VIMALSHAH BABABHAI Vs. WEALTH TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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Y.R. Meena, Judicial Member -
(1.) THESE 8 appeals by the assessee are against the order of the Commissioner under Section 25(2) of the Wealth-tax Act, 1957 ('the Act') dated 24-1-1981. The assessment years involved are 1971-72 to 1978-79. Since common issues are involved in all these appeals, we have heard them together and dispose of by this common order for the sake of convenience.
(2.) The main issue for our consideration in these appeals is whether the order of the Commissioner under Section 25(2) is erroneous and bad in law. The wealth-tax assessments in the case of Shri Vimalshah, Shri Bababhai and others, executors of the estate of late Smt. Bai Manek, widow of Sheth Jamnabhai Bhagubhai, for the assessment years 1965-66 to 1978-79, were completed by the WTO on 13-3-1979. On going through the records in this case the Commissioner found that the WTO had allowed incorrect deductions in computing the net wealth of the assessee. According to the Commissioner the net wealth of the estate of the deceased person is chargeable to tax under Section 19A of the Act and in computing the net wealth of the deceased person taxable in the hands of the executors, one-third value of the wealth in both movable and immovable properties was not taxed in the hands of the executors by the WTO on the ground that the religious trust had vesting interest in one-third share of the property in terms of a will executed by the testatrix in August 1951. Notice was issued to the assessee and after hearing them the orders of the WTO were set aside and direction was given to him to reframe the said orders for the assessment years under appeal as per law. Being aggrieved the assessee came in appeal before us.
The submission of the learned Advocate General for the assessee before us was that Smt. Bai Manek, widow of Sheth Jamnabhai Bhagubhai, executed a will dated 25-8-1951 and a codicil dated 3-11-1952. She died on 5-12-1952. Under the will she authorised the executors to make some cash bequeathed after payment of tax of the estate and further it is stated in the will that the three sons of Bababhai and two sons of Bhagubhai, each be given a bungalow constructed by the executors at a cost of up to Rs. 50,000. The other bungalow should be given to the daughter of Bababhai, i.e., Veenaben, costing about Rs. 25,000. Clause 7 of the deed speaks of management or administration of testatrix and after distribution of the property as directed in the will from Clauses 1 to 9. Clause 10 provides for the creation by the executors of a trust under the name and style of Sheth Jamnabhai Bhagubhai Religious Trust and it further provides that the property equivalent to 4 annas in a rupee of 16 annas share of the properties that may remain over after making the dispositions as directed earlier in the will shall be settled on a trust. The other wealth of the trust is stated in Clause 16. It is mentioned in Clause 16 that whatever is left after giving the amounts as above and meeting expenses should go to the aforesaid religious trust. The combined reading of the will and codicil, thus, provides as far as the religious trust is concerned is as under:
0-4-0 share in the residue property in a rupee of sixteen annas. 0-1-6 being the balance of 0-12-0 share after giving 0-10-6 share to relatives from the remaining of the residue property."
So far as Shahibag bungalow is concerned, after the death of Bhagubhai and after provisions of residence of the sons of Bababhai a nd Bhagubhai, the same was to be given to the trust. According to the learned Advocate General, the residue property was 51/2 annas in a rupee which comes to the trust and Shahibag bungalow that was clear and the said property vested in the trust on the day when the trust was created. When the property was vested in the religious trust, that property should be excluded from the wealth of the assessee and that should not be taxed in the hands of the executors of the said estate. He relied on the cases of Navnitlal Sakarlal v.CWT [1977) 106 ITR 512 (Guj.), CIT v. Navnitlal Sakarlal  125 ITR 67 (Guj.) and CWT v. S. Prakasam  125 ITR 772 (Mad.). Shri Talati, the learned counsel for the assessee, also argued for the assessee. He submitted that it is true that provisions of Section 19A was not in the Act when their Lordships of the Gujarat High Court decided the issue in Navnitlal Sakarlal's case (supra) but the decision in the case of the same assessee in income-tax proceedings was given by their Lordships of the Gujarat High Court in the case of Navnitlal Sakarlal's case (supra). The section involved was 168 of the Income-tax Act, 1961 ('the 1961 Act') which is identical to Section 19A of the 1957 Act. Therefore, the existence of Section 19A does not make any difference on the real issue. He further submitted that a note was submitted to the Commissioner and along with that details were given for the property distributed. The same has not been considered by the Commissioner. If that was properly looked into, there would have been no case for setting aside the assessment orders. The learned Advocate General also pointed out that the income of the trust was excluded from the income of the assessee and on the same analogy the wealth should also be excluded from the wealth of the assessee and the wealth vested in the assessee is exempt under Section 5(1)(i) of the Act. Therefore, one-third value of the wealth representing the share of the religious trust in the estate is required to be deducted in computing the net wealth of the assessee and, therefore, the orders of the WTO were correct. The order of the Commissioner should be set set aside.
(3.) ON the other hand, the contention of the learned departmental representative, Shri Kathuria, was that the assessee had requested the higher authorities for granting exemption in respect of income from the trust as well as the wealth of the trust from both income-tax as well as wealth-tax proceedings. The CBDT issued directions wherein exemption is allowed only in respect of the income of the trust but no exemption in respect of wealth-tax is given. The assessee has not objected to the refusal to exempt from the wealth-tax. The Board has specifically stated that the assessee is liable to be assessed in view of the provisions of Section 19A of the Act. He further submitted that under Section 19A(5) read with Sub-section (6) thereof, the benefit is available to the specific legatee oniy and not to the residuary legatee. Unless the estate is distributed or applied to the benefit of the specific legatees and till the administration of the estate, the share of the residuary legatee cannot be ascertained and when the share of the residuary is not ascertainable, it cannot be deducted from the wealth of the assessee. He further submitted that in this case, the complete distribution to the beneficiaries of the estate has not been done as required by Sub-section (5) of Section 19A and as such there is no question of exclusion of such share simply saying that the trust has 51/2 annas share and that is vested in the trust is not enough. Actual distribution and corapletion of administration is a must under Section 19A. He relied on the decision of CIT v. Bakshi Sampuran Singh  133 ITR 650 (Punj. & Har.).;
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