- (1.) THIS reference arises out of an assessment to wealth tax made on the assessee for the asst. yrs.1957 58 to 1962 63, the relevant valuation dates being 31st March of each of the years 1957 to 1962. The reference involves the question of construction of a trust deed dt. 8th Oct., 1945, made by the assessee's wife, Chanchalbai, hereinafter referred to as the settlor. By the trust deed, the settlor settled shares of the value of Rs. 1,75,000 and a fixed deposit of Rs. 25,000 on the trust set out in cl. 1, 2 and 3 of the trust deed. These clauses ran, inter alia, as under : "The trustees shall out of the income of the trust property pay in the first instance all costs, charges, and expenses incurred by them in or about the recovery of such income and all other costs, charges and expenses incurred by them and properly payable out of the said income and shall pay the balance of the said income to the said Chanchalbai, the settlor during her life until her death, and on the death of the settlor, leaving surviving her, her husband, the said Sheth Bhogilal Maganlal Shah, the trust, property shall vest in him and the trustees shall pay out and hand over to him the said Sheth Bhogilal Maganlal Shah, the entire trust property, i.e. the corpus with all the accretions thereto to be used, enjoyed and disposed of by him, the said Sheth Bhogilal Maganlal Shah, as he likes at his own sweet will.
(2.) IF the said Sheth Bhogilal Maganlal Shah predecease the settlor and her son Ramniklal Bhogilal Shah survives the said Bai Chanchalbai, the entire trust property shall on the death of the settlor vest in the said Ramniklal Bhogilal Shah and the trustees shall pay out and hand over to him the entire trust property, i.e., the corpus with all the accretions thereto to be used enjoyed and disposed of by him, the said Sheth Ramniklal Bhogilal Shah, as he likes at his own sweet will. In case neither the said Sheth Bhogilal Maganlal Shah nor the said Ramniklal Bhogilal Shah survives the said Bai Chanchalbai, but a lineal descendant or descendants of the said Ramniklal Bhogilal Shah survives the said Bai Chanchalbai, the trustees shall hold the trust property, i.e. the entire corpus together with the accretions thereto upon the trust following that is to say : ". Then followed in the contingency set out in cl. 3, dispositions in favour of the lineal descendants of Ramniklal but these dispositions are not material for the purpose of the present reference and it is, therefore, not necessary to make any reference to them in detail. 2. In the course of the assessment of the assessee to wealth tax for the asst. yrs. 1957 58 to 1962 63, a question arose whether the assessee was taxable on his interest under the trust deed. The WTO took the view on a construction of cls. 1 and 2 of the trust deed that under the trust deed the assessee had a vest interest in he corpus and he accordingly proceeded to determine its value on the relevant valuation dates on the basis of its being a vested interest and included it in the net wealth of the assessee. The assessee being aggrieved by the orders made by the WTO, preferred appeals to the AAC, there being a separate appeal in respect of each assessment year. The AAC disagreed with the view taken by the WTO and held that the assessee did not have any interest, vested or contingent, in the corpus but what he had was merely a chance or possibility of obtaining an interest and that was not an "asset" within the meaning of S. 2(e) so as to be includible in the net wealth of the assessee. The AAC accordingly reduced the net wealth of a assessee by deducting the value of the assessee's interest under the trust deed which had been included by the WTO. This led to the filing of appeals by the WTO before the Tribunal. The Tribunal, on an examination of the provisions of the trust deed, came to the conclusion that the interest of the assessee in the corpus was neither a vested interest nor a contingent interest, but it was merely a spes successionis a chance of obtaining the property which was in the nature of a mere possibility of getting something on a future date and was, therefore, incapable of alienation by virtue of S. 6(a) of the Transfer of Property Act. This being in the opinion of the Tribunal the true nature and character of the interest of the assessee in regard of the corpus, the Tribunal held that the interest was such as could not be sold and no price could be realised for it and the value of the interest was accordingly nil. The Revenue thereupon applied for a reference and on the application the Tribunal drew up a statement of the case and referred the following question for the opinion of the Court : "Whether, on the facts and in the circumstances of the case, did the assessee acquire any interest under the deed of settlement dt. 8th Oct., 1945, executed by his wife, Smt. Chanchalbai Bhogilal Shah, which could be considered on the relevant valuation dates, as an asset within the meaning of s. 2(e) of the WT Act ?" 3. The question unfortunately is not happily worded and does not bring out the whole of the controversy between the parties. It takes into account only one aspect of the controversy, namely, whether the assessee had merely a spes successionis under the trust deed or he had an interest in the corpus which could be regarded as an "asset" within the meaning of S. 2(e). It does not comprehend the further aspect, namely, that if the view taken by the Tribunal is found to be wrong and it is held that what the assessee had under the trust deed was not a mere spes successionis but an interest in the corpus, whether such interest was a vested interest or a contingent interest. That was certainly a point of dispute between the assessee and the Revenue and was agitated before the Tribunal. The Tribunal of course took the view that the assessee had neither a vested interest nor a contingent interest and it was merely a spes successionis which he had under the trust deed, but if this view were found incorrect, it would clearly be necessary to decide whether the interest of the assessee in the corpus was a vested interest or contingent interest. It is, therefore, necessary to reframe the question to take in this aspect of the controversy as well and this can best be done by framing two questions instead of one, the question framed by the Tribunal being numbered question No. 1 and the second question being as under : "(2) If the answer to the first question is in the affirmative, whether such interest was a vested interest or a contingent interest ?" These two question between themselves bring out the whole controversy between the parties in regard to the true nature and quality of interest of the assessee in the corpus.
(3.) NOW , before we proceed to examine the nature and quality of the interest of the assessee in the corpus, it is necessary first to clear the ground by pointing out that in any event it cannot be regarded as a spes successionis. Even if the construction placed by the Tribunal on the relevant provision of the trust deed is right and the gift of the corpus to the assessee is held to be contingent on his surviving the settlor the interest of the assessee in the corpus would be a contingent interest and not a spes successionis. A spes successionis is a bare or naked possibility such as the chance of a relation obtaining a legacy on the death of a kinsman or any other possibility of a like nature which must be distinguished from a possibility coupled with interest. Where interest in corpus is given to a donee under a settlement and such interest in contingent on the happening of an uncertain event the donee acquires a contingent interest in the corpus which become vested on the happening of the uncertain event and such contingent interest, though dependent on a possibility for its vesting, is very much different from a spes successionis. It is a form of property which is assignable or transferable and on which money can be raised unlike spes successionis which is non transferable by reasons of S. 6(a) of the Transfer of Property Act. This distinction between the two legal concepts is clear and well defined and does not need any authority to support it. But if any authority were needed, it is to be found in the decisions of the Privy Council in Ma Yait vs. Official Assignee (1930) LR 57 IA 10 : AIR 1930 PC 17. In that case too the gift to the children was contingent on the youngest attaining the age of 20 and the argument was that the interest of the children being in the of nature of spes successionis was not transferable and the assignment of such interest was therefore invalid. The Privy Council repelled this argument holding that the interest which the children took in the corpus was contingent interest which, "..... was something quite different from a mere possibility of a like nature of an heir apparent succeeding to the estate, or the chance of relation obtaining a legacy......" The Privy Council observed that a contingent interest is, ".....a well ascertained form of property it certainly has been transferred in this country for generations in respect of which it is quite possible to raise money and to dispose of it in any way that the beneficiary chooses." [See also the decision of a Division Bench of this Court in CWT vs. Ashokkumar Ramanlal (1967) 63 ITR 133 (Guj) : TC 64R.227]. ;