ASSISTANT COMMISSIONER OF WEALTH TAX Vs. TRUSTEES OF PRINCE MOAZAM JAH TRUST
LAWS(IT)-1994-11-4
INCOME TAX APPELLATE TRIBUNAL
Decided on November 28,1994

Appellant
VERSUS
Respondents

JUDGEMENT

R.P. Garg, Accountant Member - (1.) THESE eleven appeals by the Revenue are against the order of the Commissioner of Wealth-tax (Appeals) for assessment years 1978-79 to 1988-89. For the sake of convenience, they are being disposed of by this common order.
(2.) The common question in all these appeals concerns the assessment made under Section 21(4) of the W.T. Act. The common grounds raised in the appeals are as under : 1. The CWT (Appeals)-I should have held that the provisions of Section 21(4) are clearly applicable in this case in view of the disputes amongst the children of Prince Moazam Jah leading to a court litigation and also in view of the fact that the ITAT held that the interest of Prince Shahmat Ali Khan was remote and contingent; 2. The CWT (Appeals should have appreciated the fact that in the light of the Supreme Court's decision reported in 108 ITR 555 matter relating to an assessment should be based on facts only existing as on the relevant date and accordingly he should have held that the beneficiaries in this trust are unknown and that their shares are indeterminate. The facts of the case are as follows : In pursuance of an agreement with Government of India and out of natural love and affection, HEH Nawab Sir Mir Osman Ali Khan, Nizam of Hyderabad, created a trust depositing Rs. 1.82 crores with the Government of India with tax-free interest at the rate of 1 per cent per annum on 8-10-1949 for the benefit of his son Walashan Prince Moazam Jah (hereinafter referred to as "the Prince") and his daughter-in-law princess Niloufer, wife of the said Prince. As per Clause 2 of Trust Deed, the Trustees are to hold and stand possessed of the Trust Fund upon trust: (a) To deposit the same forthwith with the Government of India pursuant to the arrangement arrived at with the Government of India as aforesaid and to recover from the Government of India the interest thereon and to pay out of such interest the charges for collection thereof and all other costs, charges, expenses and all other outgoings relating to this trust and the administration thereof. (b) To pay the net interest of the Trust Fund or of the balance thereof for the time being to the said Prince free of Income-tax, super-tax and all other taxes whatsoever until his death. (c) During the life-time of the said Prince to recover and receive from the Government of India and to pay to the said Prince out of the corpus of the Trust Fund as long as the same shall be available such sum every year as together with the net interest of the Trust Fund payable to him as aforesaid, will in all make up the sum of Rs. 5,00,000 (Rupees five lacs) per annum, the first of such payments to be made on the 1st day of November, 1949 and each of the subsequent payments to be made on the first day of October in each and every year thereafter TO THE INTENT that the whole of the said sum of Rs. 5,00,000 (Rupees five lacs) shall be paid to the said Prince free of income-tax, super-tax and all other taxes whatsoever provided that nothing contained in this clause shall be deemed to give to the said Prince or vest in him or be deemed to vest or have the effect of vesting in him any amount in excess of the said sum of Rs. 5,00,000 (Rupees five lacs) in any year during his life-time out of the income and corpus of the Trust Fund nor shall anything contained in these presents be deemed to give to or vest or have the effect of vesting in the said Prince either immediately or at any time hereafter any moneys or interest otherwise than as provided in this sub-clause and in Sub-clauses (d) and (e) hereof, the intention of the Settlor expressly being that under no circumstances whatsoever shall the Prince under or by virtue of these presents be paid or be entitled to receive out of the interest and corpus of the Trust Fund any sum whatsoever in excess of the said sum of Rs. 5,00,000 (Rupees five lacs) in any one year during his life-time pursuant to this sub-clause and the benefit of the sums of Rs. 1,00,000 (Rupees one lac) per annum during his life-time and the sum of Rs. 20,00,000 (Rupees twenty lacs) in a lump sum in the manner as provided in Sub-clauses (d) and (e) hereof. (d) During the life-time of the said Prince to further recover and receive from the Government of India out of the corpus of the Trust Fund as long as the same shall be available a sum of Rs. 1,00,000 (Rupees one lac) every year to meet unforeseen or emergent expenses of the said Prince and to set aside and invest the sums so recovered and received in any of the securities authorized by these presents and to add the income thereof to the principal sum so set aside and to pay to the said Prince the corpus of such sums as also the accumulations of the income thereof or such part or parts of the corpus or the income thereof as the Trustees may deem fit from time to time for any urgent necessity or unforeseen circumstances or emergent expenses of the said Prince such as his illness, his tour to Europe or other foreign countries or otherwise for the benefit of the said Prince. The trustees shall be at liberty to invest any of the sum or sums so set aside as aforesaid or the balance thereof in promissory notes, Debentures, stocks or other Securities of the Government of India or of the Hyderabad State or of the United Kingdom or in Fixed Deposits with any Scheduled Bank as the Trustees may in their absolute discretion deem fit with full power to the Trustees in their absolute discretion to alter, vary or transfer the investments from time to time in such manner as they may think proper into or for others of the same or a like nature without being responsible or accountable to any one for the same or for any loss or diminution in the price thereof. (e) During the life-time of the said Prince to further recover and receive from the Government of India out of the corpus of the Trust Fund as long as the same shall be available a sum or sums not exceeding in all Rs. 20,00,000 (Rupees twenty lacs) for the purpose of providing a suitable residence for the said Prince in Bombay and on receipt thereof to purchase land and building suitable for the residence of the said Prince in Bombay or to purchase land in Bombay and erect a suitable building or buildings thereon for the residence of the said Prince and to purchase furniture and fittings for any such building and to otherwise furnish, fit up and decorate any such building with full power to the Trustees to pull down any such structure and to re-erect any new structure or to make additions or alterations to any existing structure but so that the total capital expenditure incurred for the aforesaid purposes shall not exceed Rs. 20,00,000 (Rupees twenty lacs) in all AND if and when such property is purchased or erected in Bombay, the Trustees shall allow the said Prince to use and occupy the same free of rent so long as the said Prince carries out all ordinary repairs to such property and pays all Municipal, Property and other taxes and outgoing that may be payable from time to time in respect of such property PROVIDED FURTHER that in the event of the said Prince failing to carry out such repairs or to pay such taxes or other outgoings in respect of the said property as aforesaid the Trustees shall be at liberty to themselves carry out the repairs and pay all such taxes and outgoings in respect of such property and to deduct the amount of moneys so expended or paid out of the moneys receivable by the Trustees from the Government of India out of the interest of the Trust Fund and payable to the said Prince under these presents PROVIDED FURTHER that in the event of the death of the said Prince leaving the said Princess as his wife surviving, then on the death of the said Prince and until the death or remarriage of the said Princess, whichever event shall take place first, the Trustees shall similarly allow the said Princess to use and occupy such property (including furniture and fittings therein) free of rent and all expenses of and incidental to the said property (including all Municipal, Property and other taxes) during the period the said Princess shall use and occupy the property shall be paid by the Trustees out of the interest of the Trust Fund, if and so long as the same shall be available to the Trustees. (f) On and after the death of the said Prince and if he has left a widow surviving other than the said Princess Niloufer, to pay out of the interest of the then balance (if any) of the corpus of the Trust Fund, as and when recovered from the Government of India as aforesaid, a sum of Rs. 24,000 (Rupees twenty four thousand) free of income-tax, super-tax and all other taxes whatsoever per annum to such widow of the Prince in advance on the first day of October in each and every year, the first of such payments to be made on the first day of October following the date of the death of the said Prince and each of the subsequent payments to be made on the first day of October of each and every year thereafter, until her death or re-marriage whichever event shall occur first PROVIDED however that-if the amount of the net interest accrued on the Trust Fund or the balance thereof for the time being in any year be less than the said sum of Rs. 24,000 (Rupees twenty four thousand) the Trustees shall in that year pay the amount of such interest (instead of the said sum of Rs. 24,000) to such widow of the said Prince as aforesaid PROVIDED FURTHER that such widow shall be a person who shall have been born at the date of these presents and shall be a member of a respectable Muslim Family of good status and her marriage to the said Prince shall have been recognised by the Settlor, or, in case the Settlor be not alive at the time of the marriage, then if such marriage to the said Prince shall have been recognized by the Government of India and the Nizam of Hyderabad living at the time of such marriage. (g) Subject to the provisions of Sub-clauses (a), (b), (c), (d), (e) and (f) hereof, if the said Prince shall have left issue him surviving either by the said Princess Niloufer or by any other widow satisfying the qualifications laid down in Sub-clause (f) thereof, then on and after the death of the said Prince, to divide, transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees amongst and to all the issues of the said Prince then living in accordance with the provisions of the law of succession governing Sunni Muslims as if the said prince had died intestate leaving the said corpus or the balance thereof, as the case may be, as his sole and absolute property. (h) Subject to the provisions of Sub-clauses (a), (b), (c), (d), (e), (f) and (g) to transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees, as the case may be, to the Settlor if he be then living and in the event of the Settlor predeceasing the said Prince, to transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees, as the case may be, to the Nizam of Hyderabad living at that time.
(3.) ON a bare reading of the aforesaid Sub-clauses (a), (b) and (c), it is evident that the Trustees are to receive the income/corpus and give a net sum of Rs. 5,00,000 every year to the Prince free of income-tax, super-tax and all other taxes. As per Sub-clause (d), the Trustees are to receive a sum of Rs. 1,00,000 per annum from the Government of India out of the corpus to meet unforeseen or emergent expenses of the Prince and set aside and invest with accretion in certain securities and to pay to the Prince from time to time for any urgent necessities/unforeseen circumstances like illness, tour to Europe, or other foreign countries or otherwise. Sub-clause (e) provides for a further receipt of Rs. 20 lakhs in lump sum from the Government of India out of the aforesaid corpus for providing a suitable residence in Bombay to the Prince and allow him for life to use and occupy the said residence with an obligation on the Prince to carry out ordinary repairs and pay Municipal, Property and other taxes and outgoings payable from time to time. Princess Niloufer is given a similar right of residence after the death of the Prince until her death or re-marriage whichever is earlier, with similar obligations regarding repairs and payment of taxes. Sub-clause (f) provides for a right to the lower amount of Rs. 24,000 per annum or the accrued interest from the remaining corpus, if any, to a widow of the recognised marriage of the Prince other than Princess Niloufer, until her death or re-marriage whichever is earlier. Sub-clause (g) provides Yor a division, transfer and hand-over of the balance corpus amongst and to all the issues of the Prince then living in accordance with the Sunni Muslim Law of Succession as if the Prince died intestate and the property was his sole and absolute property. Sub-clause (h) provides for a residuary transfer of the corpus to the Settlor or to the Nizam of Hyderabad living at that time.;


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