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M.K. Ananthakumar Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1983)3ITD672(Mad.)
AppellantM.K. Ananthakumar
RespondentWealth-tax Officer
Excerpt:
.....of the deed the trust is said to be irrevocable. under clause 20, the trustees are enjoined at the time of marriage of the settlor to pay all the accumulated funds in the trust, both the corpus and the accrued income thereon, to the bride. according to clause 22, if the marriage is not solemnised for any unforeseen reason within a period of ten years from the date of the deed, the trustees have the power to apply the trust fund and the accumulation thereof in any manner they deem fit. it further appears that the amounts received by the trust from the settlor from time to time stood invested in the business of sri ananthalakshmi traders, coimbatore and the copy of the trust's account in the books of sri ananthalakshmi traders show that besides a sum of rs. 15,000 paid by cheque by the.....
Judgment:
1. This appeal by the assessee M.K. Ananthakumar relates to his wealth-tax assessment for the year 1975-76. The sole dispute raised by the assessee in this appeal pertains to the inclusion of an amount of Rs. 1,40,000 claimed to have been transferred by the assessee to a trust for his would-be wife and later handed over by the trust to the lady who subsequently became the assessee's wife. It appears, the assessee set up a private trust by a document dated 24-11-1969 designated as M.K. Ananthakumar Marriage Benefit Trust, whereby he settled absolutely on the trustees a sum of Rs. 15,000 in cash to hold the same for the objects and purposes mentioned therein. According to Clause 19 of the deed the trust is said to be irrevocable. Under Clause 20, the trustees are enjoined at the time of marriage of the settlor to pay all the accumulated funds in the trust, both the corpus and the accrued income thereon, to the bride. According to Clause 22, if the marriage is not solemnised for any unforeseen reason within a period of ten years from the date of the deed, the trustees have the power to apply the trust fund and the accumulation thereof in any manner they deem fit. It further appears that the amounts received by the trust from the settlor from time to time stood invested in the business of Sri Ananthalakshmi Traders, Coimbatore and the copy of the trust's account in the books of Sri Ananthalakshmi Traders show that besides a sum of Rs. 15,000 paid by cheque by the assessee Ananthakumar on 9-2-1970, there were also payments made by him by cheque of Rs. 35,000 on 4-4-1972, Rs. 40,000 on 6-4-1972 and Rs. 50,000 on 31-4-1972 aggregating in all to Rs. 1,40,000. This total amount of Rs. 1,40,000 was paid by one of the trustees of M.K. Ananthakumar Marriage Benefit Trust to one Shri S. Nagaraja Chetty as the father and guardian of minor Geethalakshmi on the assessee's marriage with her having been agreed upon on 8-8-1972 and the amount was invested on her behalf in Karur Vysya Bank Ltd., Coimbatore, as fixed deposit in the name of Geethalakshmi, father and natural guardian Shri S Nagaraja Chetty. A relevant fact which may be noted at this juncture is that the assessee's marriage with Geethalakshmi took place on 28-8-1972. We have also been furnished with copies of gift-tax assessment of the assessee for the years 1972-73 and 1973-74 showing value of gifts of Rs. 77,000 and Rs. 50,000 respectively which are said to include the amounts paid to the trust and later paid by the trustees to Geethalakshmi. On these facts, the WTO in the wealth-tax assessment made for the year under appeal included the amount of Rs. 1,40,000 as hit by Section 4(i)(a)(iv) of the Wealth-tax Act, 1957 ('the Act') and interest referable thereto at Rs. 9,139 for the period the amount was lying to the credit of the account of the trust in the books of Sri Ananthalakshmi Traders and accrued interest of Rs. 44,800 for the period from 28-8-1972 to 13-4-1975, the valuation date. The AAC upheld the inclusion of the amounts made by the WTO on the ground that there was a violation of the provisions of Clauses 20 and 22 of the trust deed, according to which the accumulated funds in the trust had to be handed over at the time of the marriage of the settlor and not earlier.

2. It is contended before us in the further appeal on behalf of the assessee that the provisions of Section 4(1)(a) are not attracted to the facts of this case. It is submitted that without going into the question of validity of the trust deed or the question as to whether there was any violation thereof, the fact remains that the amount of Rs. 1,40,000 was gifted to Geethalakshmi and accepted on her behalf by her father and natural guardian before the assessee's marriage with the said Geethalakshmi took place, i.e., before she became his wife (spouse). Section 4(1)(a), it is argued, is attracted only where the transfer is to the wife and in support of the claim reliance is placed on the decision of the Supreme Court in Philip John Plasket Thomas v.CIT [1963] 49 ITR 97. Reliance was also placed on a decision of the Andhra Pradesh High Court in CWT v. Khan Saheb Dost Mohd. Alladin [1973] 91 ITR 179.

3. The contention of the department in reply was that at the time when the amount was paid by the trustees to Geethalakshmi's father she was a minor and she could be said to have received the amount only on her attaining majority and the date when she so received the amount would be the material date for considering the question of applicability of Section 4(1 )(a).

4. Having considered the facts and the rival contentions of the parties, we uphold the claim of the assessee. Section 4(1)(a)(t) contemplates inclusion in the assessment of an individual the value of assets which on the valuation dates are held 'by the spouse of such individual to whom such assets have been transferred by the individual....' The language of Section 16(3) of the 1922 Act considered in the Supreme Court decision in Philip John (supra) is somewhat different, but it does not, according to us, make any difference to the principle of the decision being applied to the facts of this case. The words 'to whom such assets have been transferred' would, according to us, mean to the spouse indicated in the earlier part of the clause and not to the individual or person concerned who subsequently becomes the spouse as argued by the learned departmental representative. In Sampat lyengar's Three New Taxes, 5th Edition at page 310 the same view has been expressed. It is stated that for the application of this clause the relationship of spouse should have existed at the time of transfer. We also do not find any force in the department's contention that merely because the father of Geethalakshmi received the amount because she was a minor, it would not amount to payment to her. It is also unnecessary for us to go into the question of the validity of the trust or as to whether there is any violation thereof, though we have our doubt as to whether the trust created in the circumstances in favour of a nonexistent indefinite person, depending on the uncertain event of a marriage taking place, would be a valid one. However, as we have already observed it is not necessary to go into this aspect as the actual payment of the amount to Geethalakshmi is before the marriage took place is an accomplished fact and cannot be disputed. We may observe in passing that the decision of the Andhra Pradesh High Court relied on by the assessee is not quite relevant and is distinguishable and in the absence of any dispute as to whether there was adequate consideration for the transfer or not, it is not necessary for us to consider the decision. In the result, the appeal is allowed.


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