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Showing contexts for: settlor trust in Commissioner Of Wealth-Tax vs Nawab Fareed Nawaz Jung And Ors. on 3 September, 1969Matching Fragments
3. Trust created on 8 - 2 - 52with Imperial Bank ofIndia (S.B.I.) 3% N.G.P. notes O.S. 31,000 3% N.G.P. notes O.S. 69,000 1,331
4. Trust created on 9-12-52 with I.B.I. 21/2% N.G.P. notes 11,000 3% N.G.P. notes 31,000 3% G.O.I, loan 7,100
5. Trust created on 13 - 5-53 with I.B.I. 3% N.G.P. note 10,600 21/2 N.G.P. notes 25,600 21/2% N.G.P. notes 28,200 3% conversion loan 1,500
7. In all the five trusts the settlor, namely, the assessee himself, was one of the two trustees. In the first two trusts the 9ther trustee is the Central Bank and in the last three trusts the other trustee is the Imperial Bank of India. The first trust deed consists of four schedules of properties. As provided under Clauses 3, 4, 5, 6 and 7 of the trust deed the, net income derived from the properties mentioned in the schedules 1 and 2 should be paid to the settlor (assessee) for his life and thereafter the net income should go to his daughters and grand-children and with regard to the properties mentioned in schedules 3 and 4 the net income thereof should be paid to the settlor for a period of 14 years and after 14 years or the death of the settlor whichever event happens first the trustees should hand over those properties (securities) mentioned in schedules 3 and 4, respectively, to his two daughters for the purpose of utilising the same for the marriages of their daughters and if any of his daughters happens to die during the lifetime of the settlor the trustees should hand over the trust properties to the settlor himself or if he be not alive to the fathers of the grand-daughters of the settlor on the condition of their employing the same for the purposes of the marriages of the grand-daughters.
10. In the fourth trust deed dated December 9, 1952, the trust properties were described in four schedules. With regard to the properties in schedules 1 and 2 the benefit was created in favour of the grand-children of the settlor. There is also a revertible provision as mentioned in Clauses 2 and 3 with regard to the trust properties of these schedules to the effect that in case all the beneficiaries are to die without leaving any issue at the time when the beneficiaries are entitled to the payment of the trust properties as provided therein, the trustees shall stand possessed of the properties in trust for the settlor, his heirs, executors, administrators and assigns absolutely. With regard to the trust properties specified in schedules 3 and 4 it was provided under Clause 4 that the net income should be paid to the settlor during his lifetime and after his death to his daughters and grand-children. It was also provided under Clause 7 that if both the daughters of the settlor were to die without leaving any issue at the time of their deaths, the trust properties in the hands of the trustees should go to the benefit of the settlor, his heirs, executors, administrators and assigns absolutely.
11. In the fifth and last trust dated May 13, 1953, the trust properties were described in two schedules. It was provided in Clause 2 of the trust deed that the trustees should pay the net income from the trust properties to the settlor during his lifetime and thereafter to his daughters and grandchildren. There is a similar revertible clause in this deed also in case both the daughters of the settlor were to die without leaving any issue at the time of their deaths.
12. In all the five trust deeds, there is a clause to the effect that during the lifetime of the settlor the trustees shall sell the trust properties and re-invest the sale proceeds as the settlor may from time to time in writing direct.
13. The Wealth-tax Officer came to the conclusion that the right of the assessee created in the trusts is not an annuity on the ground that the payments to be received by the assessee under the trusts are not fixed payments as they have direct bearing on the corpus of the relevant trusts because the relevant clauses in the first deed gave the assessee unrestricted powers to vary the investments of the trust funds at his sweet will and whenever the investments are varied there will be variation in the income of the trusts also. Therefore, according to the Wealth-tax Officer, as per the terms contained in the trust deeds there is a possibility of variation in the income of the trusts and therefore the payments to be made to the assessee and it is not possible to contend that the right created is an annuity so long as it is not a fixed payment. It may be noticed even here, as shown above in the table, that the properties settled on the trusts in question as they stand are Government securities getting fixed incomes at some rates of interest. The Appellate Assistant Commissioner took a similar view in the appeal by holding that the assessee was to receive the net income earned from the" trust properties and that income may be varied as the assessee was empowered, to direct the change of the investments which might in turn change the yield of incomes, and, therefore, it cannot be said that what the assessee was to receive from the trusts are fixed amounts and that apart in the event of all the beneficiaries pre-deceasing the assessee leaving no heirs, the trustees were to stand possessed of the corpus of the various trusts in trust for the settlor, his heirs, etc, and that in such an event the trust properties would form part of the estate of the settlor and, therefore, it could not be said that the corpus of the trust properties was irretrievably lost to the assessee forever. On this premise the Appellate Assistant Commissioner held that the assessee cannot claim the benefit of Section 2(e)(iv) of the Act. We fail to understand how the question of genuineness or otherwise of the creation of the trusts would arise. Anyway it is not before us. What is to be considered is the nature of the right created in favour of the assessee under the trusts as they stand.