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Commissioner of Wealth-tax Vs. R.S. Seth Ghisalal Modi Family Trust - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberM.C.C. No. 312 of 1984
Judge
Reported in[1988]169ITR531(MP)
ActsWealth Tax Act, 1957 - Sections 21(1), 21(4), 22(1) and 27(3)
AppellantCommissioner of Wealth-tax
RespondentR.S. Seth Ghisalal Modi Family Trust
Appellant AdvocateR.C. Mukati, Adv.
Respondent AdvocateNone
Excerpt:
.....in tax liability and thereby not deciding the point that the wealth-tax officer having exercised the option of making the assessment directly on the..........on the facts and in the circumstances of the case, the tribunal is justified in deciding that the wealth-tax assessment in the case of the assessee is to be made under section 22(1) of the wealth-tax act and not under section 21(4) by holding that the beneficiaries as well as their shares are known ?2. whether, on the facts and in the circumstances of the case, the tribunal is justified in holding that inasmuch as the wealth-tax officer has made an assessment on the beneficiaries even if an assessment was to be made on trustees, such an assessment being one under section 21(1) cannot mean any difference in tax liability and thereby not deciding the point that the wealth-tax officer having exercised the option of making the assessment directly on the beneficiaries, he cannot now make the.....
Judgment:

1. Shri R.C. Mukati, counsel for the applicant, was heard on the question of admission.

2. This is an application filed by the applicant, viz., Commissioner of Wealth-tax, under Section 27(3) of the Wealth-tax Act, 1957, with a prayer to call upon the Tribunal to send the statement of the case in connection with the following questions of law :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in deciding that the wealth-tax assessment in the case of the assessee is to be made under Section 22(1) of the Wealth-tax Act and not under Section 21(4) by holding that the beneficiaries as well as their shares are known ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that inasmuch as the Wealth-tax Officer has made an assessment on the beneficiaries even if an assessment was to be made on trustees, such an assessment being one under Section 21(1) cannot mean any difference in tax liability and thereby not deciding the point that the Wealth-tax Officer having exercised the option of making the assessment directly on the beneficiaries, he cannot now make the assessment on the trustees ?'

3. The facts giving rise to this petition may be stated, in brief, thus, which relate to the assessment year 1972-73.

4. The respondent-assessee filed its return of wealth for the assessment year on June 26, 1971, the accounting period for which ended on Diwali, 1970. The assessee claimed that no assessment can be made in its case. The Wealth-tax Officer, however, completed the assessment on a net wealth of Rs. 4,27,720 on February 22, 1979.

5. Wealth-tax assessments were also made on the beneficiaries of the trust. Shri Nandikishore was assessed on a net wealth of Rs. 2,63,302 by an order of the Wealth-tax Officer dated January 16, 1976. Shri Surendrakumar was assessed on a net wealth of Rs. 3,10,007 on March 8, 1979. Wealth-tax assessment was also completed in the case of Arunkumar on January 21, 1974. Similarly, the assessment of Shri Rajendrakumar was completed on the wealth as shown. The contention of the assessee was that since the Wealth-tax Officer finalised the assessments of three out of the four beneficiaries prior to February 22, 1979, he is debarred from making an assessment on the trustees. The contention of counsel was that the Wealth-tax Officer made the assessment on the basis of the provisions of Section 21(4) of the Wealth-tax Act ; as such the Wealth-tax Officer had exercised the option of making the assessments directly on the beneficiaries and thus he could not make the assessment on the trustees.

6. The trust was created by a deed dated May 28, 1959. It was not noticed by the departmental authorities that the shares of the beneficiaries were not specified in the trust deed. In the income-tax case, the contention of the assessee was that the trust had passed a resolution on December 15, 1969, wherein they provided that distribution of the income of the trust property amongst the beneficiaries would be in equal proportion. On this basis, the claim of the assessee was that the trust as originally created stood modified. However, the Tribunal in the income-tax appeal found that the trustees were not given authority to modify the terms of the trust so as to change the shares which the income of the trust shall be utilised (sic). Therefore, the Tribunal relying on certain authorities held that on the relevant valuation date not only the beneficiaries are known but also their shares are equally known. They are also of the opinion that inasmuch as the Wealth-tax Officer has made an assessment on the beneficiaries even if an assessment was to be made on the trustees, such an assessment being one under Section 21(1) cannot mean any difference in tax liability.

7. The Department filed a reference application under Section 27(1) of the Wealth-tax Act which was rejected by the Income-tax Appellate Tribunal, Indore Bench, Indore, in relation to the questions of law as proposed above. Hence, this petition.


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