Per Shri R. L. Sangani, Judicial Member - This appeal by the assessee relates to the assessment year 1976-77. The assessment with which we are concerned in this appeal is with regard to Peter Luis Trust. One of the properties of the said trust is situated at 8, Turner Road, Bandra, Bombay. The assessee claimed that valuation of the said property should be made under section 7(4) of the Wealth-tax Act, 1957 (the Act) because the said property was in occupation of the trustee, who had life interest, and all the beneficiaries. The WTO was of the opinion that section 7(4) was not applicable to the trust property and, therefore, rejected the claim.
2. In the appeal filed by the assessee, the AAC observed that section 7(4) required that the property in question should be exclusively used by the assessee for residential purposes during the relevant period. Since the assessee was a trust, it could not be said that the property had been used by the trust for residential purposes. According to the AAC, provisions of section 7(4) would be applicable only when the assessee was a living person. His attention was drawn to the fact that in the income-tax proceedings, the property in question was being treated as self-occupied property. But the AAC declined to take a different view. According to him, a mistake was being committed in those proceedings and that commission of the said mistake did not justify commission of a similar mistake in the wealth-tax proceedings. He declined to interfere in the order of the WTO.
3. The crucial question for decision is whether provisions of section 7(4) would apply to the trust property. The essential condition under section 7(4) is that the house in question should belong to the assessee and should be exclusively used by the assessee for residential purposes throughout the relevant period. When the assessee is an individual, what all we have to see is whether the house in question belonged to that individual and whether the said house had been exclusively used by that individual for residential purposes throughout the relevant period. However, when the property is settled on a trust, considerations that arise are different. It is to be noted that the trust itself is not an assessable unit under the Act. The assessment is to be made either on the trustee or on the beneficiary. If the assessment is made on the trustee, the wealth-tax is to be levied in the like manner and to the same extent as it would be leviable upon the beneficiaries. Consequently, even when the property is settled on a trust, the assessees are living persons.
4. In Bai Hamabai J. K. Mehta v. CIT : 16ITR115(Bom) , the Bombay High Court held that where the beneficiary under a trust was entitled to reside rent-free in a property and under section 41(2) of the Indian Income-tax Act, 1922 (the 1922 Act), the income-tax authorities assessed the said beneficiary directly in respect of the income from the property, the assessee would be entitled to the benefit under section 9(2) of the 1922 Act in the same capacity, viz., that of the owner of the property. This decision is an authority for the proposition that where the property is settled on a trust, the beneficiary, who has been permitted to reside rent-free under the terms of the trust, is to be treated as the owner of the property residing therein.
5. In CWT v. Official Trustee of West Bengal for Trust Murshidabad Estate : 136ITR162(Cal) , the question involved was that of interpretation of section 5(1) (iv) of the Act, as it stood in the assessment year 1971-72. That provision which dealt with exemption of one house, contained the following words : one house or part of a house belonging to the assessee and exclusively used by him for residential purpose. In that case, the house in question had been settled on a trust and the beneficiaries had been residing in the said house. The contention before the High Court was that the house belonged to the official trustee and since the official trustee was not residing in the said house, exemption under section 5(1) (iv) could not be granted. The High Court rejected this contention. It was held that the assessee, who was official trustee, was entitled to exemption under section 5(1) (iv) in respect of a part of the building where the building was used partly for residential purposes by one of the beneficiaries. It was further held that a trustee cannot be denied benefit of exemption on the ground that the house was not used by the trustee personally for residential purposes. This decision is an authority for the proposition that if the beneficiaries resided in a house settled on the trust, then it should be deemed that the house belonging to the assessee had been used for residence.
6. In the present case, it is the claim of the beneficiaries that they have been residing in the house in question. But this claim has not been verified as yet. If this claim is true, exemption under section 7(4) would be admissible. In the circumstances, we restore the matter to the WTO with the direction to grant exemption under section 7(4), if he finds that the house in question was being used for residence during the relevant period by the persons who were beneficiaries under the trust deed. Relevant enquiries shall be made by the WTO after giving opportunity of being heard to the assessee. We direct accordingly.
7. In the result, the appeal is allowed.