Per Shri K. S. Viswanathan, Accountant Member - We find it convenient to dispose of this batch of 14 appeals together. Both the assessee and the department have come on appeal against the consolidated order of the AAC in respect of the assessments for the years 1961-62 to 1967-68.
2. The assessments have been made in respect of the assets of a trust. The settlor of the trust was the late V. S. Apte. He made a declaration on trust on 15-5-1945 settling certain land and building in trust for the benefit of his grandsons Madhav and Arvind for their life. The settlor himself was a trustee. He reserved for himself absolute discretion of the amount payable to the beneficiaries. Nothing was stated in the trust deed as to know the corpus of the trust was to be divided later. Madhav and Arvind, the grandsons, were only entitled to the income. In 1949, a declaration was made that the beneficiaries would be entitled to equal shares in the income. In this declaration also, nothing was stated about the disposition of the corpus.
3. In 1952, the settlor died without making any further declaration. He was survived by his only son, L. V. Apte. He was at that time also a trustee. His children, i.e. the settlors grandsons, who were entitled to the life interest, had by a deed pool dated 29-3-1968, surrendered and released their respective life interest in the remainder of the income of the trust properties. Thus, on 29-3-1968, the trust had no beneficiaries, So on that date, the trustees conveyed the trust properties to the persons who would be entitled to the properties of the settlor on his death, i.e. conveyance was made to L. V. Apte, his son.
4. We are concerned with wealth-tax assessments in respect of the trust property for the assessment years 1961-62 to 1967-68. Since the settlor died in 1952 without making any provision for the disposal of the corpus of the trust property, under section 83 of the Indian Trusts Act, 1882, the trustees will be holding the corpus of the trust for the benefit of the legal heirs of the settlor. Since the settlor died before the coming into effect of the Hindu Succession Act 1956 the property will have the characteristics of HUF in the hands of the legal heirs. It cannot be disputed that after 1952 the beneficial owner of the trust properties was the HUF headed by L. V. Apte. We are told by Shri Inamdar, the learned counsel for the assessee, that the HUF had filed their wealth-tax returns for the assessment years 1963-64 to 1967-68 in which the value of the trust properties was shown. Accordingly to him, the department has not taken any action on these returns.
5. The WTO was of opinion that the corpus of the trust less the interest of the life tenant would be assessable in the hands of the trustees. Since no return was filed by the trustees in the relevant years, he reopened the assessments and completed the same on 15-3-1979. In the assessments for these years, he brought to tax the value of the reversionary interest passing to the legal heirs of the settlor.
6. The assessee appealed. Two points were taken up before the AAC. The first point was that the trust had come to an end with the conveyance of the properties to the heirs of the settlor on 29-3-1968. Therefore, when the assessments were taken up, there was no trust in existence. Therefore, no assessment could be made. This submission was rejected. The AAC, however, gave a finding that the HUF of L. V. Apte was the sole remainderman having 100 per cent reversionary interest. He directed the WTO to assess the same under section 21(1) of the Wealth-tax Act, 1957 (the Act).
7. Against this finding, both the assessee and the department are on appeal. We take up the departmental appeals first. The only contention of the department is against the finding that L. V. Apte (HUF) was the sole remainderman. We do not see how this finding could be challenged. It is the only finding the AAC could give on law. The departmental appeals seem to be without any merit and they are dismissed.
8. Coping to the appeals filed by the assessee, Shri Inamdar reiterated the contention taken up earlier that there is no machinery provided in the Act to assess the net wealth of a dissolved trust. He further submitted that the question whether the reversionary interest can be subject to section 21(1) or section 21(4) is also not provided for in the statute. Referring to the decision of the Bombay High Court in the case of Jamnadas v. CWT : 56ITR648(Bom) , he pointed out that in the absence of any provision for charging and assessing the net wealth of a deceased individual beyond the financial year in which the person dies, no assessment could be made, Similarly, in the absence of any specific provision in respect of a dissolved trust, no assessment could be made after its dissolution. He draw a distinction in this mater between section 161 of the Income-tax Act, 1961 (the 1961 Act) and section 21(1) of the Act. He pointed out that whereas section 161 has provided for a receipt to be assessed in the name of the trustee himself in respect of the income, there is no such provision in section 21. Regarding the second submission he pointed out that section 21(1) has no application for reversionary interest because such an interest must be held by the trustee appointed under a trust declared by a duly executed instrument. In the case before us, he pointed out that there was no such trust under which the HUF had been indicated as the beneficiary. The HUF is the beneficiary only because of the provision of law. The trustees were, therefore, only constructive trustees. The provisions of section 20 of the Act would not apply to such constructive trusts.
9. We are unable to accept these submissions. We will first take up the issue whether a dissolved trust can be assessed in respect of the net wealth which was held by the trust on the relevant valuation dates. It is, no doubt, true that the assessee must exist on the valuation date as well as on the date of completing the assessments. If the assessee does not exist at the time of making the assessments, there should be provision enabling the department to proceed against certain other person in respect of the assessments of the assessee. If there is no such provision, then no assessment could be made. This has been laid down by the Bombay High Court in the case of Jamnadas (supra) referred to by Shri Inamdar. However, the position in the case before us is not the same. Now, the trustee at the time of dissolution of the trust was Mr. M. L. Apte and Mrs. Manorama Apte. Under general law and under the Indian Trust Act, the property of the trust vests on the trustees. This had been made clear by the Privy Council in the case of Chhatra Kumari Devi v. Mohan Bikram Shah . Their Lordships stated :
'The trustee is [in their Lordships opinion], the owner of the trust property, the right of the beneficiary being in a proper case to call upon the trustee to convey to him. The enforcement of this right would, [their Lordships think], be barred after six years under Article 120 [Limitation Act] ...' (p. 196)
So, under the general law, the trust properties are owned by the trustees. Now, the charge under section 3 of the Act is a tax in respect of the net wealth on the corresponding valuation date of every individual, HUF and company Net wealth has been defined in section 2(m) of the Act as the aggregate value of all assets belonging to assessee. Now, it is necessary to give a finding that the trustees not only own the assets but it is also necessary to give a finding that the assets belong to them. Now, the expression belonging to has been considered by the Supreme Court in the case of Raja Mohammad Amir Ahmad Khan v. Municipal Board of Sitapur : AIR1965SC1923 . The Supreme Court has pointed out that though the word belonging, no doubt, is capable of denoting an absolute title, it is never the less not confined to connoting that sense. Even possession of an interest less than that of full ownership could be signified by that word. The Supreme Court pointed out that in Websters Dictionary belong to is explained as meaning, inter alia,to be owned by, be the possession of. Therefore, the Supreme Court had equated the words belong to to mean not merely full ownership but also interest of lesser degree than full ownership. From this it follows that the trust properties belong to the trustees and the provisions of section 3 would be applicable.
10. We may also refer to the decision of the Supreme Court in the case of CWT v. Kripashankar Dayashankar Worah : 81ITR763(SC) . In that case, an argument was taken up before the Supreme Court that no assessment could be made on a trust because section 21 referred to properties held by the trust on behalf of the beneficiaries, whereas, in law the properties are held by the trust and the condition is that the properties are held for the benefit of the beneficiaries. The Supreme Court pointed out that the conception in the Act that the trustee is holding the trust property on behalf of others may not be in conformity with the legal position as contemplated by the Indian Trusts Act but the Legislature is competent in the absence of any restrictions placed on it by the Constitution to give its own meaning to the words used by it in a statue. The mere fact that the conception does not accord with the provisions of the Indian Trusts Act does not invalidate section 21(1). We are quoting this only to show that it is well recognized that in general law the owners of a property under trust are the trustees themselves and further that the expression of the words on behalf of the beneficiaries does not alter the position of the trustees as far as section 3 is concerned.
11. In this connection, a reference should also be made to a decision of the Gujarat High Court in the case of CWT v. Kum. Manna G. Sarabhai : 86ITR153(Guj) . Therein, the Gujarat High Court had considered the expression belonging to found in section 2(m). After referring to the decision of the House of Lords in the case of Heritable Reversionary Co. Ltd. v. Miller  Ac 598, the Court held that the assets held are not the trustees property in any real sense and they are the property of the beneficiaries. The trustees of a trust cannot, therefore, be assessed to wealth-tax in respect of the trust properties. We may also mention that the Supreme Court in the case of CWT v. Trustees of H. E. H. Nizams Family (Remainder Wealth) Trust : 108ITR555(SC) , noticed this decision to the effect that trustee cannot be assessed under section 3 alone without recourse to section 21. But they had not expressed any opinion about the correctness of the decision of the Gujarat High Court in Kum. Manna G. Sarabhais case (supra). This decision of the Gujarat High Court supports the assessees contention. While realising that this authority is in favour of the assessee, we nevertheless have to hold that the trust properties are owned by the trustees as laid down by the Privy Council in the case of Chhatra Kumari (supra) and further that it could also be considered as belonging to the trustees in view of the meaning given to that expression belong to by the Supreme Court decision in Trustees of H. E. H. Nizams Family (Remainder Wealth) Trusts case (supra).
12. We will now refer to two decisions which throw some light on this issue. This first is the decision of the Calcutta High Court in the case of Asit Kumar Ghose v. CAIT : 22ITR177(Cal) . The Calcutta High Court in that case was considering a question regarding agricultural income which arises to an executor of an estate. The High Court has pointed out that an executor does not, while the administration is still incomplete, hold the estate or receive its income on behalf of any one else, but doe so on behalf of himself as the person in whom the estate lies vested at the time. Even if the executor and trustee be the same person, he does not assume the latter character till the administration has been completed and the residuary legacy ascertained and assented to. Till then, the High Court pointed out, hie is liable to assessed not in a representative capacity but under the general provisions as the owner of the income. Clearly, the position of the executor and the position of the trustee, as far as the vesting of the properties is concerned, are the same. A trustee would also be assessable directly under the general provisions of the Act.
13. The other decision we will refer to is the decision of the Supreme Court in the case of Administrator-General of West Bengal for the Estate of Raja P. N. Tagor v. CIT : 56ITR34(SC) . The Supreme Court was considering the case of an administrator for the purpose of income-tax assessment. It was pointed out therein that so long as the administration of an estate was not completed, the Administrator-General received the income of the estate on his behalf of the residuary beneficiaries, i.e. the assessments would be made on the Administrator General himself without referring to section 41 of the Indian Income-tax Act, 1922, which is in pari materia with section 21 of the Act. The Supreme Court gave this finding because the income was receivable by the assessee themselves. A similar finding has to be given by use in the wealth-tax proceedings because the asset belongs to the trustees.
14. At this stage, we should clear another point. Section 3 which creates the charge makes it clear that the charge is only in respect of individuals, HUFs and companies. No charge on the face of it is created where a group of persons hold property together. Since they could be an AOPs, it can be conceivable that no assessment could be made on the trustees holding the properties together. This point has also been answered by the Calcutta High Court in the case of Suhashini Karuni v. WTO : 46ITR953(Cal) . It has been pointed out that joint trustees must be taken to be a single unit in law and not as an AOPs and there is nothing wrong in treating such a unit as an individual holding property and becoming assessable under section 3 for the purpose of wealth-tax.
15. The same position has been retreated by the Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT : 88ITR47(SC) . That was the case of a trust created wherein the primary beneficiaries were members of the settlors family. It was worded as if it was a charitable trust. Two objections were taken against the assessment to wealth-tax of the trust. The first was whether the trustees could not be assessed at all in view of the fact that section 3 charged only the net wealth of individuals, HUFs and companies. The second one was whether it would be considered as a charitable trust. Both the points were answered in favour of the department. The Supreme Court observed as follows :
'In CWT v. Kripashankar Dayashankar Worah : 81ITR763(SC) , the contention raised was that trustees could not be assessed under the Act as section 21(1) of the Act provides for assessing the trustees who held the trust property on behalf of others. In law, a trustee does not hold the trust property on behalf of others. Hence, trustees cannot be assessed to tax under the Act. That contention was rejected by this Court. No contention was raised in that case that trustees did not come within the scope of section 3 of the Act. The judgment in that case proceeded on the basis that trustees can be assessed to wealth-tax in respect of the trust property of which they are trustees.
There is also no dispute that section 5(1) (i) of the Act proceeds on the basis that trust property comes within the scope of the Act. Section 3 of the Act does bring within its scope an individual which expression in view of the Central General Clauses Act includes individuals as well, unless the context otherwise indicates. In this case, the context, for from not indicating that Income-tax Act provides for the assessment of an association of persons, the context therein may indicate that individual does not include individuals, But such an interpretation is not permissible when we deal when section 3 of the Act.
It would appear from a reading of the decision that the question not considered in the case of Kripashankar Dayashankar Worah (supra) that is, whether the trustees did not come within the scope of section 3, has been answered in this decision and the answer is clear they are assessable under that section.
16. It is beyond dispute that the trustees of the trust were available to the department in respect of the assessment of the net wealth held by the valuation dates. It might be argued that at the time of assessment the trustees no longer have the character of trustees and, therefore, no assessment could be made on them. We do not find this argument acceptable. We have already stated that the charge of wealth-tax is on the net wealth held by the assessee. We have found that the net wealth held by the assessee. We have found that the net wealth was held by the assessee on the valuation dates. It is not necessary at the time of making the assessment that the assessee should continue to have the assets on which the assessment is to be framed. It is true that at the time of making the assessment the persons who were trustees to longer have that fiduciary capacity. But that only means that the trustees are, as far as section 3 is concerned, on the same footing as a person who after the valuation date has transferred the properties to another. It can never be said that merely because at the time of assessment the assessee does not own the properties there could be no assessment on him.
17. It is beyond dispute that the trustees of the trust were available to the department inrespect of the assessment of the property held by them on the valuation dates. Therefore, the two conditions, i.e. the existence of the assessee on the valuation date and the existence of the assessee at the time of assessment, have been satisfied. The WTO was, therefore, correct in holding that the trustees can be proceeded against wealth-tax assessment for the valuation does concerned even though the trust itself has been dissolved subsequently.
18. The second point made out by Shri Inamdar is that the trust was holding the property on the valuation dates on account of the position in law. In other words, Shri Inamdars case is that they were not holding properties by virtue of any trust declared by a duly executed instrument in writing. The assessee was holding the properties for the benefit of the HUF/legal heirs of the settlor not because of the any trust deed but because of section 83 of the Indian Trusts Act. Accordingly to him, that is not sufficient to bring in the assessment under section 21 of the Act. We see the point made out by Shri Inamdar. It is true that section 21 does not cover the obligations in the nature of trust visualised in sections 80 to 85 of the Indian Trusts Act. In that type of fiduciary relationship the provisions of section 21 will to apply. But does this advance the case of the assessee In our opinion it does not. Section 21 has been placed in the statue in order to equalise the liability to pay wealthy-tax by the trustees to the amount which would have been payable if the beneficiaries were to be assessed direct. It minimises the burden on the trustees. It is a matter of advantage for the trustee who is otherwise assessable under section 3 itself. The Supreme Court has pointed out in Trustees of H. E. H. Nizams Family (Remainder Wealth) Trusts case (supra) that the provisions of section 3 are subject to be read along with section 21. Now, the result of Shri Inamdars submission would be that the benefit of section 21 would to be available to the assessee. The trustees would be assessable under section 3 itself without any of the limitations placed by section 21. However, we need not give a finding that the assessee would be assessable without referring to section 21. That benefit has been given by AAC, and the department has not come on appeal on that point. But it is clear that the second argument taken by the assessee also does not help.
19. In the result, we will dismiss the departmental appeals as well as the assessees appeals.