Income Tax Appellate Tribunal - Hyderabad
Trustees Of Wedding Gifts Trust Of Heh ... vs Wealth-Tax Officer. on 17 March, 1989
Equivalent citations: [1989]30ITD490(HYD)
ORDER
Sri T. V. Rajagopala Rao, Judicial Member - These are assessees appeals for 1976-77 to 1980-81. As common points are involved in these appeals they can be taken up together and disposed of by a common order. These appeals arise out of the order of the Commissioner of Wealth-tax (Appeals)-I, Hyderabad dated 29-1-1988 for assessment years 1976-77 to 1978-79 and the separate common order dated 29-1-1988 passed by the Commissioner of Wealth-tax (Appeals)-I, Hyderabad for assessment years 1979-80 and 1980-81.
2. The appellant in these appeals is "Trustees of Wedding Gifts Trust of HEH the Nazams Two Grand-daughters representing Sb. Fatima Fouzia Fund". Firstly the reopening done by the Wealth-tax Officer by issuing notice under section 17 of the Wealth-tax Act was challenged as illegal. Secondly the finding of the Commissioner of Wealth-tax (Appeals) that the right to wear jewellery given to the two grand-daughters-one among whom is Sb. Fatima Fouzia, can be considered to be an asset assessable to wealth-tax within the meaning of section 2(e) of the Wealth-tax Act is contested. It is also contended that whether sec. 21(1) can be resorted to against the Trustee without specifying all the names of the beneficiaries and their respective interest in the Trust. It is also challenged that the value of the jewellery of Rs. 14,35,545 is assessable in the hands of Trustees in the representative character under sec. 21(1) of the Wealth-tax Act. Nextly it is contended that the decision of the Andhra Pradesh High Court in the case of CWT v. Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trust [1981] 129 ITR 796 can at all be applicable to the facts of the present case.
3. We have heard Sri. P. Muralikrishna, learned counsel for the assessee and Sri. K. K. Viswanatham, learned D. R. for the department. For assessment years 1976-77 to 1978-79 returns were filed by the assessee on 24-12-1979 disclosing nil wealth. Subsequently on 13/15-2-1984 sec. 17 notice was issued by the Wealth-tax Officer, in pursuance of which again nil return was filed on behalf of the assessee on 9-3-1984. It was contended that either Sb. Fatima Fouzia Begum or So. Amina Marzia were ever personally assessed for the same wealth in the same assessment years viz., 1976-77 to 1978-79. The CWT (A) in his common orders disposing of the appeals for 1976-77 to 1978-79 specifically found the following at para 2.2 of his impugned orders dated 19-9-1988 :
"It is contended before me that the W. T. O. had already assessed the beneficiaries directly in respect of the jewellery and as such the present impugned assessments on the trustees were not valid. A perusal of the records of both the beneficiaries viz., Fatima Fouzia and Sb. Amina Marzia does not indicate that any such assessment was made."
Therefore, it was contended that the argument of the learned counsel for the assessee that for the same assessment years the interest of the two beneficiaries Fatima Fouzia and Amina Marzia in this Trust were assessed in their individual hands u/s 21(2) of the Wealth-tax Act is factually not correct. In fact the learned Departmental Representative heavily relied on CWT (A)s order dated 29-1-1988 in which the decision of the A. P. High Court in Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum, Trusts case (supra) was held fully applicable. The learned CWT (A) had taken the fact of Andhra Pradesh High Court distinguishing the decision of another Bench of the same High Court in RC No. 67 of 1969 dated 5-11-1971 and while distinguishing the Andhra Pradesh High Court held as follows :
"At this stage a decision in RC No. 67 of 1969 of this Court was brought to our notice by the learned counsel for the respondent. The said decision deals with the interest in share fund and the jewellery. Therein it was held that the right to use jewels does not constitute an asset within the meaning of section 2(e) of the Wealth-tax Act. In the present case, the point was that arose for consideration was whether the jewellery fund is liable to be assessed under section 21(1) of the WT Act. In RC No. 67 of 1969, this aspect was not under consideration but was confined to the pointed whether the mere wearing of the jewellery constitutes an asset. Taking into consideration the terms of the trust deed in the instant case, we are of the view that the jewellery fund is liable to be taxed under section 21(1) of the WT Act."
It us argued that the learned CWT (A) held that the appellants interest in the jewellery in the relevant schedule is of a similar character to that enjoyed by Smt. Anwar Begum in respect of jewellery in Part-I of the Trust Deed, in her case and that the value of such jewellery is assessable u/s 21(1) in the hands of the trustees. Therefore according to the learned D. R., the order of the CWT (A) is perfectly justified and does not call for any interference from this Tribunal.
4. Firstly let us take up for consideration the question whether the Andhra Pradesh High Court decision in Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trusts case (supra) actually applied to the facts of this case. Before deciding this question let us consider the terms of the Trust Deed executed by the Ex-Nizam of Hyderabad on 4-9-1951 under which he made his two grand-daughters Sb. Fatima Fouzia and Amina Marzia and their children after their marriage, beneficiaries under the Trust. Sb. Fatima Fouzia and Amina Marzia were two daughters of the second son of the settlor. The first and second schedules to the Trust Deed consisted of a complete set of ladies jewellery of oriental type.
Para 2 of the Trust Deed is as follows :
"The Trust hereby created shall be called The Wedding Gifts Trust of H. E. H. the Nizams Two Grant-Daughters."
Para 3 of the Trust Deed is as follows :
"(a) ** ** ** (b) ** ** **
(c) On the marriage of the said Fatima Fouzia to give the articles of jewellery specified in the First Schedule hereunder written to the said Fatima Fouzia as wedding gift to her from the Settlor along with other jewellery which may be given to her on the occasion provided, however, that soon after the ceremonies and festivities in respect of the wedding of the said Fatima Fouzia shall be over, she shall return and hand over to the Trustees all the said articles of jewellery specified in the First Schedule hereunder written and thereafter the Trustees shall hold the same UPON TRUST to allow the said Fatima Fouzia to wear and use the said articles of jewellery or such of them as may be required on and for the purpose of any special ceremonial or festive occasion and after any such ceremonial or festive occasion shall be over to take charge of such articles from the said Fatima Fouzia PROVIDED ALWAYS that the Trustees shall not be liable or held responsible in any manner whatsoever by any person whomsoever for any loss or damage that may be caused to or in respect of any of the said articles in the course of the removal or transit of any of the said articles for the purposes aforesaid or for any other consequences resulting from the action of the Trustees in allowing the said articles or any of them to be worn or used as aforesaid."
It is also stated in the trust deed in para 3(d) that after the death of Fatima Fouzia the trustee shall hold the jewellery as per the directions given in clause 4 of the trust deed. Clause 4 of the trust deed is as follows :
"On the death of the said Fatima Fouzia the Trustees shall hold the said articles of jewellery specified in the First Schedule hereunder Written (hereinafter called Fatima Fouzias Jewellery fund) UPON TRUST to divide the same amongst her children and/or remoter issue then living per stirpes in the proportion of two-shares for every male child or remoter issue of hers standing in the same degree of relationship and so that no person shall take whose parent entitled to a share under this clause shall be living and further so that persons standing in the same degree of relationship shall take between themselves in the same proportion as above the share which their parent would have take if then living Provided, however, that if the said Fatima Fouzia shall die without leaving any child or remoter issue her surviving then the Trustees shall hold Fatima Fouzias Jewellery Fund UPON TRUST for the Nizam of Hyderabad who may be surviving at the date of the death of the said Fatima Fouzia in order to enable him to meet the essential expenditure for the management of the Sarf-e-khas for which he will be responsible as the Head of the Family of the Settlor shall come to an end for any reason whatsoever and there shall be no Nizam of Hyderabad existing at the date of the death of the said Fatima Fouzia then the Trustees shall in the event aforesaid hand over and transfer Fatima Fouzias jewellery Fund to the eldest male descendant in the direct male line of succession of the Settlor according to the law of primogeniture then living in order to enable him as the Head of the Family of the Settlor to maintain the dignity of the House of Asaf Jah to which the Settlor belongs and the status and position of the various members of his family."
Therefore, the above clauses in the settlement deed clearly show that Sb. Fatima Fouzia is entitled only to wear the jewellery in the first schedule on her marriage and other ceremonial occasions and as soon as the occasions come to a close the trustees are directed to take possession of the jewellery and keep them. Sb. Fatima Fouzia had to enjoy the right of wearing the jewellery on ceremonial occasions etc. only during her lifetime. After her death the vested remainder right in the corpus of the jewellery is given to her children and other as stipulated under para 4 of the settlement deed extracted above.
5. So also under para 3(e) Sb. Amina Marzia had the right to wear the jewellery mentioned in the second schedule on the occasion of her marriage but soon after the ceremonies and festivities in respect of her wedding would be over she shall have to return and hand over the jewellery to the trustees who should keep the said jewellery with them. However, the trustees should allow Sb. Amina Marzia to wear and use the articles of jewellery or such of them she may require on and for the purpose of any special ceremonial or festive occasion and after such ceremonial and festive occasion shall be over, the trustees shall again have to take custody of the jewellery from Sb. Amina Marzia, She shall enjoy the right of wearing the jewellery only during her lifetime and subsequent to her death the disposal of the jewellery should be made according to the terms of para 5 of the trust deed which is as follows :
"On the death of the said Amina Marzia the Trustees shall hold the said articles of jewellery specified in the Second Schedule hereunder written (hereinafter called Amina Marzias Jewellery Fund) UPON TRUST to divide the same amongst her children and/or remoter issue then living per stripes in the proportion of two shares for every male child or remoter issue of hers and one share for every female child or remoter issue of hers standing in the same degree of relationship and so that no person shall take whose parent entitled to a share under this clause shall be living and further so that persons standing in the same degree of relationship shall take between themselves in the same proportion as above the share which their parent would have taken if then living Provided, however, that if the said Amina Marzia shall die without leaving any child or remoter issue her surviving then the Trustees shall hold Amina Marzias Jewellery Fund UPON TRUST for the Nizam of Hyderabad who may be surviving at the date of the date of the said Amina Marzia in order to enable him to meet the essential expenditure for the management of the Sarf-e-Khas for which he will be responsible as the Head of the Family of the Settlor but if the dynasty of the Settlor shall come to an end for any reason whatsoever and there shall be no Nizam of Hyderabad existing at the date of the death of the said Amina Marzia then the Trustees shall in the event aforesaid hand over and transfer Amina Marzia Jewellery Fund to the eldest male descendant in the direct male line of succession of the Settlor according to the law of primogeniture them living in order to enable him as the Head of the Family of the Settlor to maintain the dignity of the House of Asaf Jah to which the Settlor belongs and the status and position of the various members of his family."
As can be seen from the above, the disposal of the jewellery mentioned in the second schedule of the trust deed should be made after the death of Sb. Amina Marzia, according to the directions of para 5 extracted above. According to those terms firstly her children would become persons having remaindermen interest each male child would be entitled two shares as against the female child entitled to one share. In the even of her dying without any issue then the jewellery should be held in Trust for the Nizam of Hyderabad, whoever he may be at the time of her death, and it should be used for the management of Sarf-e-Khas. In case by the date of her death there was no Nizam of Hyderabad existing then it should be transferred to the male descendant in the direct male line of succession to the Settlor according to law of primogeniture and that ultimate beneficiary should use the jewellery fund to maintain and keep up the dignity of the House of Asaf Jah to which the Settlor belongs.
6. We have gone through the decision of the Andhra Pradesh High Court in Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trusts case (supra). We found that the provisions of the Trust Deed involved in that case is materially different from the provisions of the Trust Deed now before us. In the Trust Deed involved in that case also there were two schedules in each of which some jewellery was mentioned. The jewellery mentioned in first schedule was to be worn on ceremonial occasions whereas the jewellery in second schedule of that Trust Deed was clearly meant for personal use of Sahebzadi Anwar Begum, one of the daughters-in-law of the Settlor. However, there was a clause in that Trust Deed under which that even if the jewellery were to be sold by the Trustees, the income realised on investment made from out of the said sale proceeds should be paid to Sahebzadi Anwar Begum. This provision makes ocean of difference between the two Trust Deeds. In the case before the High Court the question was whether the Trustees of Sb. Anwar Begum Trust should be assessed u/s 21(1) or sec. 21(4). Now in the case before us the question is quite different. The assessee did not have any objection for making an assessment u/s 21(1). However, her objection is that her mere right to wear jewellery is not an asset u/s 2(e) of the WT Act. Therefore, her right to wear jewellery does not bear any value whatsoever and does not attract any wealth-tax. Secondly, her contention is that while proceeding to assess the Trustees u/s 21(1), all the beneficiaries should be mentioned and their interest in the Trust should also be assessed separately, and thus the total interest held held by all the beneficiaries under the Trust is liable to be ascertained which is not done in this case and therefore, the assessment u/s 21(1) is bad. In the Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trusts case (supra) for assessment years 1957-58 to 1963-64 the direct question which was referred by this Tribunal was whether the right to wear the jewellery, inter alia, described in the Jewellery Fund constitutes an asset within the meaning of Sec. 2(e) of the Wealth-tax Act. The Honble Andhra Pradesh High Court comprising of Justice Chinnapa Reddy and Justice A. D. V. Reddy considered that matter by their judgment dated 5-11-1971 in case referred No. 67 of 1969. They have pointedly addressed themselves to this question. At the close of the judgment after discussing elaborately, what is the concept of an asset and whether every asset should be capable of being sold in the open market and if no right of alienation is given can it be called as an asset, were all considered, their Lordships came to the following conclusion :
"Even so, we are not satisfied that the interest of the Shahebzadi in the Jewellery Fund is an asset within the meaning of Sec. 2(e) of the Wealth-tax Act. Under the terms of the Trust the Shahebzadi is merely allowed to wear the jewels. She has no property interest of any sort in the jewels. For instance she cannot pledge the jewels, she cannot lend the jewels to a friend or relative to be worn on occasions. The Trustees are further given the right to withdraw the jewels from her any time they like and sell them. No doubt the income from the sale proceeds will have to be paid to the Shahebzadi but the Shahebzadi herself has no voice on the question whether the jewels may or may not be sold. Her interest in the jewels is limited to being allowed to wear them if the trustees do not withdraw them from her. To our minds, the interest appears to be of a permissive nature and cannot be called property however widely the expression may be interpreted. We, therefore, agree with the Tribunal that neither the interest of the Shahebzadi in the jewellery Fund nor her interest in the Shares Fund is an asset within the meaning of the Wealth-tax Act. The question is answered accordingly."
Following this decision the appeals relating to subsequent years in the case of Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trust (supra) were decided in favour of the assessee Trust by the A Bench of this Tribunal by their orders dated nil passed in WTA Nos. 415 to 420/Hyd. /1982 relating to assessment years 1970-71 to 1975-76 a copy of which is provided in a paper compilation filed before us. In our opinion the Sb. Fatima Fouzia or Amina Marzia were not having the right to demand the proceeds of sale from the trustees, after the sale of the jewellery whereas in the case of Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trust (supra) she had the right to demand the said sale proceeds from the trustees on the sale of jewellery.
7. As against the above arguments advanced on behalf of the assessee the learned Departmental Representative relied on very much upon CWT (A)s order. After considering both sides arguments, we accept the contentions advanced on behalf of the assessee Trust. Firstly we hold that the decision in Trustees of H. E. H. the Nizams Sahebzadi Anwar Begum Trusts case (supra) cannot be applied to the facts of this case. We further hold that the decision rendered by the Andhra Pradesh High Court in RC. 67 of 1969 dated 5-11-1970 is the direct decision on the point. According to the said decision, the right to wear jewellery either on the occasion of the marriages or on festive and ceremonial occasions throughout their lives of Sb. Fatima Fouzia and Amina Marzia, does not confer any asset on them in the jewellery mentioned in either schedule 1 or schedule 2 to the Trust Deed titled on "The Wedding Gift Trust of HEH the Nizams two grand daughters". Further let us see what was the ambit of sec. 21(1).
Section 21(1) as far as, is relevant for our purpose reads as follows :
"In the case of asses chargeable to tax under this Act, which are held by any Trustee appointed under a Trust declared by a duly executed instrument in writing, the wealth-tax shall be levied upon and recoverable from the Trustee, 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."
Now let us recall to our minds who are all the beneficiaries under Trust as far as we are concerned. In view of the decision of Andhra Pradesh High Court in RC. 67 of 1969 either Sb. Fatima Fouzia or Amina Marzia cannot be called to be beneficiaries as their right to wear jewellery cannot be considered to be property, however, widely that expression may be interpreted. Then the beneficiaries contemplated under the Trust must be either the sons or daughters of Sb. Fatima Fouzia or Amina Marzia or in the event of their not marrying or dying before the valuation dated of their not marrying or dying before the valuation dates in question, the beneficiaries must be considered to be either the Nizam of Hyderabad or the eldest son of the settlor judged by the right of primogeniture. None of them, their particulars, their interest in the Trust, were ascertained or mentioned in the assessments. Therefore, in our opinion the assessments against the assesses cannot stand and we hold that the assessment purported to have been completed u/s 21(1) is not valid under law.
8. Therefore, these appeals are allowed and the assessments are cancelled.