V.K.SINGHAL, J - (1.) THE Income-tax Appellate Tribunal has referred the following question of law under section 27(1) of the Wealth-tax Act, 1957, for the assessment year 1975-76, which arises out of the order of the Tribunal dated June 28, 1986 :
(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in holding that the shares of Smt. Jinia Bai and after her death the shares of other beneficiaries in the trust income are determinate and known and the provisions of section 21(4) of the Wealth-tax Act, 1957, do not apply The only question in dispute is as to whether the assessment should have been passed under section 21(1) of the Wealth-tax Act, 1957, and not under section 21(4) of the Act while determining the interest of the trustee (sic). According to the assessee, the shares of the beneficiaries were determinate and, as such, the provisions of section 21(1) should have been applied. According to the Revenue, Shri Pusalal Mansinghka, S/o. Seth Mahadeoji Mansinghka, executed a trust deed dated June 29, 1949, creating the assessee-trust and appointed four trustees to execute the same. The trust deed was registered to which certain properties were transferred. Three-fourths of the net income of the trust, after meeting the expenses including income-tax, were payable to Smt. Jinia Bai, wife of the settlor. It was also provided that further payment to the said lady during any year to the extent of the balance one-fourth of the said net income and also 25 per cent. of the corpus of the trust could be made if the said amount of three-fourths of the net income in any year is not sufficient. Similarly, if the said amount of three-fourths of the net income in any year is more than what is necessary to her needs, the payment could be reduced up to one-fourth of the said net income. The decision of the trustee in this regard was considered final. After the death of the lady Smt. Jinia Bai, the trustees hold the trust property for the benefit of son or sons of the settlor, and, in case there is no son or sons surviving, the benefit was to pass on to the widow or widows of such son or sons and thereafter to the benefit of the grandsons. If there was no male successor or descendant of the settlor according to Hindu law, the trustees could exercise the power to spend the income for any charitable purposes. In these circumstances, it was contended that the benefit derived by the lady beneficiary was indeterminate and the shares of the persons having a reversionary interest in the trust properties were also said to be indeterminate. In CWT v. Trustees of H. E. H. Nizams Family (Remainder Wealth) Trust, 1977 108 ITR 555(SC) it was held by the apex court that the provisions of section 21(1) will apply only where the trust property is held by the trust on behalf of a single beneficiary or where there are more than one beneficiaries, then the individual shares of the beneficiaries in the trust property are determinate and known. If the shares are indeterminate or unknown, the provisions of section 21(4) will apply. There could be another possibility where specific amounts are directed to be paid to certain beneficiaries at certain intervals and in that case, the interest of such beneficiaries in the trust will be considered known and determinate and the provisions of section 21(1) will apply. In the present case, Pusalal Mansinghka executed a trust deed on June 29, 1949, by which the assessee-trust was created and four trustees were appointed to execute the same. The trust deed was registered on August 11, 1949, and the properties mentioned in the annexures to the said trust deed were transferred to the trustees with full rights over the same. The Tribunal observed that : Three-fourths of the bet income of the trust after meeting all expenses including income-tax, would be paid to Smt. Jinia Bai, wife of the settlor, in four quarterly instalments, if necessity arose. They, however, had power to make further payments to the said lady during any year, to the extent of balance one-fourth of the said net income and also up to 25 per cent. of the corpus of the trust; if the said amount of three-fourths of the net income in any year is more than what is necessary to her needs, payment to the lady in that year can be reduced from the said amount up to one-fourth of the said net income; the decision of the trustees as to such necessity or otherwise would be final in this respect. After the death of the lady, Smt. Jinia Bai, the trustees would hold the trust property for the benefit of son or sons of the settlor, in case there is no son or sons surviving the lady, for the benefit of widow or widows of such son or sons, thereafter for the benefit of grandsons of the settlor or their widows as the case may be, etc., with residual condition that in case there is no male Hindu successor/descendant of the settlor as per Hindu law surviving the lady at any time, the trustees would have full power to spend the income of the trust for any charitable purpose; The benefit which the lady has derived as a beneficiary cannot be said to be indeterminate. The beneficiary was also known and it cannot be said to be indeterminate so as to attract the provisions of section 21(4). The decision of the apex court in the case of CWT v. Trustees of H. E. H. Nizams Family (Remainder Wealth) Trust, 1977 108 ITR 555(SC) is fully applicable.
(3.) ACCORDINGLY, we are of the view that the Income-tax Appellate Tribunal was right in holding that the shares of Smt. Jinia Bai and after her death the shares of the other beneficiaries in the trust income are determinate and known and the provisions of section 21(4) of the Wealth-tax Act do not apply. The reference is answered in favour of the assessee and against the Revenue.;