Income Tax Appellate Tribunal - Hyderabad
Trustees Of Heh The Nizams Jewellery ... vs Assistant Commissioner Of Wealth-Tax. on 30 August, 1993
Equivalent citations: [1994]51ITD363(HYD)
ORDER
Per Bench - These two cross objections are by the assessee against the order of the Commissioner of Wealth-tax (Appeals) for assessment years 1985-86 and 1986-87. For the sake of convenience, they are being disposed of by this common order.
2. On 29-3-1951, HEH Nawab Sir Mir Osman Ali Khan Bahadur, GCSI, GBE, the Nizam of Hyderabad and Berar, settled certain precious gems, jewels, ornaments and other articles of jewellery and antique pieces specified in the First Schedule and securities worth Rs. 10,00,000 specified in the Second Schedule of the Deed, on trust for the benefit of his children. The trust is named as "HEH the Nizams Jewellery Trust". Except some specific dispositions of certain items mentioned in the First and Fourth Schedules, the remaining part of the principal fund was settled as per clause 3 of the deed an various trusts on terms and conditions mentioned in clauses 4 to 10 of the deed by dividing or treating as notionally dividing among six funds viz :
(1) Prince Azam Jah Fund having 4/16 share;
(2) Prince Moazzam Jah Fund having 4/16 share;
(3) Princess Shahzadi begum Fund having 1/16 share;
(4) Sb. Nawab Basalat Jah Fund having 1/16 share;
(5) Remaining Sons Fund having 3/16 share; and (6) Remaining Daughters Fund having 3/16 share.
We are concerned in this case with "Remaining Sons Fund" and in other cases with "Remaining Daughters Fund" also, wherein the terms and conditions except the sharing ratio of the beneficiaries are almost similar Clause 9 of the deed, which deals with the share of property of the Remaining Sons Fund, reads as under :
"The Trustees shall hold the said three equal parts of the principal Fund allocated to the sons, grandsons and grand-daughters of the Settlor mentioned in Part II of the Third Schedule hereunder written (hereinafter called "the Remaining Sons Fund") UPON TRUST to divide the same or to treat the same as notionally divided into 126 (one hundred and twenty-six) equal units and to allocate such 126 units to the respective beneficiaries specified in Part II of the Third Schedule hereunder written in the respective proportions set opposite their respective names in the second column of Part II of the Third Schedule hereunder written and to hold the same upon the respective trusts hereinafter declared and contained of and concerning the same respectively, namely :-
(a) To manage the respective Units of the Remaining Sons Fund allocated to each respective beneficiary as aforesaid and to collect and recover the interest and other income (if any) comprised in or representing the investments of such Units of the Remaining Sons Fund (all which securities and investments shall be included in the expression "the respective Units of the remaining Sons Fund allocated to each such beneficiaries as aforesaid").
(b) To pay out of the income of the respective Units of the Sons Fund allocated to each such beneficiary as aforesaid and if necessary out of the corpus thereof (including the remuneration payable to the Trustees under the provisions hereof) which would not be met or deffrayed out of the income of corpus of the said securities specified in the Second Schedule hereunder written.
(c) During the lifetime of the Settlor to accumulate and invest the net income (if any) of the respective Units of the Remaining Sons Fund allocated to each such beneficiary as aforesaid Provided that it shall be lawful for the Trustees whenever they in their absolute discretion so think fit during the lifetime of the Settlor to pay to each such beneficiary such sums of money from time to time as they may think proper out of the income of the respective Units of the Remaining Sons Fund allocated to each such beneficiary or the accumulations thereof AND subject to the above, such accumulations of the income of such respective Units of the Remaining Sons Fund and the investments thereof all resulting income therefrom shall form part of such respective units of the Remaining Sons Fund allocated to each such beneficiary and be held upon the same trusts as those relating to such respective Units of the Remaining Sons Fund allocated to each such beneficiary.
(d) From and after the death of the Settlor to pay the net income of the respective Units of the Remaining Sons Fund allocated to each such beneficiary as aforesaid to each such beneficiary absolutely for and during the terms of his or her respective life.
(e) On the death of the Survivor of the Settlor and of each such beneficiary leaving a child or children and/or remoter issue him or her then surviving to divide and distribute the Units of the Remaining Sons Fund allocated to such beneficiary as aforesaid among such child or children and/or remoter issue of such beneficiary per stripes in the proportion of two shares for every male child or remoter issue of such beneficiary to one share for every female child or remoter issue of such beneficiary 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 proportions as above the share which their parent would have taken if living provided, however, that if any of the first 13 (thirteen) beneficiaries specified in Part II of the Third Schedule here under written (i.e., beneficiaries other than the 7 (seven) grand-children of the Settlor specified in item 14 of Part II of the Third Schedule hereunder written) shall die without leaving any child or remoter issue him surviving then the Trustee shall on his death hold the Units of the Remaining Sons Fund allocated to such beneficiary as aforesaid UPON TRUST to divide the same into two equal parts and to allocate one such equal part to the remaining beneficiaries specified in Part II of the Third Schedule hereunder written (including the 7 (seven) grand-children of the Settlor specified in item 14 of Part II of the Third Schedule hereunder written) in the share and proportions mentioned against their respective names in the second column thereof and to allocate the other such equal part to the daughters of the Settlor specified in Part III of the Third Schedule hereunder written in equal shares and proportions and to hold and stand possessed of the respective shares which on such division and allocation shall go to the respective beneficiaries specified in Parts II and III of the Third Schedule hereunder written Upon Trust to add the same to and amalgamate the same with the respective Units of the Remaining Sons Fund or the Remaining Daughters Fund hereinafter referred to (as the case may be) originally allocated to them respectively under the provisions of this clause and the next succeeding clause 10 hereof and to hold the same respectively upon the same respective trusts as those upon which the respective original Units to which they are added and with which they are amalgamated as aforesaid are directed to be held under the provisions of this clause and of the next succeeding clause 10 hereof provided further that if any of the said 7 (seven) grand-children of the Settlor specified in item 14 of Part II of the Third Schedule hereunder written shall die without leaving any child or remoter issue him or her surviving then the Trustees shall on his or her death hold the Units of the Remaining Sons Fund allocated to such grand-child of the Settlor as aforesaid UPON TRUST to divide the same in the proportions in which the Units of the Remaining Sons Fund are allocated to the remaining grand-children of the Settlor as specified against their respective names in the Second column of Part II of the Third Schedule hereunder written and to hold and stand possessed of the respective shares which on such division shall go to the respective grand-children specified in item 14 of Part II of the Third Schedule hereunder written UPON TRUST to add the same to and amalgamate the same with the respective Units of the Remaining Sons Fund originally allocated to them respectively under the provisions of this clause and to hold the same respectively upon the same respective trusts as those upon which the respective original Units to which they are added and with which they are amalgamated as aforesaid are directed to be held under the provisions of this clause."
3. On a perusal of the aforesaid clause it is evident that the Trustees are to manage and accumulate the income after meeting expenses till the death of the Settlor, though an absolute discretion is given to the Trustees to pay to the beneficiaries in their specific shares, upon death of the Settlor, the net income is to be given absolutely to the beneficiaries for their respective lives and on their death the units of the fund are to be divided among/distributed to their children in such a way that a male child or remoter issue gets double the share of a female child or remoter issue.
4. The Settlor died in 1967 and as per the information given to us, the following immediate beneficiaries also died by the date of hearing (i.e., 26-8-1993) :-
Remaining Sons Fund :
1. Nb. Rajjab Jah Bdr. (9-12-1968)
2. Nb. Bhojat Jah Bdr. (8-1-1982)
3. Nb. Abid Jah Bdr. (1-8-1983)
4. Nb. Shabbir Jah Bdr. (3-3-1985)
5. Nb. Taghi Jah Bdr. (4-11-1985)
6. Nb. Hashmat Jah Bdr. (2-1-1988)
7. Nb. Saadat Jah Bdr. (16-3-1988)
8. Nb. Hasham Jah Bdr. (March 1991)
9. Nb. Basharat Jah Bdr. (June, 1991).
Remaining Daughters Fund :
1. Sb. Meharunnisa Begum (28-10-1964)
2. Sb. Mahboodunnisa Begum (28-10-1969)
3. Sb. Jamalunnisa Begum (27-10-1973)
4. Sb. Ramzani Begum (6-10-1974)
5. Sb. Hashmatunnisa Begum (2-3-1975)
6. Sb. Nazeerunnisa Begum (10-10-1975)
7. Sb. Asmatunnisa Begum (29-10-1979)
8. Sb. Masoodunnisa Begum (24-11-1980)
9. Sb. Mahmoodunnisa Begum (25-7-1984).
5. The value of the entire fund was estimated by the departmental Valuation Officer, Sri Chowlera, and bifurcated into the aforesaid funds in their respective shares. Another valuation was made by the District Valuation Officer, Sri K. V. Y. Sastry, bifurcating the value of the respective funds into life interest, reversionary/remaindermens interest and residuary/remainder corpus for the purposes of assessment under section 21(1A) of the Wealth-tax Act.
6. Up to assessment year 1979-80, these trust funds were being assessed under section 21(1) of the Act and in those years also, as per the information given to us, the beneficiaries were directly assessed under section 21(2) of the Act instead of the value being assessed in the hands of the Trustees under section 21(1), the former being more beneficial to the Revenue. The assessee in the impugned years, however, divided the entire value of the fund by the number of ultimate beneficiaries on the respective valuation dates. The department, however, assessed only that portion of the value which was worked out by the departmental Valuation Officer, Sri Sastry, directly in the individual assessments under section 21(2) and the balance value of the residuary/remainder corpus was assessed under section 21(1A) of the Act in assessees hands.
7. In some years, the assessee initially filed the returns under section 21(1A) proceeding on the basis of valuation on the lines adopted by the departmental Valuation Officer Sri Sastry, but later changed the stand and claimed that nothing was taxable under section 21(1A) by revising the returns. In these years, no returns for assessment under section 21(1A) was filed and notices under section 27(1) (a) were issued a by the Wealth-tax Officer by recording the following reasons :-
"The departmental Actuary has worked out residue corpus assessable under section 21(1A) in respect of the above fund. The assessee has not filed return of wealth. I have, therefore, reason to believe that by reason of omission on the part of the assessee to make a return under section 14 of the net wealth assessable under section 21(1A) of the Wealth-tax Act, 1957, for the assessment year 1983-84 net wealth chargeable to tax has escaped assessment for that year."
8. Various disputes were raised by the assessee in the assessment proceedings. These are broadly as under -
(1) Validity of initiation of proceedings under section 17;
(2) Application of section 21(1A), (3) Valuation of beneficiarys interest and the corpus of the trust;
(4) Exemption under section 5(1) (xii); and (5) Deduction for cumulative tax liabilities.
Insofar as the disputes at Sl. Nos. 3, 4 and 5 are concerned, both the parties agree that the issues stand covered by the decision of the Income-tax Appellate Tribunal in the case of WTO v. Trustees of HEH the Nizams Jewellery Trust 35 ITD 402, wherein it was held that the value of the jewellery should be taken at 50% of the amount estimated by the departmental valuer, that the deduction under section 5(1) (xii) should be granted on seven items of jewellery and that deduction for cumulative tax liability is to be allowed under section 2(m) of the Act and the Tribunal disposed of the appeals of the Revenue in accordance therewith. In these cross-objections, the first two issues are in dispute. They are discussed hereinafter.
9. Regarding the initiation of proceedings under section 17(1) (a), the contention of the assessees counsel is that it was not valid because, (1) the same wealth has been assessed in the hands of the main trust, (2) there was no omission or failure on the part of the assessee and (3) only protective assessments have been made and there was a double assessment of the wealth. The protective assessment in respect of the same assessee, according to the learned counsel, is not possible and for this proposition, he relied upon the decision of the Madhya Pradesh High Court in the case of Smt. Dayabai v. CIT [1985] 154 ITR 248. It was further submitted that the assessee was under no obligation to draw or suggest possible inference to the Wealth-tax Officer once it had placed the material on record and for this proposition, he relied upon the decision of the Supreme Court in the case of Indian Oil Corpn. v. ITO [1986] 159 ITR 956. It was further submitted that an error of judgment cannot give rise to valid initiation of proceedings under section 17(1) (a) in view of the decision of the Supreme Court in the case of Gemini Leather Stores v. ITO [1975] 100 ITR 1, and the decision of the Andhra Pradesh High Court in the case of ITO v. Sirpur Paper Mills Ltd. [1978] 113 ITR 393. It was also submitted that the nexus between non-disclosure of wealth and escapement thereof has to be established by the Revenue to invoke jurisdiction under section 171(1) (a) of the Act. For this proposition, reliance was placed on the decision of the Supreme Court in the case of ITD v. Lakhmani Mewal Das [1976] 103 ITR 437.
10. On the applicability of section 21(1A), the learned counsel of the assessee submitted that it has no application to the peculiar facts and circumstances of the case. The assessee had already distributed the value of the corpus of the trust notionally and nothing remained for assessment under section 21(1A) of the Act. It was further submitted that the life interest value was nil and, therefore, everything belonged to the reversionary beneficiaries/remaindermen and that the life interest has not been assessed by the department. In these circumstances, it was contended that the assessment on the basis of the bifurcation of the value of the corpus into remaindermens interest and remainder corpus is not warranted. The learned counsel also attempted to submit that in arriving at the value of the remainder corpus for the purposes of section 21(1A), a deduction from the value of the entire corpus, of the life interest of beneficiaries, has to be made. The departmental Valuation Officer has deducted the same by applying a rate of 6 1/2 per cent. This, according to the learned counsel, was based on "the underlying principles of calculation of ultimate beneficiaries interest which presuppose the calculation of life interest at the same rate of interest as had been adopted for arriving at the ultimate beneficiaries interest". The Valuation Officer has to estimate and deduct the value of life interest irrespective of the fact whether it was returned by the assessee or not, or whether it was assessed by the department or not, and it is only when something is left out, the value will be adjusted between remaindermens interest and remainder corpus. This also, according to the learned counsel of the assessee, is provided as per rule 1B of the Wealth-tax Rules which is obligatory on the department.
11. The learned departmental representative, on the other hand, submitted that the assessee had not submitted any return for assessment under section 21(1A) of the Act and, therefore, the initiation of proceedings under section 17(1) (a) was justified. In any case, he submitted, the basis on which the value of the corpus was divided amongst the remaindermen is not in accordance with the decision of the Supreme Court in the case of CWT v. Trustees of HEH Nizams Family (Remainder Wealth) Trust [1977] 108 ITR 555, whereunder assessment under section 21(1) or, as the case may be, under section 21(2) of the Act could be made only in respect of the actuarial valuation of the interest of the beneficiaries and consequently the remainder value is to be assessed under section 21(1A) of the Act. He further submitted that in assessment year 1982-83, the assessee had himself filed the returns on that basis though subsequently nil returns were filed claiming that the trust was not assessable under section 21(1A) of the Act, but for these years no returns were filed by the assessee. As regards protective assessments, the learned departmental representative submitted that the initiation of proceedings cannot be challenged on that ground, the event of assessment being subsequent to the initiation of proceedings, and, in any case, in many cases the word protective has not been written in the assessment order. He further submitted that though the department was pursuing to assess the cumulative value representing the remaindermens interest of all the funds as a single unit, that does not mean that there was double assessment on the same person. In any case, he submitted that the single unit assessment has been set aside by the Commissioner (Appeals) and, as informed by the learned counsel of the assessee, the departmental appeal there against was dismissed by the Tribunal and, therefore, there was no question of double assessment.
12. On merits, the learned departmental representative submitted that in view of the decision of the Supreme Court in 108 ITR 555, the trustees were liable to be assessed only on the value of the interest of the beneficiaries and nothing more and that that value was to be arrived at on actuarial basis. The remainder value of corpus which was held not taxable by the Supreme Court was now brought to tax by insertion of section 21(1A) of the Act with effect from 1-4-1980. He further submitted that life interest is taken at nil by the departmental valuer and, therefore, the assessee is not right in submitting that the Valuation Officer has estimated the value of the life interest by adopting a rate of 61/2 per cent. He referred to various clauses of the report to demonstrate that the value of life interest has been taken at nil by the Valuation Officer. The assessees method, he submitted, is not based on the present value of the future interest. The assessee has just allocated the value of the entire corpus to the remaindermen on the basis of a notional division.
13. We have heard the parties and considered the rival submissions. In our opinion, the departmental authorities were justified in initiating the proceedings and applying the provisions of section 21(1A) of the Act and bringing to tax the residuary value of the corpus. The contention of the assessee that the Trustees have filed the returns declaring the value of the entire corpus and, therefore, there was no omission or failure to declare a part of it, has no force. The declaration by the assessee was in clear violation of the provisions of section 21(1A) read with the decision of the Supreme Court in Trustees of HEH the Nizams Family (Remainder Wealth) Trusts case (supra). The assessee had proceeded on the assumption that the corpus stood distributed amongst the reversionary beneficiaries which is clearly unwarranted in the eye of law. It is only after the death of the life beneficiary that a reversionary beneficiary gets absolute right. So long as the life beneficiary is alive, a reversionary beneficiary cannot claim the property of the trust as belonging to him absolutely. The fact that there was no income of the trust and that the value of life interest is nil has no relevance in determining the taxability of the residuary under section 21(1A). The future distribution or the obligation of the trustees to distribute the corpus upon the death of the life beneficiary does not, in our opinion, mean the distribution of corpus among the beneficiaries on the assumption of which the assessee had proceeded. It has to be actual and not notional, nor a distribution to take place upon certain contingency (death of the life beneficiary in this case) that can make the beneficiary assessable for the entire value of the corpus and till then, as held by the Supreme Court in 108 ITR 555, the Trustees liability for assessment would be for value of the beneficial interest under section 21(1). The residuary value of the corpus would be assessable after 1-4-1980 under section 21(1A) in the hands of the Trustees as such. As in the case of a trust, which is specific for life beneficiary and discretionary for remainderman their Lordships of the Supreme Court in the case referred to above, held that two assessments were to be made on the Trustees - one under section 21(1) and the other under section 21(4) of the Act; in the same way, two assessments are to be made in this case on the Trustees - one for the specific interest of the beneficiaries and the other for remaindermens interest under section 21(1A) of the Act. The assessee has not filed returns for the net wealth representing the remainder/residuary interest under section 21(1A). It was clearly an omission or failure on the part of the assessee for the purposes of section 17(1) (a) of the Act. The returns filed by the Trustees by allocating the value of the jewellery were, or could at best be treated as, returns for the purposes of section 21(1) of section 21(2). The assessees failure to disclose the value assessable under section 21(1A) is, in our opinion, sufficient for the Wealth-tax Officer to invoke the provisions of section 17(1) (a) of the Act.
14. The objection of the assessee that the Wealth-tax officer having assessed the value of the residuary interest in the hands of the parent trust representing all the sixteen units of the six funds, the reopening of the proceedings in these cases and assessment of the same value amounted to double taxation which is not permissible in law, has also no force. The position that the Trustees were to be assessed as one unit or 16 units was not clear till the decision of the Supreme Court in the case of CIT v. Trustees of HEH the Nizams Family Trust [1986] 162 ITR 286, which was reported in 1986. Till then, the assessee had been claiming that it was not a creation of a single trust but a case of six funds representing various units which were separate trusts and, therefore, the Wealth-tax Officer was left with no option but to initiate the proceedings on that basis. On the declaration by the Supreme Court that it was a case of creation of multiple trusts by a single deed, the position became clear and on that basis of the Commissioner (Appeals) has cancelled the assessment in the hands of the parent trust on 25-2-1988 and as aforesaid, the said decision of the Commissioner (Appeals) has been upheld by the Tribunal. In any case, the present assessee is the right person to be assessed under law and, therefore, any assessment of the net wealth in the hands of the other persons does not amount to double taxation or a bar for bringing it to tax in the hands of the right person by issuing notices under section 17 of the Act. Similar would be the position as regards the direct assessment under section 21(2) of the Act.
15. As regards making protective assessment, we may state that the Commissioner (Appeals) was right in his observation that the question of making a protective assessment or a substantive assessment arises only after the return is filed and the assessment is taken up for hearing. The initiation of proceedings is a prior stage. Therefore, in our opinion, nothing turns of this fact. Admittedly, the Trustees did not file any return representing each of the Remaining Sons Fund and Remaining Daughters Fund of the Jewellery Trust returning the residuary value and, therefore, no fault can be found with the initiation of proceedings under section 17(1) (a) of the Act. The decision of the Madhya Pradesh High Court in the case of Smt. Dayabai (supra) relied upon by the learned counsel of the assessee, has no application as this is not a case of double assessment in the hands of the same assessee. It is true that the assessee is not under an obligation to draw or suggest the possible inference to the Wealth-tax Officer, as observed by their Lordships of the Supreme Court in the case of Indian Oil Corpn. (supra) relied upon by the learned counsel of the assessee, but here the assessee has not filed the return of the residuary value assessable under section 21(1A) of the Act and, therefore, the reliance on the aforesaid decision of the Supreme Court is of no help to the assessee. Similar is the position with regard to the proposition that error of judgment cannot give rise to valid initiation of proceedings under section in 17(1) (a) and that there must be nexus between non-disclosure of wealth and escapement thereof, because the assessee has not filed the return of wealth assessable under section 21(1A) of the Act.
16. In these circumstances, we are of the opinion that the departmental authorities were justified in reopening the proceedings under section 17(1) (a). The assessees ground is rejected.
17. As regards the applicability of section 21(1A) also, we agree with the departmental authorities. The assessees contention that there being nil value of the interest of the life beneficiaries, the wealth of the trust stood notionally divided amongst the remaindermen and therefore, nothing was left for a assessment under section 21(1A) has no force. In the absence of any income of the trust, the value of the interest of the life beneficiary was nil. It has been so determined at nil by the departmental Valuation Officer and, therefore, so long as the life beneficiary was alive and the fund of the trust was not actually distributed amongst the remaindermen, the Trustees have to be assessed for the residuary value under section 21(1A) of the Act. The value of residuary interest is to be arrived at after deducting from the value of the corpus the interest of the beneficiaries on the basis of actuarial valuation which is the most scientific method recognised under the accounting principles as well as by the courts. In this context, the learned counsel of the assessee, relying on the decisions of the Supreme Court in 73 CC 490, [1989] SCC 38, [1980] SCC 2181 para 93, Raipur Ruda Meha v. State of Gujarat AIR [1980] SC 1707 at 1708 and Additional District Magistrate v. Shivakant Shukla AIR 1976 SC 1207 at 1278, submitted that what is binding is the question of law decided by the Supreme Court and not the mere observations here and there. Though we might have no quarrel with this proposition, but in a case of valuation of beneficial interest, actuarial valuation is the most scientific method well recognised in law and accounting principles.
18. As per the scheme of the Wealth-tax Act, the Trustees would be liable for wealth-tax on the aggregate, value of this beneficial interest of the life beneficiaries and reversionary beneficiaries/remaindermen in the like manner and to the same extent as it would be leviable upon and recoverable from such beneficiaries. As option is given to the department under sub-section (2) of section 21 to make a direct assessment of the persons on whose behalf of for whose benefit the assets above referred are so held. That assessment, as their Lordships of Supreme Court have held in Trustees of HEH Nizams Family (Reaminder Wealth) Trusts Case (supra), would be only in respect of the actuarial valuation of the totality of the beneficial interest and not the value of the entire corpus. In most cases, if not all, their Lordships observed, "the aggregate of the values of the life interest and the remaindermens interest would be less than the value of the total corpus of trust property, since the value of the remaindermans interest would be the present value of his right to receive the corpus of the trust property at an uncertain future date and this would almost invariable be less than the value of the corpus of the trust property after deducting the value of the preceding life interest." The balance of the value of the corpus of the trust property, their Lordships held, would not be subjected to assessment to wealth-tax. To bring to tax such balance of the value of the corpus of the trust property, the provisions of section 21(1A) were brought on the statute with effect from 1-4-1980. For the sake of reference, this provision is extracted below -
"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 fails 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."
The contention of the learned counsel of the assessee that the acturial valuation is not the only and necessary basis for estimating the value and therefore the value of the entire corpus is allocated by the assessee amongst the remaindermen, cannot be accepted firstly because the allocation by the assessee is in contravention of the scheme of the Act and the principles laid down by the Supreme Court, and secondly because the valuation on acturial basis represents the most scientific and recognised method in valuing the interests of the beneficiaries for purposes of assessment under fiscal enactments. The departmental authorities are, in our opinion, justified in proceeding on the basis of the acturial valuation and estimating the value of the residuary corpus assessable in the hands of the assessee.
19. The contention of the assessee that the value of the life interest to be determined as per the provisions of rule 1B of the Wealth-tax Rules has to be deducted, cannot be disputed in principle. However, on the facts and in the circumstances of the case, where the value of the interest of the life beneficiary is determined at nil and is also determinable at nil as per the provisions of rule 1B, there being no income of the trust, no deduction for any hypothetical value can be allowed to the assessee. Both as per the assessee as well as the department, the value of life interest is nil and, irrespective of the fact that no value has been determined by the assessee, or the fact that no value has been assessed, the assessee should be granted deduction thereof. When the value is nil, the deduction would also be nil. The assessee, therefore, fails on this ground as well.
20. In the result, the cross-objections are dismissed.