TaxTMI 
TaxTMI 
1978 (2) TMI 11
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.... dated June 21, 1954, relinquished his right in the trust property, with the result that the terms of the trust deed came into force with effect from June 21, 1954, as if the settlor had expired on that date. In these two references, we are concerned with clauses 2, 2(d), 2(e), 2(f), 2(h), 2(j), 2(i), 2(1)(i), 2(1)(ii) and 2(1)(iii) of the trust deed and these clauses read: 2. The trustees shall hold and stand possessed of the trust fund upon trust : (d) To pay a sum of Rs. 1,000 per month to Sardar Begum, widow of the late His Highness Nawab Mahaboob Ali Khan and step-mother of the Settlor, for and during the term of her natural life or until the extinction of this trust as provided in clause 4 hereof, whichever event shall happen first. (e) To pay a sum of Rs. 250 per month to Umda Begum, widow of the late His Highness Nawab Mahaboob Ali Khan and step-mother of the Settlor, for and during the term of her natural life or until the extinction of this trust as provided in clause 4 hereof, whichever event shall happen first. (f) From the date on which Rahat Begum, mother of Sahebzada Nawab Basalat Jah Bahadur and step-brother of the settlor, goes to stay with her son the sai....
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....ng the term of their respective lives or until this trust is extinguished as provided in clause 4 hereof, whichever event shall happen first, on condition that the said sum of Rs. 250 per month shall be used by such person for the maintenance of his or her wife or husband, as the case may be, intention of the Settlor being to provide a special remuneration to each of the said 37 (thirty-seven) grandchildren payable to them on their marriage for meeting the extra expenses that they have to incur by reason of such marriage ; (ii) to pay to each of the persons whose names are mentioned in the third schedule hereunder written every month the sum mentioned against their names in the second column of the third schedule for and during the term of their respective lives or until the extinction of this trust as provided in clause 4 thereof. (iii) to set apart every month for the benefit of each of the following five persons, viz., (1) Mohesen Ali Mirza, S/o Hasan Ali Mirza. (2) Nadir Ali Mirza, S/o Hasan Ali Mirza. (3) Ameer Ali Mirza, S/o Hasan Ali Mirza. (4) Sadiq Ali Mirza, S/o Hasan Ali Mirza. (5) Requia Begum, D/o Hasan Ali Mirza. a sum of Rs. 100 per month for ....
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.... appeal, the AAC, dealing with the question of assessment made by resort to s. 21(4), held that, though the beneficiaries had some share in the income, that would not be tantamount to their having a definite share in the corpus. According to him, as the shares of the beneficiaries in the corpus of the trust were indeterminate and not known, the assessments were rightly made by the WTO under s. 21(4). On further appeal to the Appellate Tribunal, the assessee contended that the terms of the deed made it clear that the provisions of s. 21(1) are applicable to a substantial portion of the corpus. In other words, the assessee's case was that, if the shares in the income are known and determinate, then the shares in the corpus could be worked out. According to the assessee, there was no justification for the view adopted by the revenue that the share in the corpus of any beneficiary should be specific or known. The case of the department was that s. 21(1) was not applicable. It was urged by the revenue that even after separate assessments could be made in respect of the beneficiaries, whose shares are determinate, as a share payable to them has no reference proportionately to the corpus ....
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....of the income or the corpus of the fund or these persons and also those who after such disbursement are entitled to the residue of the corpus and the accumulated income ?" The third Member held that, notwithstanding the residual right in favour of the successor to the Nizam at the expiry of the period of 50 years the facts as on the relevant valuation dates have to be examined. According to him, it is not necessary for the application of s. 21(1) that the corpus itself should be held under trust. If, in effect, the income is payable to particular person, then the property is held for his benefit at the relevant time and it was not necessary to look at the ultimate beneficiary. In that view, he held that the corpus was held under the trust for the respective beneficiaries set out in cl. (2) of the deed. The trust properties to that extent as held for the benefit of the respective beneficiaries would be liable to be taxed only under s. 21(1). He was, therefore, of the view that it was not possible to say that s. 21(4) alone applied and not s. 21(1). He answered the question referred to him in these terms : "(i) The interest of a particular beneficiary in the trust fund is to be....
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....required to be spent collectively on the beneficiaries' palace kitchen under clause 2(1)(iv) of the trust deed and the corpus remaining after making the above exclusion is liable to be assessed together in the hands of the trustees under section 21(4) of the Wealth-tax Act." The following common questions have been referred to this court in both the cases : " 1. Whether, on the facts and in the circumstances of the case and on a true reading of sections 21( 1) and 21(4) of the Wealth-tax Act, 1957, in so far as it applied to assessment on trustees: (i) the interest of a person entitled to a particular amount of income of the fund on the valuation date is equal to only the actual amount due to him on the valuation date or that proportion of the trust fund as bears to the same proportion as the amount due to him bears to the total income of the trust fund ? (ii) the material persons to be held as the beneficiary or beneficiaries on the respective valuation dates for the assessment years in question were only those who are entitled on the valuation date to a particular amount out of the income or the corpus of the fund or these persons and also those who, after such disbur....
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....ght to receive specific amounts per month from the income. For this purpose, the beneficiaries must be alive on the valuation date. The other beneficiaries have to satisfy certain conditions such as marriage, etc. They have a right to receive a specified amount from out of the income of the corpus only on satisfying the conditions. The third set consists of beneficiaries who take under cl. (4) of the deed whatever remains in the corpus or income at the end of 50 years, i.e., those who would be entitled to share the entire balance as remaindermen. We are now concerned with those beneficiaries who are to receive a fixed sum per month from out of the income of the corpus. A sum of Rs. 1,000 per month is to be paid to the step-mother of the settlor during her lifetime. Similarly, a sum of Rs. 250 under cl. 2(a) was payable per month to Umda Begum, another step-mother of the settlor, during her lifetime. Another step-mother of the settlor was to get a sum of Rs. 1,000 per month for life from the date she chose to stay with her son, Sahebzadi Basalat Jah Bahadur. The three step-sisters of the settlor were similarly provided Rs. 1,000 each per month or such other lesser sum as indicated i....
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....the view that the trustees had to be assessed under s. 21(4) of the W.T. Act as, in his view, the shares of the persons on whose behalf the corpus of the assets was held were indeterminate and unknown. That view was affirmed by the AAC and the Tribunal. On a reference to the High Court, it held that the shares of the persons on whose behalf the assets were held by the trustees on the valuation date was determinate and known and the case was governed by s. 21(1) and not by s. 21(4) of the Act. In CWT v. Hansabai Tribhuwandas Trust [1968] 69 ITR 527 (Bom) was a case where a life-interest was created under the trust deed in one beneficiary and contingent interest on corpus in others. The question was whether the shares of the beneficiaries were indeterminate or unknown and whether the assessments should be made under s. 21 (1) or s. 21(4). On a construction of the terms of the deed, the Bombay High Court held that there was nothing indeterminate or unknown in the trust deed as regards the shares. Hansabai had clearly only the interest given to her in the net income and had no right in the corpus of the property, whereas the son of Tribhuwandas's brother had on the relevant date a c....
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....ld have to be applied. They also opined that, where the benefit receivable by a beneficiary is in the shape of an annuity or income from a trust estate and it is possible to evaluate its capitalised value, the share or interest of that beneficiary is not " indeterminate or unknown " within the meaning of s. 21(4) and the assessment in such a case shall have to be made under the provisions of s. 21(1) of the Act. In CWT v. Arvind Narottam [1976] 102 ITR 232, the Gujarat High Court endorsed the view of the Allahabad High Court in Chintamani Ghosh Trust V. CWT [1971] 80 ITR 331 and opined that, where shares of beneficiaries were determinate and known, the assessment should be made under either sub-ss. (1) or (2) of s. 21, as the case may be, and where the shares of the beneficiaries are indeterminate and unknown, the assessment should be made under s. 21(4) of the Act. The Supreme Court, on a review of the case law, defined the scope of s 21(1) and (4) in CWT v. Trustees of HE H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555. The learned judges held that s. 3 of the W.T. Act imposes the charge of wealth-tax " subject to the other provisions " of the Act, and these o....