Skip to content


Commissioner of Wealth Tax, Bombay City-i Vs. Kali D. Cawasji - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWealth-tax Reference No. 13 of 1969
Judge
Reported in(1980)17CTR(Bom)25; [1981]131ITR158(Bom); [1981]5TAXMAN99(Bom)
ActsWealth Tax Act, 1957 - Sections 2 and 2(e)
AppellantCommissioner of Wealth Tax, Bombay City-i
RespondentKali D. Cawasji
Excerpt:
- - the tribunal, therefore, took the view that the income flowing from the trust clearly fell within the category of 'annuity' which was classified as an exempted asset under s. it is obvious that so far as the assessee is concerned, the relevant clauses which we have reproduced above indicate that under the trust deed dated november 19, 1941, the assessee was entitled to the net income from the trust property and under the trust created by the will also the assessee was entitled to the income of the 'residual movable estate and accumulation'.this clearly was a life interest of the assessee and was not an annuity within the meaning of s......j.1. the assessee is the son of one shri dinshaw cawasji. dinshaw cawasji had executed a trust deed dated november 19, 1941, and he had created another trust by his will dated may 30, 1938. the relevant clauses with which the wto was concerned while computing the net wealth of the assessee are to be found in the trust deed and in the will. under cl. 2 of the trust deed, it was provided as follows:'2. the trustees shall stand possessed of the said securities and investments (hereinafter called 'the trust fund') upon the following trusts, that is to sa :-... (c) after the death of the settlor upon trust to pay the net income thereof to the settlor's son the said dinshaw cawasji during his life and (d)...'2. the relevant clauses under the will provided for a monthly payment of rs......
Judgment:

Chandurkar, J.

1. The assessee is the son of one Shri Dinshaw Cawasji. Dinshaw Cawasji had executed a trust deed dated November 19, 1941, and he had created another trust by his will dated May 30, 1938. The relevant clauses with which the WTO was concerned while computing the net wealth of the assessee are to be found in the trust deed and in the will. Under cl. 2 of the trust deed, it was provided as follows:

'2. The trustees shall stand possessed of the said securities and investments (hereinafter called 'the Trust Fund') upon the following trusts, that is to sa :-...

(c) After the death of the settlor upon trust to pay the net income thereof to the settlor's son the said Dinshaw Cawasji during his life and (d)...'

2. The relevant clauses under the will provided for a monthly payment of Rs. 400 to be paid to the wife of the settlor during her lifetime or widowhood for her own maintenance and so far as the assessee was concerned the accumulated income of the residual movable estate was to be paid to the assessee and all other children of Dinshaw Cawasji. It may, however, be noted that the assessee was the only son of the settlor but there is one other clause in the will which required certain payments to be made to the guardian of the assessee during his minority. The relevant portion of this cl. 8 read as follows:

'8. I direct my trustees :-...

(b) to pay my wife rupees four hundred (Rs. 400) every month during her lifetime or widowhood for her own maintenance...

(d) to pay the guardian of my son Kali or any other son a sum of Rs. 300 (three hundred) every month for his education and maintenance.'

3. We may point out that in the statement of the case and the copy of the will which is produced on record, there was a typographical error because in both these documents the beginning words of cl. (d) read as 'To pay the guardian or my son, Kali...' instead of 'To pay the guardian of my son, Kali...' This mistake had given rise to an argument on behalf of the assessee that the amount of Rs. 300 was an annuity. However, in view of the mistake which has been discovered and the clause has now correctly reproduced on the basis of the copy of the will attached to the probate produced before us one of the executors, this argument need not be considered. The other clause in the will relating to the assessee which dealt with movable estate, provided that the trustees shall invest the movable property in trust securities and shall stand possessed of such investments:

'Upon trust to invest and accumulate the income of my residuary movable estate at interest till the youngest of my children shall attain the age of majority and thereafter UPON TRUST to pay the income of such residuary movable estate and accumulation, to my said son Kali and to all other children for his and their respective lives (if any)..'

4. With reference to these different provisions in the will and in the trust deed dated November 19, 1941, the question before the WTO in the wealth-tax proceedings in respect of the wealth of the assessee, Kali Dinshaw Cawasji, and his mother, Mrs. Allu Dinshaw Cawasji, was whether the life interests of the assessee for which provision was made in the two trusts can be excluded from their respective net wealth under the provisions of s. 2(e)(iv) of the W.T. Act. Under s. 2(e)(iv), it was provided that assets included property of every description, movable or immovable, but does not include 'a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant'. The WTO included the value of the life interest in each of the assessee's net wealth. The appeal filed by the assessee to the Tribunal, the Tribunal took the view that under the trust deed dated November 19, 1941, the assessee had only life interest simpliciter and there were provisions for the disposal of the income and corpus after the death of the assessee, depending on different contingencies, but it was clear that the assessee had no right on corpus. Same was the position, according to the Tribunal, under the trust created by the will because after the death of the assessee, the income and the corpus were to be held for the benefit of the assessee's children. The Tribunal, therefore, took the view that the terms and conditions under which the assessee was entitled to the income from the trust funds precluded commutation of these income or any part thereof into a lump sum grant and any payment of a lump sum grant would have been against the provisions of the trust deed and would have resulted in a breach of the trust. The Tribunal, therefore, took the view that the income flowing from the trust clearly fell within the category of 'annuity' which was classified as an exempted asset under s. 2(e)(iv). On these facts, the following question has been referred at the instance of the revenue:

'Whether, on the facts and in the circumstances of the case, the life interest of the assessee under the two trusts, i. e. one created under the will dated May 30, 1938, were annuities exempt from wealth-tax under section 2(e)(iv) of the Wealth-tax Act ?'

5. Mr. Joshi in support of the reference has argued that the matter now stands concluded by the decision of the Supreme Court in CWT v. Arundati Balkrishna : [1970]77ITR505(SC) and that in view of that decision, the life interest of the assessee cannot be considered as an annuity within the meaning of s. 2(e)(iv) of the W.T. Act. Mr. Kolah appearing on behalf of the assessee does not want to concede the proposition that life interest of the assessee was not an annuity. However, so far as we are concerned, the decision of the Supreme Court is binding on us. In Arundati Balkrishna's case : [1970]77ITR505(SC) , the Supreme Court has pointed out that an annuity is a money payment of a fixed sum annually made and is a charge personally on the grantor and where certain sum of moneys were required to be paid under a trust or the trustees were required to pay the income of the trust fund after deducting the expenses to the assessee during his or her lifetime, then such payments were not annuities within the meaning of s. 2(e)(iv) of the W.T. Act, 1957, and in such a case, the assessee is not entitled to exemption from payment of wealth-tax in relation to such annuity. It is obvious that so far as the assessee is concerned, the relevant clauses which we have reproduced above indicate that under the trust deed dated November 19, 1941, the assessee was entitled to the net income from the trust property and under the trust created by the will also the assessee was entitled to the income of the 'residual movable estate and accumulation'. This clearly was a life interest of the assessee and was not an annuity within the meaning of s. 2(e)(iv) of the Supreme Court, the question referred to us be answered in the negative and in favour of the revenue.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //