1. The facts giving rise to this reference are quite simple. The assessment year in question is 1960-61, and the corresponding valuation date within the terms of the Wealth-tax Act, 1957, is the 31st of March, 1960. The assessee by a trust deed dated the 23rd of March, 1960, transferred 500 shares of the Surat Cotton Spinning and Weaving Co. Ltd. to trustees upon the trusts set out therein. The first recital to the trust deed stated that the settlor was desirous of setting the shares in question for the benefit of his daughter, Maithili, and her issue and in certain events for the benefit of his other children and their issue in the manner and subject to what was provided in the said deed. The material portion of the operative part of the said document provided that the trust property was to be held upon the following trusts :
'A. Until the end of calendar year 1963 to accumulate the whole residue of such income of the trust fund and invest the same and the resulting income therefrom from time to time to hold such accumulation as an accretion to the capital of the trust fund and as one fund with such capital. The expression 'trust fund' in these presents shall include such accumulation.
B. After the end of calendar year 1963 to pay the whole residue of the income of the trust fund to the said Maithili during her life at the end of every calendar year absolutely the first of such payment being due as at end of calendar year 1964. ...
E. Notwithstanding anything contained to the contrary in these presents, the trustees shall after the said Maithili shall attain her age of majority and after the birth of the first child of the said Maithili pay when and so often as may be required by the said Maithili a part of the trust fund not exceeding on the whole one-half thereof, to the said Maithili absolutely freed and discharged from the trusts and provisions of these presents.'
2. The Wealth-tax Officer included the value of the said 500 shares of the Surat Cotton Spinning and Weaving Co. Ltd., in the net wealth of the assessee, purporting to do so under section 4(1)(a)(iii) of the Wealth-tax Act. The said section, inter alia, enacts that, in computing the net wealth of an individual, there is to be included, as belonging to him, the value of assets which on the valuation date are held by the persons to whom such assets have been transferred by the assessee other wise than for adequate consideration for the benefit of the assessee or his wife or minor children. The order of the Wealth-tax Officer was reversed by the Appellate Assistant Commissioner and the order of the Appellate Assistant Commissioner was confirmed by the Tribunal which followed the decision of the Supreme Court under the corresponding provision of the Indian Income-tax Act, 1922, in the case of Commissioner of Income-tax v. Manilal Dhanji. In the said case it was held that since the provision that is to be found in clause (b) of section 16(3) of the Indian Income-tax Act, 1922, created an artificial liability to tax, it has to be strictly construed and that an assessee can only be taxed on the income of a trust created for the benefit of his minor child, if in the year of account the minor child derived some benefit thereunder. In the present reference which arises out of that order of the Tribunal, the following question of law has been referred to us :
'Whether, on the facts and in the circumstances of the case, the value of 500 shares of the Surat Cotton Spinning and Weaving Co. Ltd. could be included in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act for the assessment year 1960-61 ?'
3. In addition to Manilal Dhanji's case referred to above which Mr. Joshi sought to distinguish on the ground that the scheme of the Income-tax Act was different from the scheme of the Wealth-tax Act, Mr. Joshi cited before us the decision of the Gujarat High Court in the case of Chandulal v. Commissioner of Wealth-tax, which, Mr. Joshi contended, supported his contention that for the purposes of the Wealth-tax Act the benefit did not have any relation to the valuation date, and so long as the minor child could look forward to getting some benefit when she became major, the transfer of the assets to the trustees must be held to have been for the benefit of the minor child within the meaning of section 4(1)(a)(iii) of that Act. It is, however, unnecessary for me to deal either with the decision of the Supreme Court in Manilal Dhanji's case or with the decision of the Gujarat High Court in Chandulal's case, in view of the fact that, in my opinion, the point that arises in the present reference is concluded by the later decision of the Supreme Court in the case of Yeshwant Rao Ghorpade v. Commissioner of Wealth-tax to which MR. Joshi himself, with his usual fairness, referred. In Yeshwant Rao Ghorpade's case the trust in question provided for the three minor children of the assessee by setting three sets of shares on trust, the first to be held for the benefit of a charitable trust for two years and thereafter absolutely for the first son; the second to be held for the benefit of a charitable trust for 12 years and thereafter absolutely for the second son; and the third to be held for the benefit of a charitable trust for 8 years and, thereafter, absolutely for the daughter of the assessee. There were other provisions in the said trust deed to which I do not think it necessary to refer. At the date of the creation of the trust, the sons of the assessee were of the ages of 16 and 6, and his daughter was 10 years old. The question which arose before the High Court as well as the Supreme Court was whether the share in question were held by the trustees under the said trust for the benefit of the three minor children mentioned therein so that the assessee could be taxed in respect thereof under section 4(1)(a)(iii) of the Wealth-tax Act. It may be mentioned that the said section was amended as from 1st April, 1965, by the Wealth-tax (Amendment) Act, 1964 (46 of 1964), whereby, inter alia, the words 'immediate or deferred' were added before the word 'benefit' in the said section. It was sought to be contended before the Supreme Courts in Yeshwant Rao Ghorpade's case that the said amendment was merely diclaratory of the law as it stood prior thereto, but the Supreme Court rejected that contention and took the view that the amendment made a deliberate change in the law and that the question referred to the court in the said case had to be answered on the basis of the Act as it stood prior to that amendment (at page 447). The Supreme Court observed (at page 452) that the effect of the provisions in the trust deed was that the income stated accruing under the settlement to each of the minor children when they reached the age of about 18, and was of opinion that it was difficult to say that while the property was being for the benefit of the charitable trust, it was also being held for the benefit of the minor children since during those periods the assessee's children had no interest whatsoever in that income (at pages 447 and 451). The Supreme Court, therefore, held by a majority (at pages 447 and 453) that the word 'benefit' in section 4(1)(a)(iii) as it stood prior to the 1964 amendment immediate benefit, and that, considering the trust deed before it as a whole, the shares in question could not be said to have been held for the benefit of the three minor children of the assessee 'as on March 31, 1958, and March 31, 1959' and the question referred to the court had, therefore, to be answered against the revenue. Even Shah J. in the minority judgment concurred in the view that under section 4(1)(a)(iii) as it stood prior to the 1964 amendment, assets transferred for the immediate benefit of the assessee, his wife or minor children alone could be included in the net wealth of the assessee (at pages 458-459), though he differed from the majority in regard to the construction of the trust deed.
4. In my opinion, the present case is on all fours with Yeshwant Rao Ghorpade's case in so far as, in the present case also on the valuation date which was 31st March, 1960, the assessee's daughter, Maithili, had no interest whatsoever in the income of the property which was settled on trust by the assessee, though, as in Yeshwant Rao Ghorpade's case, she was the ultimate beneficiary under that trust deed. I am bound by the view taken by the Supreme Court in the said case that, in order to attract the applicability of section 4(1)(a)(iii) of the Wealth-tax Act, 1957, the minor child of an assessee must under a trust created in his or her favour have an interest in the income on the valuation date. In the present case also, it must, therefore, be held that the value of the 500 shares of the Surat Cotton Spinning and Weaving Co. Ltd., in respect of which the assessee had created a trust by the trust deed dated the 23rd of March, 1960, could not be included in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act, 1957, in respect of the assessment year 1960-61.
5. Mr. Joshi also sought to contend at the beginning of his argument that, even if the view taken is that Maithili should have an interest in the income on the valuation date, since she had, according to Mr. Joshi, a vested interest under the trust deed, she must be held to have an interest both in the income as well as the corpus on the valuation date. That argument of Mr. Joshi is misconceived, and indeed, that precise argument was sought to be advance before the Supreme Court in Yeshwant Rao Ghorpade's case and was rejected by that court (at pages 447 and 450) on the ground that, even assuming that the beneficiary had a vested interest, what the court had to consider was whether the trustees held that trust property for the benefit of the minor children as on the relevant valuation date.
6. In the result, this reference must be answered against the revenue.
S.K. Desai, J.
7. I agree and have nothing to add.
BY THE COURT
8. Question answered in the negative and in favour of the assessee. The Commissioner to pay the assessee's costs of the reference.
9. Question answered in the negative.