1.This is reference under s. 27(1) of the W.T. Act, 1957 (referred to hereinafter as 'the said Act'). The question referred to us for our determination in this reference are as follows :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest which the assessee had under the trust deed dated the 29th March, 1957, was merely a contingent interest ?
2. Whether, on the facts and in the circumstances of the case, the inclusion of the entire value of the corpus of the trust fund in the net wealth of the assessee was justified ?'
2. It is common ground that question No. 1 does not correctly being out the controversy between the parties. With the consent of the counsel appearing on both the sides, the said question is, therefore, reformed as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest which the assessee had in the corpus of the trust fund under the trust deed dated 29th March, 1957, was merely a contingent interest ?'
3. The facts giving rise to this reference are as follows :
The assessee is a minor and is taxed as an individual. The relevant assessment years are 1965-66, 1966-67 and 1967-68 for which the respective valuation dates are March 31, 1965, March 31, 1966, and March 31, 1967. The assessee is the beneficiary under a trust deed executed by his grandfather, Sir Cowasjee Jehangir (referred to hereinafter as 'the Settlor'), dated 29th March, 1957. Under the said deed, the settlor had settled on trust shares Nos. 1 and 13 of Cowasjee Jehangir and Company Ltd. The objects of the trust are contained in cl. 6 thereof. Under the provisions of sub-cl. (b) of cl. 6, the assessee is entitled to get the net income of the said trust fund up to the time he completes the age of 27 years. Sub -clause (d) of the said clause provides that on the assessee completing the age of 27 years the entire corpus of the trust fund remaining is to be transferred to the assessee. Clause (e) provides as to what is to happen in the eventuality of the assessee dying before completing 27 years. We need no consider the provisions of that clauses in any detail, save and except to say that there is no provision in the said trust deed that in the event of the death of the assessee before completing the age of 27 years, the trust fund shall go to his estate. Sub -clause (c) of cl. 6, which has mainly given rise to the controversy before us, reads thus :
'During the lifetime of the said Jehangir and until he shall complete the age of twenty seven (27) years to pay to the said Jehangir or to expend or utilise on his behalf or for his benefit or for his benefit such sums of money out of the corpus of the remaining trust fund as the trustees may in their absolute discretion think proper from time to time, it being intended that the trustees shall be entitled so to pay, utilise or expend the corpus or any part thereof to any extent they consider fir and so that such corpus or part of the corpus shall be paid, expended or utilised for any business in which the said Jehangir may be interested or for his expenses of travel or on account of or in respect of any unforeseen circumstances or otherwise however for the benefit of the said Jehangir as the trustees may in their absolute discretion consider fit and proper : ...'
4. The WTO concerned held that the entire corpus of the trust fund was not exempt from the charge of wealth-tax under the said Act and he included the entire corpus in the computation of the net wealth of the assessee. On appeals preferred by the assessee against the assessment orders passed by the WTO in respect of the said assessment years, the AAC upheld the conclusion arrived at by the WTO in respect of the aforesaid question. The assessee then preferred appeals to the Tribunal, which appeals were heard together. The Tribunal held that the assessee could not be assessed to wealth-tax in respect of the discretion granted to the trustees under the said sub-cl. (c) of cl. 6 of the trust deed. It was held by the Tribunal that, as far as the corpus of the trust is concerned, the only right of the assessee during the assessment years in question was the contingent right to receive the corpus or such part thereof as remained on his completing the age of 27 years, the said right being contingent, depending on the assessee completing the age of 27 years. The Tribunal held that although the said contingent right was liable to be valued and brought to tax, the assessee could not be taxed in respect of the value of the corpus of the trust fund. It was pointed out by the Tribunal that until the assessee completes the age of 27 years, it is in the absolute discretion of the trustees to expend such part of the corpus as they think fir for the purposes state in cl. 6(c) for the benefit of the assessee. The assessee had no right to demand from the trustees that they should spend any particular amount for any of the purposes set out in cl. 6(c) and hence the assessee could not be said to possess any 'asset' as far as the provisions of cl. 6(c) of the trust deed are concerned. It is from this decision of the Tribunal that the aforesaid question have been referred to us.
5. On a plain reading of sub-cl. (c) of cl. 6 it clearly appears that it was entirely in the discretion of the trustees to expend or utilise for the benefit of the assessee such sum of the money out of the corpus of the trust fund, as they, in their absolute discretion, thought fit for any of the purposes set out in the said sub-clause. The assessee, as pointed out by the Tribunal, had no right whatever to demand that the trustees should spend any particular amount out of the trust fund for any of the purposes set out in the said sub-clause. In view of this, it cannot be said that the absolute discretion granted to the trustees under the said sub -clause to expend amounts form the corpus of the trust fund for the benefit of the assessee and for the purposes set out in the said sub -clause constituted an asset of the assessee for the purposes of the said Act. As held by the Tribunal, the assessee had no interest other than the contingent interest referred to earlier in the corpus of the said trust fund on the relevant valuation dates.
6. In the result, the questions referred to us are answered as follows :
Question 1 as reframed : In the affirmative and in favour of the assessee.
Question 2 : In the negative and in favour of the assessee.
7. The Commissioner to pay to the assessee the costs of the reference.