COMMISSIONER OF WEALTH TAX ANDHRA PRADESH Vs. TRUSTEES OF H E H THE NIZAMS FAMILY POCKET MONEY TRUST

JUDGEMENT

(1.) Late Nizam of Hyderabad created a "Family Pocket Money Trust" on 29/12/1950, for the benefit of his family members whose names had been mentioned in Sch. II of the trust deed. The corpus of the trust was Rs. 55,00,000 and it was divided into 550 equal units. The income corresponding to 23 equal units was directed to be utilised for meeting the administration charges of the trust. The income out of the balance of 527 units was directed to be divided among the members of the family mentioned in the trust during their lifetime to enable them to meet their pocket expenses.

(2.) The WTO held that the corpus relating to 23 units as per clause 4 of the trust deed should be treated as wealth liable to wealth-tax in the hands of the assessee-trustee under s. 21(4) of the W.T. Act (hereinafter referred to as "the Act") overruling the claim of trustees that they were entitled to the statutory allowance of Rs. 1,50,000 under s. 5(1A) of the Act. On appeal by the assessee, the AAC allowed the assessees claim for the deduction of Rs. 1,50,000 on the ground that s. 21(4) of the Act was not applicable at all as the trustees were not holding the corpus for the benefit of any person or persons.

(3.) In an appeal filed against that order of the AAC, the Income-tax Appellate Tribunal held that the matter was governed by s. 21(4) of the Act read with the second proviso to that section together with the Explanation. On that basis, the Income-tax Appellate Tribunal declared that the assessee was entitled to the statutory exemption of Rs. 1,50,000 under s. 5(1A) of the Act and the assessee should be taxed at the normal rate and not at the rate of 1 1/2 % which was adopted by the WTO.