Income Tax Appellate Tribunal - Madras
M.M. Marican Trust vs Wealth-Tax Officer on 5 May, 1990
Equivalent citations: [1991]37ITD174(MAD)
ORDER
T.V. Rajagopala Rao, Judicial Member
1. These are assessee's appeals directed against the order of the Deputy Commissioner (Appeals), 'F' Range, Madras, dated 4-5-1988. Since common points are involved in all these appeals and since the assessee is one and the same, all these appeals can be taken up together and disposed of by this common order.
2. The assessee is a private trust. The trust is created by four deeds of instruments respectively dated 15-7-1970, 15-12-1970, 23-2-1971 and 3-3-1971. The person who executed these four documents, the author of the trust is a Muslim by name Shri Muna Mohammed Abdul Kader Marican (also known as M.M. Marican), a resident of Karaikal in the erstwhile Pondicherry State. The founder of the trust had three sons -Mohammed Idrees Marican, Mohammed Hameed Marican and Mohammed Ibrahim Marican - and three daughters - Madarkani Ummal, Ayisha Ummal and Safiya Ummal. Copies of the four instruments mentioned above were provided to us in the form of a paper book. Since many of the issues which arise for decision in these appeals depend upon the construction of the deeds as well as the correct interpretation of the recitals in the deeds we felt it essential to note the important clauses of each of these deeds.
3. The first of the deeds is dated 15-7-1970. The founder is one Shri M.M. Marican, aged about 80 years and the trustee appointed is Mohammed Idrees Marican, son of Shri M.M. Marican, aged about 50 years. Both the founder as well as the trustee are stated to have belonged to Karaikal, Pondicherry State. The trust is called "M.M. Marican Trust". The properties which were committed to the possession of the trustee and which were stated to have vested in the trustee were the same properties as were noted in Annexure-A of the order of the Wealth-tax Officer for the assessment year 1973-74. It is stated that the trustee was entitled to a remuneration of Rs. 600 per month, which was to be drawn out of the income of the trust. In case the trustees were more than one, they were asked to divide Rs. 600 equally among them. The income of the trust properties was directed to be utilised as follows. Out of the net income a sum of Rs. 25,000 shall be paid to Mohammed Shamsuddin Marican, son of Mohammed Idrees Marican (trustee) and another sum of Rs. 25,000 to be paid to Mohammed Mustafa Marican, son of Mohammed Hameed Marican, during a period of 25 years from the date of trust; the trustee or trustees were vested with the discretion to pay this amount as and when funds were available with the trust. The trustee or trustees were at liberty to pay this amount either in lump sum or periodically as they deem fit. After the payment of the aggregate sum of Rs. 50,000 as aforesaid, 50% of the balance of income was to be distributed during the course of 25 years among the sons and daughters of the founder who were living at the date of the deed of trust in proportion of two shares to the male issues and one share to the female issues. The balance of 50% of the net income was directed to be accumulated and invested in properties and in business for the benefit of the trust. At the end of the 25th year the trustee/trustees shall distribute the corpus and the income of the trust of the heirs of the founder directly in accordance with the Muslim law and execute such instruments as may be required for transfer of the properties in favour of the beneficiaries. Clause 5 of the instrument defines what is meant by 'trust fund' which is said to consist of properties listed in 'A' Schedule, adverted to above, the income therefrom, the sale proceeds, if any, therefrom and also said to have consisted of any other properties or moneys that may be obtained by the trust. Clause 6 of the deed says that Shri Mohammed Idrees Marican shall be the sole trustee of Annexure 'A' properties. Clause 13 enumerates the powers of the trustee/s. The trustee or trustees were empowered to sell, mortgage or exchange any of the properties provided that all the proceeds of such sale, mortgage or exchange shall be added to and be utilised for the benefit of the 'MM. Marican Trust' and shall be held by the trustee/s for the benefit of the said trust. The trustee/s were also given powers to borrow moneys with or without security for the purposes and objects of the trust. Clause 16 says that the trust is irrevocable for 25 years. Clause 17, which is important, is as follows: "If any of the beneficiaries or descendants disputes or does not want the benefits of this trust conferred upon him or her then his or her share shall be distributed in favour of the other beneficiaries or descendants as the case may be in accordance with the Muslim Law.
4. The second document executed by Sri M.M. Marican was the deed dated 15-12-1970. In that deed, Sri M.M. Marican described himself as the founder and Shri Mohammed Idrees Marican was described as the trustee. The properties which were transferred in favour of the trustee were the properties found in annexure 'B' to the Wealth-tax Officer's assessment order for the assessment year 1973-74. In the deed dated 15-12-1970, it was stated that previously the founder had executed a deed of trust on 15-7-1970 setting up a trust called 'M.M. Marican Trust' and by the present deed in question he wanted to convey more properties to the above trust. All the other important clauses of this deed are similar to the clauses found in the previous deed dated 15-7-1970 except the clause with regard to the payment of Rs. 25,000 to each of his named grandson/grand/daughter. Under this clause, with regard to the remuneration to the trustees, similar to the one found in the deed dated 15-7-1970 was not there. It is stated in this deed that from out of the net income of the properties conveyed (annexure-B properties as per the wealth-tax assessment for 1973-74) a sum of Rs. 25,000 was directed to be paid to Fathima Joharan, daughter of Mohammed Idrees Marican (trustee) and another sum of Rs. 25,000 was directed to be paid to Mohammed Farook Marican, son of Mohammed Hameed Marican, during the course of 25 years. The trustee/s had full discretion to pay the above amounts as and when the funds are available with the trust either in a lump sum or periodically as he or they may deem fit. However, a new clause which was not found in the deed dated 15-7-1970 was found as Clause l(a). It says that if either Fathima Joharan or Mohammed Farook Marican predeceases the founder after the date of execution of the deed and before the receipt of either whole or part of Rs. 25,000 each during the 25 years, then the sum of Rs. 25,000 or part thereof which was due to each of them should be distributed among their rightful brothers and sisters who might be living according to Mohamedan Law, i.e. two shares each to the brother or brothers and one share each to the sister or sisters surviving the deceased person. The other important recitals remain the same as were found in the earlier deed dated 15-7-1970. Annexure 'B' to the Wealth-tax Officer's assessment order for 1973-74 comprised of nanjai agricultural lands mentioned in the deed and situated in Teezaveli village, Varamarakadu village and Kovilpattu village. The total extent of the nanjai lands which were conveyed under this deed was 3 velies, 8 mas and 68 kuzies.
5. The third document executed by Shri M.M. Marican in favour of the first son Shri Mohammed Idrees Marican constituting him as a trustee and making over the properties described in annexure 'C' to the wealth-tax assessment order for 1973-74 was dated 23-2-1971. A specific recital was made even in this deed saying that the founder was desirous of adding some more properties to his private family trust called M.M. Marican Trust. All other Clauses (17 in number) remained the same as the clauses found in the predecessor deed dated 15-12-1970 except Clauses 1 and l(a). They are also similar clauses but the names of the beneficiaries change. In Clause 1 under this deed it is stated that from out of the net income of the properties conveyed under this deed a sum of Rs. 25,000 should be paid to Mohammed Mariam Beevi, daughter of Mohammed Idrees Marican (trustee) and another sum of Rs. 25,000 should be paid to Mohammed Ariff Marican, son of Mohammed Hameed Marican. The trustee's have the liberty to pay these amounts either in a lump sum or in instalments at any time they choose within 25 years as and when the funds of the trust are available. Clause 1 (a) states that in case either or both of these beneficiaries predeceases the founder after the execution of the deed and before they realise the whole or part of Rs. 25,000 due to them then the whole or part of Rs. 25,000 due to them should pass to their real brothers and sisters in proportion of two shares to each brother and one share to each sister. This deed also contains the following important recital:
Whereas the donor founder desirous of having a private family trust have on the 15th day of July, 1970 executed a family trust called 'M.M. Marican Trust'." "The founder donor desirous of conveying more properties to the above trust hereby vests the properties described in the Schedule hereunder in possession of the trustee and he shall hold in trust as and for the purposes of the trust hereinafter appearing." Annexure C properties to the wealth-tax assessment order for the assessment year 1973-74 representing the schedule of properties to this deed comprised of five house properties with or without backyards and all of them are situated in Karaikal town.
6. The last of the deeds executed by Shri M.M. Marican was dated 3-3-1971. Under this deed also M.M. Marican described himself as the founder and Mohammed Idrees Marican was stated to be the trustee. In the preamble to the deed it was stated that previously he had executed a private family trust called M.M. Marican Trust on 15-7-1970 and by the present deed he wanted to convey some more properties to the said trust and put them in possession of the trustees and he wanted to direct the trustee to hold them for purposes of the trust thereafter appearing in the deed. Except the fact that Clause 1 to this deed mentions different names of the beneficiaries and except para 2(a) singularly found only in this deed, the other clauses of the deed are similar to those found in the trust deed dated 15-12-1970. The properties mentioned in the schedule to this deed were stated to be none other than the properties mentioned in annexure 'D' to the wealth-tax assessment order passed by the Wealth-tax Officer for the assessment year 1973-74. However, we compared the properties mentioned in annexure-D mentioned above with the schedule of properties given under this deed. We found that all the properties mentioned in the schedule under the deed are not reflected in annexure-D to the assessment order for the assessment year 1973-74. The villages and the survey numbers in which the agricultural lands covered by this deed were not specifically mentioned in Annexure-D to the assessment order for the assessment year 1973-74. As per the deed the agricultural lands are covered by S. Nos. 53(Nanjai), 155(Punjai) and S. No. 148/2 (Punjai) in Vadamarakadu village. A manaikat with coconut trees measuring 141 ft. east west and 83 ft. north south situated in nearby village was taken as part of agricultural land in annexure-D to the wealth-tax assessment order for the assessment year 1973-74. However, since there is no dispute with regard to the identity of the properties mentioned in the schedule under this deed there is no need to extract them separately. As in its sister deed in this deed also it is stated that M.M. Marican was the founder and Mohammed Idrees Marican was the trustee. So also the following clause commonly occurring in the two predecessor deeds was also found in this deed, "Whereas the donor founder desirous of having a private family trust have on the 15th day of July, 1970 executed a family trust called 'M.M. Marican Trust". The founder donor desirous of conveying more properties to the above trust hereby vests the properties described in the schedule hereunder in possession of the trustee and he shall hold in trust as and for the purposes of the trust hereinafter appearing." Clause 1 gives out the names of different beneficiaries. It is stated in clause No. 1 that from out of the net income derived over the schedule properties an amount of Rs. 25,000 should be paid to Mohammed Moosa Marican, son of Mohammed Idrees Marican (trustee) and another sum of Rs. 25,000 should be paid to Mohammed Ashraff Ali Marican, son of Mohammed Hameed Marican during the course of 25 years. However, the trustee or trustees shall have discretion to pay this amount as and when funds are available with the trust either in a lump sum or periodically as they deem fit. Clause 2(a) in this deed is as follows : "In the event of any of my beneficiaries becoming indebted or becoming insolvent no creditors or receiver or official assignees shall have any claim on their share of my property in these trusts, nor shall he or she be entitled to receive any income from my estate, but any issues by such beneficiary (i.e., grandson or grand-daughters) shall be entitled to all the benefits of these trusts as if they had been the principal heirs to my estate and such income and corpus of my property shall be distributed to them by the trustee or trustees according to Mohamedan Law." There is a dispute that this clause is meant to apply to each of the deeds executed by M.M. Marican and therefore this clause must be deemed to have been incorporated in each of the trusts dated 15-7-1970, 15-12-1970 and 23-2-1971 also. We shall decide this issue later.
7. It is admitted that the founder of the trust Shri Marican died in 1983. In this case the Wealth-tax Officer wanted to assess M.M. Marican Trust represented by its trustee Mohammed Idrees Marican on the ground that on the valuation date relevant to the assessment years 1973-74 to 1981-82 either the names of the beneficiaries or their shares were not definite and ascertainable and therefore this is a fit case where the provisions of Section 21(4) of the Wealth-tax Act applied. 30th June is the valuation date and therefore the valuation dates relevant to the assessment years in question are 30-6-1972 to 30-6-1980. The Wealth-tax Officer accepted the wealth-tax returns filed for the assessment years 1973-74, 1974-75 and 1975-76 and held that the entire wealth returned was exempt from tax. However, later it was found out that either the immovable properties belonging to the trust were declared at a very low value or that all the assets covered by all the four deeds mentioned above were not admitted in the wealth-tax returns filed for those assessment years. The Wealth-tax Officer concluded that there was escapement of wealth and on that ground he reopened the assessment for the assessment years 1973-74, 1974-75 and 1975-76. For other assessment years no wealth-tax returns were filed. Section 17 notices were issued and for the first time the returns were filed only after the issue of Section 17 notices. Therefore the assessments were reopened for the assessment years 1973-74 to 1981-82 from out of which these appeals arose. The dates of the reopened assessments and the net wealth assessed under each of them are provided hereunder: -
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Assessment year Valuation date Date of reopened Assessed net
assessment wealth
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(1) (2) (3) (4)
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1973-74 30-6-1972 27-3-1986 Rs. 3,43,800 1974-75 30-6-1973 27-3-1986 Rs. 3,46,400 1975-76 30-6-1974 27-3-1986 Rs. 3,37,800 1976-77 30-6-1975 27-3-1986 Rs. 6,43,400 1977-78 30-6-1976 27-3-1986 Rs. 6,34,400 1978-79 30-6-1977 27-3-1986 Rs. 6,27,000 1979-80 30-6-1978 27-3-1986 Rs. 11,79,800 1980-81 30-6-1979 27-3-1986 Rs. 11,46,900 1981-82 30-6-1980 27-3-1986 Rs. 10,09,600
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While making the assessments in question the properties covered by all the four deeds were considered to be belonging to the assessee trust and they were all assessable in the hands of the assessee trust only but not in the hands of the beneficiaries.
8. Aggrieved against each of the reassessment orders passed for these assessment years, the assessee trust went in appeal before the Deputy Commissioner (Appeals), Madras, who disposed them of by a common order dated 4-5-1988. On behalf of the assessee written submissions were made before the Deputy Commissioner (Appeals) and they were dated 27-3-1987. These written submissions were marked to the Wealth-tax Officer for his parawise remarks. The Wealth-tax Officer's parawise remarks were all dated 15-7-1987. The assessee very much relied upon the Madras High Court decision in the case of Estate of V.R. Chetty, 120 ITR 329 for the contention that it is wrong to assess all the properties in the hands of the assessee trust instead of assessing the beneficial interest in the hands of each of the beneficiaries which are distinct in number and their shares are also distinct on each and every valuation date and thus the case should have been governed and the assessments should have been made under Section 21(1) of the Wealth-tax Act and not under Section 21(4). The learned Deputy Commissioner (Appeals) held that the case cited can be distinguished on facts and thus the ratio of the Madras High Court decision cited in support of the assessee's contention cannot come to its aid and ultimately held that the assessee was correctly assessed as an individual under Section 21(4) of the Wealth-tax Act for each of the assessment years under consideration. With regard to the valuation of the properties covered by the four deeds mentioned above the Wealth-tax Officer omitted to send his comments in the first instance. However, the Deputy Commissioner (Appeals) directed him to send his comments on the question of valuation also. Thereafter the Wealth-tax Officer by his letter dated 13-9-1987 sent his comments on the question of valuation. The comments made by the Wealth-tax Officer on the question of valuation of the alleged residential property under Rule 1BB were reproduced in the impugned order passed by the Deputy Commissioner (Appeals) and hence it is felt that we need not repeat those comments in this order. The comments conveyed by the letter of the Wealth-tax Officer dated 30-9-1987 were passed on to the assessee trust by letter dated 24-2-1988 on 18-4-1988. The authorised representative of the assessee trust gave counter comments dated 29-2-1988, which are fully extracted in the Deputy Commissioner (Appeals)'s order containing four paras. So also the counter comments found in the letter of the authorised representative appearing on behalf of the assessee trust, dated 2-5-1988 were also fully extracted in the Deputy Commissioner (Appeals)'s order and therefore we felt it unnecessary to extract them once again in this order. For the reasons given out in para 7 of his impugned order the Deputy Commissioner (Appeals) held that it was only the trust which owned the properties and the trust was rightly assessed under Section 21(4) of the Wealth-tax Act and all the properties covered by the four deeds mentioned above were rightly considered in all the nine assessments as belonging to the appellant-trust. In support of his conclusion the Deputy Commissioner (Appeals) held that the beneficiaries acquired a right to share the trust properties only on the expiry of 25 years from the dates of the deeds. Till then they did not have any kind of right or interest in the trust properties. That is according to him the corpus and the income was to be accumulated for a period of 25 years. The Deputy Commissioner (Appeals) highlighted Clause 17 in the deed dated 15-7-1970 in which it was mentioned and if any of the beneficiary or descendant disputed or did not want the benefit of the trust his share of benefit was to be distributed in accordance with the Muslim Law. Further there were many other restrictive clauses in the deed. Therefore he agreed with the Wealth-tax Officer in concluding that it was premature to know who would be the beneficiaries or descendants on the expiry of 25 years. So also it was not known whether each beneficiary would accept or dispute or did not want the benefit of the trust. Again as per Clause 2(a) of the deed dated 3-3-1971 it was stated that in the event of any beneficiary becoming indebted or insolvent the share of such beneficiary would pass on to his or her issue as if such issue was the principal heir. In the course of 25 years one cannot foresee which of the beneficiaries would become indebted or insolvent. Having regard to all the above the Deputy Commissioner (Appeals) agreed with the Wealth-tax Officer while holding that the assessee trust should be assessed as a single person represented by its trustee under Section 21(4) of the Wealth-tax Act. With regard to the valuation of the properties, having considered the comments as well as the counter comments of the Wealth-tax Officer as well as those of the assessee's authorised representative and also having considered the enquiry report of the inspector of income-tax, conveyed by his letter dated 13-9-1987, the Deputy Commissioner (Appeals) felt it justifiable that the matter of valuation of all the properties should be reconsidered and re-examined for all the nine assessment years. He directed the Wealth-tax Officer to make a reference to the valuation cell of the department under Section 16A(1) of the Wealth-tax Act to arrive at the fair market value of the different properties covered under the four trust deeds as per law. He further held that wherever the provisions of Rule IBB of the Wealth-tax Rules are found applicable to any of the properties of the appellant, the valuation of the relevant properties should be made as per those rules. Therefore, he restored the matters to the file of the Wealth-tax Officer for fresh determination according to law and thus he partly allowed the appeals of the assessee for statistical purposes. The Deputy Commissioner (Appeals) disposed of all the appeals relating to the nine assessment years by his common order dated 4-5-1988. Once again having been aggrieved the assessee filed these second appeals.
9. The following grounds were taken in the original grounds : -
1. The Deputy CIT(A) erred in observing that one cannot foresee which of the beneficiaries would become indebted or insolvent and hence in the event thereof the share of benefit are indeterminate. Hence, the assessee trust was liable to be assessed under Section 21(4) of the W.T Act.
2. The assessee trust cannot be a legal entity in terms of the Trust Act much less an assessee under the provisions of the W.T Act.
3. The Deputy CIT(A) erred in concluding that it would be premature to know who will be the beneficiary or descendants on the expiry of the period of 25 years and hence the shares of beneficiaries are indeterminate.
4. The Deputy CIT(A) is not justified in concluding that the trust per se is assessable under the W.T Act and in any event under Section 21(4) of the W.T Act on the ground that the share of benefits as well as the beneficiaries are indeterminate and unknown.
At the time of hearing of the appeals, additional grounds of appeal were filed, in each of these appeals, and a petition seeking leave to raise them were also filed along with additional grounds. It is contended that the properties conveyed to the trust under the four deeds dated 15-7-1970, 15-12-1970, 23-2-1971 and 3-3-1971 and beneficiaries under them were different. The Wealth-tax Officer under the circumstances had no authority to aggregate the values of all the properties conveyed under the four deeds and assess the value of the same to wealth-tax invoking the provisions of Section 21 (4) of the Wealth-tax Act. Section 21(4) of the WT Act does not permit aggregation. This Tribunal in its order in the case of WTO v. Pradeep D. Kothari Trust [1988] 30 TTJ 688 (Mad.), held that even for adopting maximum marginal rate under Section 21(4) the basic exemption in the schedule to the Wealth-tax Act should be taken into account and if the net income is below the taxable minimum the maximum marginal rate cannot be applied. If separate assessments are made treating them as different trusts and taking into consideration the directions of the DC(A) to apply Rule 1BB the applicability of maximum marginal rate would not arise. Since the additional grounds raised were only legal grounds, which arise out of the facts already on record and since they do not involve fresh investigation into facts, they are permitted to be raised on behalf of the assessee-appellant.
10. The questions of law which arise for consideration, in our opinion, are the following. Whether all the four deeds speak of one trust or several trusts. Whether the ratio that it should be held that there are as many trusts as there are beneficiaries laid down in the Supreme Court decision in CWT v. Trustees of H.E.H. Nizam's Family (Remainder) Wealth Trust [1977] 108 ITR 555 applied to this case. Whether the beneficiaries under the trust/s are known and identifiable and their beneficial interest is also specified and ascertainable on each of the valuation dates and if so whether the trustee is to be assessed under Section 21(1) of the Wealth-tax Act to the same extent as the beneficiaries under the trust would have been assessed. Whether on each valuation date relevant for these nine years the beneficiaries under the trusts are known and identifiable, and if not, whether the assessment is to be made against the trustee on the totality of the beneficial interest held by all the beneficiaries under Section 21 (4) of the W. T Act. Whether any of the deeds are invalid for offending the trust law. Whether there is any error of law in the impugned order passed by the Dy. Commissioner (Appeals) or whether it is a fit one to be confirmed. Whether the maximum marginal rate cannot be applied when the trust is being assessed under Section 21 (4). The first among the questions which should be taken up for consideration is whether any of the deeds in question is invalid for offending the trust law. We have already extracted the important clauses of all the four deeds executed by Shri M.M. Marican, founder of the trust. In the last of the trust deeds dated 3-3-1971 executed by Shri M.M. Marican it is stated in Clause 2(a), which is already extracted above, that in the event of any of the beneficiaries becoming indebted or becoming insolvent no creditors or receiver or official assignee shall have any claim on their share in the properties of the trust nor shall he or she be entitled to receive any income from the estate but any issues by such beneficiary (sons, daughters, grandson or grand-daughter) should be entitled to all the benefits of the trusts as if they had been the principal heirs to his estate. The income and corpus of the trust properties should be distributed to them by the trustee according to Mohamedan Law. This, according to the assessee-appellant is the clause which invalidates the whole trust. It was contended that this Clause (2a) though omitted to be mentioned in the first three deeds should be deemed to have been incorporated in all of them since it would appear to be the intention of the founder which can easily be gathered by mere reading of Clause (2a) of the deed dated 3-3-1971.
11. We are unable to agree with this contention. Directions of the Founder to the Trustee with regard to different sets of properties conveyed under different deeds can be different. So directions with regard to administration and disposal of annexures A to C properties can be different from those given with regard to administration and disposal of Annexure-D properties. Therefore if for any reason the existence of Clause (2A) invalidates the Trust itself, in our considered opinion, it would affect only the deed dated 3-3-1971 but not its three predecessor deeds. It affects only Annexure-D properties but not annexures-A to C properties.
12. Now let us take up the issue whether Clause (2a) invalidates the deed dated 3-3-1971. We have already seen that some of the grandsons and grand-daughters and all the sons and daughters of the founder were eligible as beneficiaries to derive income from out of the income derived over the trust properties over a period of 25 years from the date of execution of each of the deeds. We have also seen that these beneficiaries though not entitled to demand the amounts due to them immediately from the trustee and though the trustee was or were given liberty to pay to them from out of the income over the trust properties either in a lump sum or periodically during a period extending over 25 years it is clear to our minds that the indebtedness or insolvency would disentitled them to claim any benefits from out of the trust income. Clause 2(a) in the deed would only show that if any of the beneficiaries were indebted or became insolvent then they were not entitled to have any claim either in the income or the property conveyed under the deed. On the other hand their issues, i.e., their sons or daughters shall be entitled to all those benefits. Therefore the intention of the founder was not to give any benefits under the deed to his insolvent son or daughter or beneficiary. Such insolvency or indebtedness on the part of either beneficiary or the sons or daughters of the donor would disentitle them to claim any benefits of the trust. The question is whether such a condition in the trust deed would invalidate the trust. In Nathan and Marshall Cases and Commentary on the Law of Trusts, Seventh Edition, edited by D.J. Hayton, at page 199 the law on this subject is stated as follows : -
It has long been established that whilst a condition or proviso for forfeiture of an interest on bankruptcy or attempted alienation of the interest is void a limitation of an interest to last until bankruptcy or attempted alienation is valid. The justification for such a distinction is that a limitation merely sets a natural limit to an interest whilst a condition or proviso cuts down an interest before it reaches its natural limit; if such a condition or proviso is void for being contrary to a course of devolution prescribed by law, in cutting down the natural length of an interest to prevent creditors obtaining the benefit of the interest, or for being repugnant to the nature of the alienable interest granted, then the whole natural interest is available for creditors and for alienation. A limitation, however, creates a determinable interest lasting until the limiting event happens and such interest itself is the whole natural interest. The conceptual difference between conditional and determinable interests might be stated as the difference between giving someone a twelve-inch ruler subject to being cut down to a six-inch ruler in certain conditions and giving someone a six-inch ruler in the first place.
As can be seen from Clause 2(a) of the deed there is no condition or proviso for forfeiture of interest on bankruptcy. On the other hand the condition is that the beneficiary would not get any benefit either in the income or in the corpus of the property if he becomes indebted or insolvent. However his indebtedness or insolvency does not debar his children to claim the interest which he is otherwise be entitled to. This according to us is the proper interpretation of Clause 2(a) and this condition, according to the above authority, appears to be a valid condition, which can validly be imposed while creating a discretionary trust. Therefore the argument that the insertion of Clause 2(a) in the trust deed dated 3-3-1971 invalidates the trust created under the deed does not appear to be correct under law and hence the argument of the assessee is to be rejected in this regard and we should hold that all the four documents are valid documents and none of them are invalid or offend the trust law.
13. The next question which crops up for consideration is whether all the four deeds constituted one trust or different trusts. In our considered opinion all these deeds constituted only one trust and not several trusts. Our reasons are as follows. M.M. Marican Trust was constituted under the deed dated 15-7-1970. The founder as well as the trustee are the same under all the four deeds dated 15-7-1970, 15-12-1970, 23-2-1971 and 3-3-1971. Clause 5 which is common to all the deeds speaks about what consists of the trust funds. Inter alia it is stated that the trust funds shall consist of not only the properties listed in the schedule of each of the deeds, the income therefrom or the sale proceeds thereof and also any other properties or moneys that might be obtained by the trust. Therefore even while executing the first of the trust deeds dated 15-7-1970 the founder contemplated that M.M. Marican Trust should not only possess the properties conveyed under that deed but should also possess the other properties which may be conveyed subsequently to the said trust. In the other three deeds, viz., 15-12-1970, 23-2-1971 and 3-3-1971 there was a specific recital in each of them to the effect that the further properties conveyed under them were each intended to form part of the properties of M.M. Marican Trust formed under the deed dated 15-7-1970. Except with regard to the payment of Rs. 50,000 from out of the income derived over the trust properties payable during a long period of 25 years to the named grandson and grand-daughter, in each of the four deeds, all other dispositions were made to the common beneficiaries under all the four trust deeds. For instance except the payment of Rs. 25,000 each to the named grandsons and grand-daughters from out of the income from the trust properties, the other sections which were common were that from out. of the remaining 50% of the net income 50% was directed to be paid over a period of 25 years to the sons and daughters of the founder himself under each and every four deeds executed by the founder. Further the ultimate beneficiaries who were entitled for the corpus of the trust properties were mentioned to be the heirs of the founder donor under each of the four deeds executed by the founder. Clause 4 of the trust deed dated 15-7-1970 was repeated in all the other three deeds also and the wording of the said clause which is as follows: "At the end of the 25th (Twenty-fifth) year the trustee or trustees in charge shall distribute the corpus and the income of the trust to the heirs of the founder donor strictly in accordance with the Muslim law and execute such instruments as may be required for transfer of properties in favour of the beneficiaries." Therefore, except in a case of payment of Rs. 50,000 from out of the income of the trust properties, the beneficaries who were entitled to the other income and who were entitled to the corpus of the trust after the trust period of 25 years were all common and same persons.
14. Reliance is placed upon the Supreme Court decision in Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust's case (supra) and it was contended that it should be held that there are as many trusts as there were beneficiaries and since the beneficiaries under one trust deed were not similar to the beneficiaries under the other trust deeds the four deeds should be considered as four trust deeds creating separate trusts. No doubt on the facts and circumstances of the case before them, having regard to the trust deed executed by the ex-Nizam and having regard to the various interests created in favour of the relatives mentioned in the Second Schedule of the trust deed, their Lordships of the Andhra Pradesh High Court held that under a single deed of trust executed by the ex -Nizam, several trusts in favour of relatives specified in the Second Schedule and their issues should be deemed to have been created. However, the decisions of the Andhra Pradesh High Court in that regard is a finding of fact and confines to the particular facts of that case. At page 580 of the reported decision the following is found : "It will be noticed that there is no intermingling of the units allocated to the relatives mentioned in the II Schedule except in the case of Laila Begam and Jani Begum, the units allocated to whom were after their death to augment the units allocated to their issue who were also relatives specified in the II Schedule. The units allocated to different relatives are kept distinct and separate and even the units of Laila Begum and Jani Begum when they descend to their issue are to be kept distinct and separate. On a consideration of the terms of the trust deed we hold that the deed of trust created several trusts in favour of the relatives specified in the II Schedule and their issue." (Emphasis supplied). It is significant that the Supreme Court did not decide the issue and left the issue purposely open in the last portion of their judgment reported at pages 600 & 601: "The High Court also examined the question whether the trust deed created one single indivisible trust or several distinct and separate trusts and, disagreeing with the view taken by the Tribunal, came to the conclusion that 'the deed of trust created several trusts in favour of the relatives specified in the second schedule and their issues'. But, on the view taken by us that it is Sub-section (1) of Section 21 and not Sub-section (4) of that section which applies in the assessment of the remainder in respect of each set of unit or units in the hands of the assessee, it is unnecessary to pursue this question and decide whether the trust deed created one single indivisible trust or as many trusts as the number of beneficiaries specified in the Second Schedule." Therefore it cannot be said that the decision of the Andhra Pradesh High Court had got the approval of the Supreme Court on the subject. We have already stated that the decision of the Andhra Pradesh High Court is rendered on the facts and circumstances of that case. In that case there were several life interest holders followed by ultimate beneficiaries. The ultimate beneficiaries claiming under the life interest holders are several and distinct unlike the facts in this case. Here in this case there are no life interest holders at all. The beneficiaries entitled to the income as well as the corpus of the trust, ultimately, are the same persons. Further under the deed dated 15-7-1970 the trustee/s is or are given a remuneration of Rs. 600 for discharging their duties as trustee/s. In the remaining three deeds no mention was made about any additional remuneration to the trustee similar to the clause about remuneration found in the deed dated 15-7-1970. The founder as well as the trustees are one and the same in all the four deeds. We have already extracted a common recital found in each of the deeds dated 15-12-1970,23-2-1971 and 3-3-1971 wherein it is specifically mentioned that the founder was executing each of them with an intention to add some more properties to M.M. Marican Trust already created under the deed dated 15-7-1970 and committed them to the possession of the sale common Trustee (Sri Idrees Marican) however, with some more additional directions. Just because there are different sets of properties made over to a common trust and just because out of three directions found in each deed one of them found changing from one deed to the other that by itself does not transform the otherwise single into different or several Trusts.
15. Several factors connected with the execution of the deeds the presence of a common portion, in the preamble of the latter three deeds, the fact that two out of three directions found were common in all the deeds made us feel that though they are four deeds they represent only one deed of one Trust through which different sets of properties were conveyed to a single Trust, M.M. Marican Trust. Hence we conclude the four deeds established only one Trust but not different Trusts. In the circumstances we are of the opinion that the deeds dated 15-7-1970, 15-12-1970, 23-2-1971 and 3-3-1971 conveyed properties only to one trust, viz., M.M. Marican Trust and the proposition that it should be held that there are as many trusts as beneficiaries approved by the Andhra Pradesh High Court in Trustees of HEM. Nizam's Family (Remainder) Wealth Trust's case (supra) cannot be applied to the facts of this case since they are very different from those considered by the Andhra Pradesh High Court. Simply because there are two separate beneficiaries mentioned in each of these deeds were made entitled to an amount of Rs. 25,000 from out of the net income of the trust properties that by itself would not make a single trust into several trusts. Consequently, it follows that with due regard to Annexure-A to D properties the assessments on the assessee should be made for each of the nine assessment years under consideration. We hold that only one common trust was created under the four deeds dated 15-7-1970, 15-12-1970, 23-2-1971 and 3-3-1971.
16. The next question posed for consideration is the main question involved in these appeals, viz., whether the names of the beneficiaries were determinate and known and whether the shares of the beneficiaries were determinate and known and whether the assessments were to be made under Section 21(1) or Section 21(4) of the Wealth-tax Act. In this connection we are of the opinion after having considered every material fact and after considering the legal position on this point that the assessee is correctly assessed under Section 21(4) of the Wealth-tax Act. Sections 21(1) and (4) were amended by the Finance (No. 2) Act, 1980 with effect from 1-4-1980. Before the said amendment Section 21(1) stood as follows :-
In the case of assets chargeable to tax under this Act, which are held by a court of wards or an administrator-general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a valid deed of wakf), the wealth-tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, receiver, manager or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf or whose benefit the assets are held, and the provisions of this Act shall apply accordingly.
Section 21 (4) prior to the amendment made through Finance (No. 2) Act, 1980 with effect from 1-4-1980 is as follows :-
Notwithstanding anything contained in this section, where the shares of the persons on whose behalf or for whose benefit any such assets are held are indeterminate or unknown, the wealth-tax shall be levied upon and recovered from the court of wards, administrator-general, official trustee, receiver, manager or other person aforesaid as if the persons on whose behalf or for whose benefit the assets are held were an individual who is a citizen of India and resident in India for the purposes of this Act, and
(a) at the rates specified in Part I of Schedule I; or
(b) at the rate of one and/one-half per cent;
Whichever course would be more beneficial to the revenue :
Provided that in a case where -
(i) such assets are held under a trust declared by will; or
(ii) such assets are held under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Wealth-tax Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the relatives of the settlor or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance; or
(iii) such assets are held by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, wealth-tax shall be charged at the rates specified in Part I of Schedule I. After the amendment made by the Finance (No. 2) Act, 1980, with effect from 1-4-1980 Sub-section (1A) to Section 21 was inserted and verbal changes were also made both in Sub-section (1) and Sub-section (4) of Section 21 and after the amendment the three Sub-sections, viz., (1), (1 A), and (4) of Section 21 stand as follows :-
(1) Subject to the provisions of Sub-section (1A), in the case of assets chargeable to tax under this Act, which are held by a court of wards or an administrator-general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a valid deed of wakf), the wealth-tax shall be levied upon and recoverable from the court of wards, administrator-general, official trustee, receiver, manager or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf or for whose benefit the assets are held, and the provisions of this Act shall apply accordingly.
(1A) Where the value or aggregate value of the interest or interests of the person or persons on whose behalf or for whose benefit such assets are held falls short of the value of any such assets, then, in addition to the wealth-tax leviable and recoverable under Sub-section (1), the wealth-tax shall be levied upon and recovered from the court of wards, administrator-general, official trustee, receiver, manager or other person or trustee aforesaid in respect of the value of such assets, to the extent it exceeds the value or aggregate value of such interest or interests, as if such excess value were the net wealth of an individual who is a citizen of India and resident in India for the purposes of this Act, and -
(i) at the rates specified in Part I of Schedule I; or
(ii) at the rate of three per cent, whichever course would be more beneficial to the revenue.
(4) "Notwithstanding anything contained in the foregoing provisions of this section, where the shares of the persons on whose behalf or for whose benefit any such assets are held are indeterminate or unknown, the wealth-tax shall be levied upon and recovered from the court of wards, administrator-general, official trustee, receiver, manager, or other person aforesaid as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from an individual who is a citizen of India and resident in India for the purposes of this Act, and
(a) at the rates specified in Part I of Schedule I; or
(b) at the rate of three per cent, whichever course would be more beneficial to the revenue :
Provided that in a case where -
(i) such assets are held under a trust declared by any person by will and such trust is the only trust so declared by him; or (ia) none of the beneficiaries has net wealth exceeding the amount not chargeable to wealth-tax in the case of an individual who is a citizen of India and resident in India for the purposes of this Act or is a beneficiary under any other trust; or
(ii) such assets are held under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Assessing Officer is satisfied, having regard to to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the relatives of the settlor or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance; or
(iii) such assets are held by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, wealth-tax shall be charged at the rates specified in Part I of Schedule I. Explanation 1: For the purposes of this sub-section, the shares of the persons on whose behalf or for whose benefit any such assets are held shall be deemed to be indeterminate or unknown unless the shares of the persons on whose behalf or for whose benefit such assets are held on the relevant valuation date are expressly stated in the order of the court or instrument of trust or deed of wakf, as the case may be, and are ascertainable as such on the date of such order, instrument or deed.
Now let us see whether the number of beneficiaries entitled to the income or corpus of the trust are determinate or known and whether their interests are also determinate or known. Under Clause 1 of the deed dated 15-7-1970 Mohammed Shamsuddin Marican, son of Mohammed Idrees Marican and Mohammed Mustafa Marican, son of Mohammed Hameed Marican were each entitled to Rs. 25,000 from out of the net income of the trust. This amount of Rs. 25,000 to each of the above persons may be given either in a lump sum or periodically during a period of 25 years at the discretion of the trustee or trustees. After deducting Rs. 50,000 from out of the net income derived over the trust properties under the said deed (Annexure-A properties) 50% of the balance income should be distributed to the sons and daughters of the founder during the course of 25 years. The sons and daughters of the founder contemplated under Clause 2 are those living on the dates of the four deeds dated 15-7-1970,15-12-1970,23-2-1971 and 3-3-1971. The trustees will have discretion to pay this amount as and when funds were available with the trust either in a lump sum or periodically as the trustee deems fit. The other 50% of the balance of income should be accumulated and invested in properties, businesses for the benefit of the trust. The period of the trust was 25 years and at the end of the 25 years the trustees should distribute the corpus and the income of the trust to the heirs of the founder strictly in accordance with the Muslim law and should execute such instruments as may be required for transfer of the properties in favour of the beneficiaries. From the facts of this case none of the two beneficiaries, who were entitled to Rs. 25,000 from out of the net income of the trust, can demand the trustee as of right on any of the valuation dates relevant to these nine assessment years to pay Rs. 25,000 to each of them inasmuch as, though they were entitled to Rs. 25,000 each, the trustee is at liberty to pay this amount either in lump sum or periodically in a period of 25 years. Thus on any of the valuation dates in question, neither Mohammed Shamsuddin nor Mohammed Mustafa Marican was entitled as of right to claim the amount of Rs. 25,000 or any part of it from the trustee. The position of the other named beneficiaries under each of the three subsequent deeds who were to be paid Rs. 25,000 each from out of the net income of Annexure B to D properties remains the same. So also none of the sons or daughters who are living on the dates of these deeds are entitled to demand 50% from out of the balance income, after deducting Rs. 50,000 from the net income, to them on any of the valuation dates for the same reason that the trustees were given full liberty to pay them the income, for which they are entitled, either in one lump sum or periodically during a span of 25 years and therefore on any of the valuation dates in question, it cannot be said that any son or daughter of the founder, found living on the dates of these deeds was entitled to demand his or her share from out of the income derived over the trust property. 25 years is the period of trust in which the trust was to be administered and after 25 years, the corpus as well as the income of the trust should be distributed among the heirs of the founder-donor in accordance with the Muslim Law. Heirs can be contemplated only after the death of the donor. Suppose the founder-donor happens to live even after 25 years of the execution of the deed his heirs have no right to demand possession of the corpus of the trust or the due share from the corpus of the trust. In case the founder-donor happens to live even after 25 years after the execution of the deed, can he derive the corpus of the property is the question. The answer is an emphatic no. Clause 14 of the deeds contains the following common clause:
For removal of doubts, it is hereby declared that no part of the funds or income of the trust shall ensure for the benefit of the founder-donor.
In view of the above clause, though the founder happens to live after 25 years of the execution of the deed, he cannot claim the corpus of the property or the income derived therefrom from the trustee. It is an admitted fact that the founder died only in 1983 by which time all the assessments in question were over. In those circumstances, on each of these valuation dates relevant to these nine assessment years, the founder was very much living and so, there is no question of Clause 4, which is common to each of these found deeds, coming into operation. There is no possibility of anybody claiming the corpus of the property as the heir of the founder on any of the valuation dates relevant to the nine assessment years. Therefore neither the number of the ultimate beneficiaries to whom the corpus of the properties should go, nor their interests are determinable or known by each of the valuation dates relevant to the nine assessment years in question. Under the above circumstances, we have to hold that the number of beneficiaries or their beneficial interests are not known or determinate on each of the valuation dates in question. The named beneficiaries and other beneficiaries who were having claims from out of the income of the trust properties, though had a vested right, none of them had a present right to demand payment from the Trustee on any valuation date relevant to any of these years. Under the circumstances, we are of the opinion that since the beneficiaries are indeterminate or unknown, inasmuch as the founder did not die before any of the valuation dates in question and the question of his heirs would arise only after his death and not before that, the correct provision under which assessment is to be made is Section 21(4) and not Section 21(1).
17. What were the circumstances under which the two sub-sections of Section 21, i.e., Sub-section (1) or Sub-section (4) of Section 21 have to be applied to a particular set of circumstances is clearly discussed by the Hon'ble Supreme Court in Trustee of H.E.H. Nizam's Family (Remainder) Wealth Trust's case (supra). At page 598 it is stated as follows :
This immediately takes us to the question as to which of the two Sub-sections (1) or (4) of Section 21 applied for the purpose of assessing the assessees to wealth-tax in respect of the beneficial interest in the remainder qua each set of unit or units allocated to the relatives specified in the second schedule. Now, it is clear from the language of Section 3 that the charge of wealth-tax is in respect of the net wealth on the relevant valuation date, and, therefore, the question in regard to the applicability of Sub-section (1) or (4) of Section 21 has to be determined with reference to the relevant valuation date. The Wealth-tax Officer has to determine who are the beneficiaries in respect of the remainder on the relevant date and whether their shares are indeterminate or unknown.... So long as it is possible to say on the relevant valuation date that the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries may change by reason of subsequent events such as birth or death would not take the case out of the ambit of Sub-section (1) of Section 21.
However, in this case, as we have already stated, there are no life interest holders followed by remaindermen. We have got all beneficiaries who are entitled either to income or to the corpus. So our only duty is to see whether on any particular valuation date whether all beneficiaries who were entitled to the income or entitled to the corpus, were ascertainable with certainty and whether their shares in the income or the corpus were definitely known. From the facts and circumstances of this case, though the beneficiaries who might be entitled to the income arising out of the Trust properties were fairly capable of being ascertained and though they must be held to have a vested right in the income, they have no enforceable present right on any of the valuation dates relevant to the nine assessment years in question. However, with regard to the names of the ultimate beneficiaries who were entitled to the corpus of all the trust properties together with the remaining funds of the trust, we must hold from facts and circumstances of this case, were unknown and their shares also were undeterminable. Further the disclaimer, if any, made by any of the beneficiaries entitled to the income or the corpus would change the position. In case of disclaimer by all, some or any beneficiaries entitled to the income of the trust would effect determinableness of the number of beneficiaries and their shares. Giving an illustration as to under what circumstances Section 21(4) WT Act would come into play the Hon'ble Supreme Court had stated as follows at page 596: "We have given in preceding paragraph illustration of a case falling within Section 21, Sub-section (1), but the illustration can be slightly modified by taking a case where property is held on trust for giving income for life to A and on his death, to such of the children of A as the trustee might think fit. Section 21, Sub-section (4) would be clearly attracted in such a case so far as the reversionary interest is concerned, because, on the relevant valuation date, the remaindermen and their shares would be indeterminate and unknown.
So it is clear that on a given valuation date where the shares of all the beneficiaries were not determinate or known Section 21(4) would apply. Now in this case it is not at all possible to determine who were the ultimate persons (heirs) who would be entitled to succeed the founder and who would be entitled to claim their share in the corpus of the trust. This would be possible only after the death of the founder and the persons who may ultimately turn out to be his heirs cannot be ascertained even before his death. Therefore the ultimate beneficiaries who were entitled to the corpus of the trust were not known. Even with regard to the beneficiaries entitled for amounts mentioned in the various clauses of each of the deeds were concerned they were not entitled to demand the amounts on any particular valuation date. No doubt they were entitled for the amounts but the trustees are equally entitled to discharge the amounts either by paying them in a lump sum or periodically within a period of 25 years. Therefore it cannot be said that definite amounts were due to the beneficiaries on any of the valuation dates in question because we are concerned only with nine assessment years whereas the trustees have got liberty to pay the amounts in 25 years from the date of the each deed. For this reason also we are of the opinion that the correct assessment which is to be made against all the beneficiaries should be under Section 21(4) and not under Section 21(1).
18. However even when it is an assessment under Section 21(4) the trustee can be assessed only up to the value of the totality of the beneficial interest which always falls short of the value of the corpus as such. This was specifically stated as page 596 in 108 ITR by the Hon'ble Supreme Court. The Supreme Court stated as under: "Once it is established that a trustee of a trust can be assessed only in accordance with the provisions of Section 21 and under these provisions, it is only the beneficial interests which are taxed in the hands of the trustee, it must follow as a necessary corollary that no part of the value of the corpus in excess of the aggregate value of the beneficial interests can be brought to tax in the assessment of the trustee. To do so would be contrary to the scheme and provisions of Section 21.
Discussing the circumstances on which an assessment under Section 21(4) can be made, they discussed the further question as to what extent the trustee can be assessed under Section 21(4). In that connection their Lordships held the following at pages 596 and 597: "But here also two assessments would have to be made on the trustee: one in respect of the actuarial valuation of the life interest of A under Sub-section (1) of Section 21 and the other in respect of the actuarial valuation of the totality of the beneficial interest in the remainder as if it belonged to one individual under Sub-section (4) of Section 21. The difference between the value of the corpus of the trust property and the aggregate of the actuarial valuation of the life interest of A and the remainderman's interest would not be assessable in the hands of the trustee because, as pointed out above, the trustee can be taxed only in respect of the beneficial interests and there being no other beneficiary apart from A and such of the children of A as the trustee might think fit, the balance of the value of the corpus cannot be brought to tax in the hands of the trustee under Sub-section (1) or (4) of Section 21." Their Lordships further made very clear that corpus of the trust funds cannot be assessed in the hands of the trustee either under Sub-section (1) or subsection (4) of Section 21 because the trustee is only a representative assessee and he is representing all the beneficiaries under the trust. In the case on hand some of the beneficiaries were entitled to specified amounts from out of the income of the trust property. So their right on each of the valuation dates relevant to the nine assessment years in question remained as the present right to receive the sum of Rs. 25,000 over a period of 25 years. So also the right of a son or daughter of the founder would remain to be his or her right to receive due share from out of the 50% of the remaining net income derived over the trust properties during a period of 25 years. So also the right of the heirs of the founder who are the ultimate beneficiaries represented by the trustee on each of these valuation dates would remain to be the total value of their present right to receive property at a future date. So the total beneficial interest which the trustee is representing would always fall short of the total value of the corpus. Under Section 21(4) the trustee can be assessed as a representative assessee representing the totality of the interest held by all the beneficiaries put together or as representing the total beneficial interest. But definitely not with the value of the whole corpus of the trust. However, admittedly the assessments in this case were framed against the trustee treating him as the owner of all the trust properties which is wrong. Therefore we set aside the assessments and direct to take the total beneficial interest only into consideration while assessing the trustee under Section 21(4). This direction of ours would apply only for the assessment years 1973-74 to 1979-80. From 1-4-1980 Sub-section (1A) was inserted in Section 21 which is already extracted above. The purpose of the insertion of the said Sub-section is to bring to tax the wealth representing the difference between the total value of the corpus and the total beneficial interest of several beneficiaries under the trust. Therefore the legal position remains that on or after 1979-80 assessment year the trustee can be assessed not only on the basis of the total beneficial interest of all the beneficiaries but also with reference to the difference between the total value of the corpus and the total beneficial interest under the trust on each of the two remaining valuation dates. Therefore in view of the insertion of Section 21 (1A) into the statute book beginning from 1-4-1980 the assessments made against the trustee in this case for the assessment years 1980-81 and 1981-82 should be found to have been correctly made and they are hereby confirmed. The Dy. Commissioner (Appeals) had already set aside the assessments with a direction that the matter of valuation of all the properties should be reconsidered and re-examined for all the nine assessment years under consideration and he also directed the WTO to make a reference to the valuation cell of the department under Section 16A(1) of the Wealth-tax Act. We directed that the valuation cell should bear in mind while valuing the properties the fact that the trustee was representing only the totality of the beneficial interests of all the beneficiaries which falls short of the total value of the corpus for the assessment years 1973-74 to 1979-80 but he should also remember that because of the insertion of Sub-section (1 A) into Section 21 he should value the total value of the corpus in the hands of the trustee for the assessment years 1980-81 and 1981-82. The Dy. Commissioner (Appeals) also directed that wherever the provisions of Rule 1BB of the Wealth-tax Rules are found applicable to any of the properties of the assessee the valuation must be made according to that rule. Against this direction the department did not come up in appeal. Therefore we confirm the said direction of the Dy. Commissioner (Appeals). Reliance was placed on Pradeep D. Kothari Trust's case (supra). The ratio laid down in the said case disposed of by Madras 'A' Bench is the following : "The operative part of subsection (4) requires the assessment to be made as if the discretionary Trust is an individual and it would follow that in such an assessment the basic exemption should be given as is applicable to an individual". The basic exemption up to 31-3-1980 was Rs. 1 lac and form 1-4-1980 it was increased to Rs. 1,50,000 under Section 21(4) the assessment is to be made on the Trustee treating him as if he is an individual. The question which arose before the Tribunal was whether basic exemption which is available to an individual while being assessed to wealth-tax is also available when the Trust was being assessed under Section 21(4) as an individual. It was held that such basic exemption was also available to the Trust. We fully agree with the ratio of the above case. However, its application would be germane only after ascertaining the net wealth of the assessee Trust.
19. We only direct that while framing fresh assessments for these years if the net wealth of the Assessee Trust is found below the basic exemption limits as per schedule 1 part 1 of WT Act the ratio of Pradeep D. Kothari Trust's case (supra) should be applied and the assessee should be held not assessable only for such assessment years in which the assessee would be found to have wealth below taxable limit set out under schedule 1 part 1 of the Wealth-tax Act.
20. Thus, the appeals are allowed for statistical purposes.