1. The following question has been referred to this court by the Income-tax Appellate Tribunal, Bangalore Bench, under section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as 'the Act') :
'Whether, on the facts and in the circumstances of the case, and having regard to the provisions of section 4(1)(a)(iii) of the Wealth-tax Act, 1957, as amended by the Wealth-tax (Amendment) Act, 1964, the Tribunal was right in law in holding that the sum of Rs. 1,56,271, being the value of 1,520 shares in Sandur Manganese & Iron Ore Ltd., could not be included in the net wealth of the assessee under section 4(1)(a)(iii) of the Wealth-tax Act for the assessment year 1965-66 ?'
2. His Highness Yeshwant Rao Ghorpade (hereinafter referred to as 'the assessee') held certain shares in Sandur Manganese & Iron Ore Ltd., on March 31, 1957. On August 24, 1957, he created two trusts, namely, (i) Shri Yeshwant Rao Maharaj Charitable Trust, Sandur (hereinafter referred to as the 'charitable trust'), and (ii) Sandur Ruler's Family (Second) Trust (hereinafter transferred to as the 'Second Trust'). The assessee transferred some shares out of the shares referred to above to the Second Trust subject to the conditions mentioned therein. Shivarao and Venkatrao, two of the sons of the assessee, and Vijayadevi, a daughter of the assessee, who were minors at the time when the trust was created, were to be beneficiaries under the Second Trust. But under the conditions of the trust, during their minority, they had no beneficial interest in the shares transferred to the Second Trust as the income therefrom had to be made over to the charitable trust. Construing the two trust referred to above in His Highness Yeshwant Rao Ghorpade v. Commissioner of Wealth-tax : 61ITR444(SC) , the Supreme Court came to the conclusion that 'the trustees hold the property for the benefit of charitable trust for a number of years before they start holding it for the minor children. It is difficult to say that while the property is being held foe the benefit of charitable trust, it is also being held for the benefit of the minor children.' (See page 447). Accordingly, it held that the value of the shares in question which where not being held for the benefit of minors was not includible in the computation of the wealth of the assessee under the Act, during the assessment years 1958-59 and 1959-60. The ratio of the above decision is that during the minority of the sons and daughter of the assessee referred to above, no property is held in trust for them by the trustees under the Second Trust. It is only as an when any of them attains majority, the trustees begin to hold the specified property for his or her benefit. This part of the decision of the Supreme Court continues to bind us even now notwithstanding the amendment of section 4(1)(a)(iii) of the Act 1964, to which we shall refer presently, and we are precluded from going behind it. We may add here that although reference was made to the above-said amendment in the course of decision, its effect on the present case was not considered.
3. The relevant part of section 4(1)(a)(iii) of the Act, prior to its amendment by the Wealth-tax (Amendment) Act, 1964 (46 of 1964), stood as follows :
'4. (1) In computing the net wealth of an individual there shall be included, as belonging to that individual -
(a) the value of assets which on the valuation date are held -.....
(iii) by person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the benefit of the individual or his wife o minor child........' By section 4 of the Amending Act referred to above, clause (iii) was substituted by a new clause, which reads : '(iii) by a person or association of persons to whom such assets have been transferred by the individual otherwise than for adequate consideration for the immediate or deferred benefit of th individual, his or her spouse or minor child (not being a married daughter) or both, or............'
4. The assessment year with which we are concerned is 1965-66 which was subsequent to the date on which the above amendment came into force. By then Shivarao had attained majority. The Wealth-tax Officer included the value of the shares which had to be held for the benefit of the other two children of the assessee after they attained majority in the computation of the wealth of the assessee on the ground that the introduction of the words 'for the immediate or deferred benefit' in the substituted clause (iii) of section 4(1)(a) altered the legal position enunciated by the Supreme Court to the prejudice of the assessee. The Appellate Assistant Commissioner of Wealth-tax allowed the appeal of the assessee and deleted the value of those shares from the computation of his wealth. The Tribunal has affirmed the decision of the Appellate Assistant Commissioner of Wealth-tax. Hence this reference at the instance of the department.
5. We are of the view that on the facts and in the circumstances of this case there is no material difference at all between the position which was prevailing prior to the amendment and the position prevailing after the amendment. Even after the amendment in order that the property transferred by the assessee otherwise than for adequate consideration to any person or association of persons can be included in the computation of his wealth, it should have been held by the transferee for the immediate or deferred benefit of any of the persons mentioned in clause (iii) of section 4(1)(a) of the Act. As mentioned earlier, on a true construction of the two trust deeds in question, the Supreme Court has held that as long as the beneficiaries were minors, the shares were not being held for their benefit but for the benefit of the charitable trust. When they were al all being held by the trustees for the minors during their minority, the question whether they were being held either for their immediate benefit or for their deferred benefit would not arise, because the critical words in this case are 'held.......... for the benefit of' appearing in section 4(1)(a) of the Act. Hence, it cannot be said that the shares in question were being held by the trustees of the Second Trust during the assessment year for the benefit of the minors in question, either immediate or deferred. It follows that section 4(1)(a)(iii), even after the amendment, would not be attracted to this case. We, therefore, hold that the decision of the Tribunal is correct. The reference is accordingly answered.