WEALTH TAX OFFICER Vs. R D MEHTA
INCOME TAX APPELLATE TRIBUNAL
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D.V. Junnarkar, Accountant Member -
(1.) THE revenue has filed these appeals for the assessment years 1968-69 to 1972-73 on the ground that the AAC erred in holding that the assessee's beneficial interest as a remainderman in the following four trusts could not be included in the total wealth of the assessee :
1. Sheth Hargovindas Jiwandas Family Trust
(2.) Bai Harkorebai Hargoivndas Trust
Shantabai Dharamdas Trust
(3.) DHARAMDAS Hargovindas and Gordhandas DHARAMDAS Joint Trust.
2. Sheth Hargovindas Jiwandas Family Trust was created by Hargovindas Jiwandas by a deed dated 4-12-1924 which was modified by an agreement dated 6-5-1962. The income of the trust was settled for the benefit of DHARAMDAS and after his death the corpus was to belong to the assessee and his brother, Amresh DHARAMDAS, in equal parts.
Bai Harkorebai Hargovindas Trust was created by Harkorebai Hargovindas by a deed dated 6-11-1931 as modified by a covenant dated 6-5-1962. The life interest belonged to DHARAMDAS (son of Harkorebai) and after his death the corpus would go to the assessee and his brother, Amresh DHARAMDAS, in equal parts.
Shantabai DHARAMDAS Trust was created by Shantabai, wife of Dharanidas, on 7-4-1943. Shantabai retained the life interest in the trust for herself and after her death the corpus would go to the assessee and his brother, Amresh DHARAMDAS, in equal parts.
DHARAMDAS Hargovindas and Gordhandas DHARAMDAS Joint Trust was created by DHARAMDAS Hargovindas and Gordhandas Hargovindas on 14-10-1943. The life interest was with DHARAMDAS and after his death the income was to be paid to the benefit of the assessee for his life and upon the death of the survivor (between DHARAMDAS or the assessee whoever died last) the corpus would belong to the assessee's sons.
3. In the wealth-tax proceedings, the assessee appended a note to the return of net wealth and also in the letter dated 9-6-1962, it was stated that the assessee did not have any life interest in the trusts at present. These trusts had filed the returns and after deducting the value of the life interest of the person having life interest which was separately assessed, the trusts had already paid wealth-tax on the balance. In these circumstances it was pleaded before the WTO that in view of the provisions of Section 21(1) of the Wealth-tax Act, 1957 ('the Act') nothing was taxable in the assessee's hands. The WTO, however, rejected the assessee's claim according to his understanding of Section 21(2). He proceeded to include the value of the life interest of the assessee in these trusts.
4. On an appeal by the assessee before the AAC for the assessment years 1968-69 to 1972-73, it was pointed out that all the four trusts were being separately assessed to tax. The trusts at Nos. 1, 2 and 4 were subjected to tax after deducting the life interest of DHARAMDAS and on the trust at No. 3, the tax was levied after deducting the life interest of Shantabai. It was submitted on behalf of the assessee that there was no dispute about the fact that the assessee was having vested interest in the corpus of the trusts at Nos. 1, 2 and 3 to the extent of 50 per cent by way of remainderman's interest. In the case of trust No. 4, however, the assessee's interest was to the extent of 50 per cent and that too on the contingency of the assessee surviving DHARAMDAS. It was the assessee's case before the AAC that the WTO having made up his mind to tax the trusts direct under Section 21(1), there was no scope for levy of wealth-tax on the assessee under Section 21(2). In this connection, reliance was placed on the CBDT Circular F. No. 45/78/66-ITJ (5), dated 24-2-1967 and another Circular No. 157 [F. No. 228/8/73-IT (A-II)], dated 26-12-1974 [see Taxmann's Direct Taxes Circulars, Vol. 1, 1980 edition, p. 564]. Further reliance was placed on the Bombay High Court decision in the case of Trustees of Chaturbhuj Raghavji Trust v. CIT  50 ITR 693. Arguments were also made before the AAC as regards the erroneous valuation of the assessee's life interest in these trusts. Having considered the submissions on behalf of the assessee and the fact that all the assessments for these five years in the case of the trusts were passed long before the assessments were made in the case of the assessee on 5-3-1979, the AAC took note of the Board's circulars relied upon by the assessee and held that the WTO was not correct in assessing the assessee's interest in the trusts as part of the assessee's wealth.;
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