- (1.) These appeals by certificate granted by the Gujarat High Court are directed against the judgment of the High Court disposing of three Wealth-tax References.
(2.) The three trust deeds were executed by the Settlor Narottam Lalbhai for the benefit of the assessee, his wife and his children and grand children. The deed dated March, 19, 1955 created a trust known as the Arvind Narottam Trust. The deed dated April 9, 1955 created a trust called the Arvind Family Trust. And the deed dated March 18, 1961 created a trust described as the Arvind Kalyan Trust. All the three trust deeds are couched, in identical terms, except in regard to the minimum amounts payable to the beneficiaries out of the income of each year There was one further difference in detail. The first two deeds specified a period of 18 years from the date of execution as the period: during which the net income could be distributed to the assessee, his wife and children, while the third specified a period of 30 years. The minimum annual payments to be made under the three trust deeds to the assessee by way of maintenance were Rs. 250/-, Rs. 150 and Rs. 250/- respectively. Under each of the trust deeds the settlor specified the interest of the beneficiaries in the trusts. The pertinent terms of one of them, the Arvind Narottam Trust Deed, may be set forth here. Clauses 7 and 8 of that Trust Deed provide : "7. (a) Whatever income by way of interest or otherwise is received each year by the trustees from the trust fund should be first applied in meeting with the expenses of the management of the trust and the payment of taxes thereof. For a period of 18 years, hereafter, the trustees may pay to Arvind or if Arvind gets married during the period to Arvind, his wife and children or to one or more of these persons, such portion of the net income remaining thereafter as the trustees deem fit. However, the trustees shall pay to Arvind, or if Arvind gets married during the period to each. Arvind and his wife, at least Rs. 150/- every year. After such distribution, if there remains any surplus from the income of any year, it shall be added to the corpus of the fund. If in any year the net income accruing to the fund is less than Rs. 300/- the whole amount should be paid to Arvind and if Arvind gets married during the period to Arvind and his wife in equal shares. If Arvind expires during the period of 18 years hereafter or if Arvind gets married during the period and both Arvind and his wife expire, the whole of the net income of the trust fund should be added to the corpus for a period of 18 years hereafter. (b) Whatever may be the corpus and the accumulated balance remaining undistributed out of the income of each year shall be paid (as capital) at the end of 18 years hereafter to Arvind, his wife and his children or survivor or such of them in such proportion as the. trustees deem fit. If the trustees are not able to decide upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so, then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind, his wife and his children. If none of the said persons are alive at the time of distribution then the distribution will be made to Niranjan, his wife and children or survivors, all or such of them and in such proportion as the trustees deem fit. If none of the said persons are alive at the time of distribution then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other eduational institution or an institution giving medical aid or attending to the health of public in general. 8. If the trustees so think fit the trustees are hereby authorised to distribute as capital even before the expiry of 18 years whatever property and income is at the particular time accumulated in the trust fund to Arvind, his wife and his children or survivor or such of them in such proportion as the trustees deem fit. If the trustees are not able to decide upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so, then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind, his wife and his children. If none of the said persons are alive, at the time of distribution then the distribution will be made to Niranjan, his wife and his children or survivors, all or such of them and in such proportion as the trustees deem fit. If none of the said persons are alive at the time of distribution, then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other educational institution or an institution giving medical aid or attending to the health of public in general. But if Arvind and his wife are the trustees at that time then they have no right to give vote in the above matter. But if the other trustees unanimously agree to allow them to vote then they can."
(3.) The Wealth-tax Officer made assessment orders for the assessment years 1962-63, 1963-64 and 1964-65 under the Wealth-tax Act, the relevant valuation dates being December, 31,1961, December 31,1962 and December 31, 1963. He assessed the assessee under sub-s. (2) of S. 21 of the Wealth-tax Act on the entire value of the assets held by the trusts. On appeal the Appellate Assistant Commissioner confined the liability of the assessee to wealth tax on the capitalised value of the minimum amounts payable under the trust deeds for his maintenance that is to say Rs. 250/-, Rs. 150/-and Rs. 250/- respectively per year. The Appellate Tribunal, on second appeal, affirmed the view taken by the Appellate Assistant Commissioner. At the instance of the Revenue, the three cases were carried in reference to the High Court for its opinion in each case on the following question of law :- "Whether, on the facts and in the circumstances of the case, the finding that it is only the capitalised value of the interest of the assessee that has to be included in the net wealth of the assessee is in law justified -;