determined with reference to the relevant valuation date. So long as it is possible to say on the relevant valuation date that the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries may change by reason of subsequent events such as birth or death would not take the case out of the ambit of sub-section (1) of section 21. The position has to be seen on the relevant valuation date as if the event which leads to the expiration of the trust took place on that date, and if, on that hypothesis, it is possible to determine who precisely would be the beneficiaries and on what determinate shares, sub-section (1) must apply and not sub-section (4). The court approved the ratio of the decisions of the Calcutta High Court in Suhashini Karuri v. WTO [1962] 46 ITR 953, the Bombay High Court in Trustees of Putlibai R. F. Mulla Trust v. CWT [1967] 66 ITR 653 and CWT v. Trustees of Mrs. Hansabai Tribhuwandas Tr....
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....hat the income from the properties is likely to be utilised unequally among the three beneficiaries, having regard to the nature of their education, the place where the education is undergone and the like. We do not find any difficulty on this point. Sub-section (1) applies when the shares of the beneficiaries in the assets are determinate or known. Under the terms of the deed of trust, whatever is in the hands of the trustee has to be divided equally among the beneficiaries, including the surplus left after meeting the expenses. The stress is on the share in the assets and not on the income. We do not therefore find any merit in this contention. The other plea to be considered is the one based on clause 8 of the deed of trust under which the family members of the author of the trust are allowed to continue to reside in items Nos. 2 and 3 without payment of rent. This, according to counsel for the Revenue, spells in the realm of indeterminateness of the shares of the beneficiaries. We are unable to agree for more than one reason. Clause 8 relates to the tenancies over items Nos. 2, 3 and 5 which may or may not be determinate. But so far as items Nos. 2 and 3 are concerned, the r....