1. The assessee, Tanil Ramdas, is the son of Ramdas Kilachand, who by a duly executed trust deed dated March 31, 1960, created a trust in respect of 130 shares in Kesar Corporation (P.) Ltd., each of the face value of Rs. 1000. The sales were fully paid up. Under cl. 1 of the trust deed, the trustees were to accumulate the income from the trust fund after discharging the necessary liabilities in the from of taxes, costs, charge and expenses in connection with the management and administration of the trust. Clause 2 of the trust deed, on the constriction of which the decision of this reference depends, read as follows :
'The trustees shall until the vesting date, which shall be on the expiration of ten years from the date hereof, stand possessed of the settled premises to accumulate the net income thereof in the way of compound interest by investing the same and the resulting income thereof from time to time in any investments hereby authorised for the investment of the settled premises and shall add the accumulations to the capital of the settled premises. From and after the vesting date, the trustees shall stand possessed of the settled premises together with accretions thereto upon trust for the said Tanil, son of the settler, absolutely, if he be then alive and if the said Tanil be than not alive for the son or sons of the said Tanil absolutely.'
2. According to this clause, the trustees were to accumulate the income of the trust for a period of 10 years from the date of the creation of the trust and with effect from the vesting date which was specified as the date on the expression of 10 years from the execution of the trust deed, the trustees were to hold the trust property for the benefit of the assessee absolutely if he was alive and if he was not then alive the property was to be held for the befit of the assessee's son or sons. Similar trust were created by Ramdas Kilachand on March 29, 1961, and March 28, 1962 in respect of 120 shares each in the said Kesar Corporation (p.) Ltd.
3. The WTO in the assessment proceedings for the assessment years 1960-61, 1961-62 and 1962-63 held that the assessee has beneficial interest in the corpus of the trust and the value thereof was liable to be included in the net wealth of the assessee in respect of the assessment years in question. He, therefore, valued the said beneficial interest of the assessee and included it in his net wealth.
4. The AAC, in the appeal by the assessee, held that the beneficial interest of the assessee in the three trusts was in the nature of a present interest which was to take effect in enjoyment only after a period of 10 years was over and not a contingent interest as defined in s. 21 of the Transfer of Property Act. He held that the fact that the income of the trust was to be accumulated for the period of 10 years did not make any difference to the position that the assessee had a vested interest.
5. In the appeal before the Tribunal, the Tribunal found that the trust deeds created a contingent interest and not 'a beneficial interest in possession in the corpus and accretion thereto' in favour of the assessee. The Tribunal took the view that the trustee were to transfer and hand over the corpus of the trust fund, including the accretion thereto, to the assessee absolutely if he was alive on the expiry of the tenth year from the date of the execution of each of the trust deeds. It appears that it was contended before the Tribunal that continent interest could not be property, and, therefore, not an asset within the meaning of s. 2(e) of the W.T. Act. The Tribunal rejected this contention holding that a continent interest being property was included in the definition of 'asset'' and, therefore, chargeable under s. 3 of the Act. Arising out of this finding recorded by the Tribunal, the following three question have been referred to this court under s. 27(1) of the W.T. Act, at the instance of the assessee :
'(1) Whether, on the facts and in the circumstances of the case, the assessee has interest, if any under the trust deed dated March 31, 1960, and the value thereof is includible in the competition of his net wealth as on the valuation date, March 31, 1960 ?
(2) Whether, on the facts and in the circumstances of the case, the assessee has interest, if any under the trust deeds dated March 31, 1960, and March 29, 1961, and the value thereof is includible in the computation of his net wealth as on the valuation date, March 31, 1961 ?
(3) Whether, on the facts and in the circumstances of the case, the assessee has interest, if any, under the trust deeds dated March 31, 1960, March 29, 1961, and March 28, 1962, and the value thereof is includible in the computation of his 'net wealth' as on the valuation date, March 31, 1962 ?'
6. Mr. Dwarkadas, the learned counsel appearing on behalf of the assessee, has contended that the assessment years in question fell within the period of 10 years, during which the trustees were merely to accumulate the trust find and according to the learned counsel, since the interest of the assessee came into being for the first time on the expiry of the period of 10 years from the execution of the 1961, and March 28, 1962, the assessee cannot be said to have any beneficial interest in the corpus of the trust on the valuation date. It is difficult to accept the contention of the assessee that the beneficial interest created by the trust deeds was not in the nature of a contingent interest. A contingent interest as defined in s. 21 of the Transfer of Property Act is an interest created on a trader of property which is to take effect only on the happening of a specified uncertain event or if a specified event shall not happen. The specified uncertain event, in this case, is that the period of 10 years has before the vesting date occurs. During this period of time, the interest of the assessee will clearly be a contingent interest. As a matter of fact, the controversy appears to us to be fully covered by the decision of this court in CWT v. Trustees of Mrs. Hansabai Tribhuwandas Trust : 69ITR527(Bom) . The terms of the trust did in that case provided that the net income of the trust properties was to be paid to Hansabai, the wife or window of the settler, so long as she continued to be and remained the wife or widow of the settlor, Tribhuwandas, and so long as she had no son or sons. In the event of a son or son being born to her and Hansabai continuing to be the wife or window of Tribhuwandas the son or sons had not any present interest but only after her lifetime the corpus was to go to the son or sons. The income of the trust property for the relevant years was in fact paid to Hansabai. The trust property for the relevant years was in fact paid to Hansabai. The trust deed also proceed that in the absence of any children the corpus was to be divided in equal shares amongst the heirs of the settler. On the valuation date, Hansabai has no sons but Nanalal, the brother of the settler, Tribhuwandas has a son and the question was whether the heirs of Tribhuwandas has an interest in the courts of the trust property. This court has in that case held that under the trust, on the relevant date, Hansabai would be entitled to the entire trust fund and the heirs of Tribhuwandas according to law would have a contingent interest in the corpus of the trust property It was pointed out that Hansabai has only the interest given to her in the net income and has no right in the corpus of the property, whereas the sons of Nanalal, Tribhuwandas's brother has on the relevant date a continent interest in the courts of the trust property as an heir of Tribhuwandas, contingent upon Hansabai 'ceasing to be the wife or window of Tribhuwandas'' which contingency would also cover the case of her death. The facts of the present case clearly show that the only person for whose benefit the income of the trust funds was accumulated was the assessee and on the relevant valuation dates, which fell within the period of 10 years before the vesting date occurs, the interest was clearly a contingent interest.
7. Mr. Dwarkadas then contended that even if it is assumed that the assessee has a contingent interest under the trust deed, the says interest cannot be said to be property so as to be included as an asset in the computation of the net wealth of the assessee because of the procession of cl. (v) of s. 2(e)(1). In so far as cl. (v) is concerned, s. 2(e) provided that 'assets' includes property of every description, movable or immovable, but does not include any interest in property where the interest is available to as assessee for a period not exceeding six years from the date the interest vests in the assessee. The learned counsel, therefore, contended that it cannot be said with any certainty that after the vesting date the assess would necessarily survive for a period of more than six years, and therefore, according to the learned counsel, m the value of this contingent interest was to be exclude from the net wealth of assessee. It is not possible for us to accept this contention. It appears to us that where the interest the kind referred to in cl. (v) in the definition under s. 2(e)(1) is sought to be excluded for the purpose of the computation of the net wealth of the assessee, such interest does not automatically cease to be property under the general law. The procession in cl. (v) is a special procession made for the purposes of wealth-tax, and, therefore, when that procession refers to the interest being available for a period not exceeding six years, in our view, that clause will be applicable only where it is possible to be positively established on record on such material as is equable, that the assessee not entitled to enjoy the beneficial interest for a period exceeding six years. On the mere possibility of the assessee not being alive beyond six years from the vesting date provided in the trust deeds, his case will not be within cl. (v) of s. 2(e)(1). This contention must, therefore, be rejected the view which we have taken, all the three questions will have to be answered against the assessee. The questions are, therefore, answered as follows :
8. Question No. 1 :-In the affirmative and against the assessee.
9. Question No. 2 :-In the affirmative and against the assessee.
10. Question No. 3 :-In the affirmative and against the assessee.
11. The assessee to pay the costs of this reference.