Govindan Nair, Actg. C.J.
1. Two questions have been referred to us by the Income-tax Appellate Tribunal, Cochin Bench. They are I
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the value of that portion of the property known as 'Valiakottaram' transferred by the assessee to the trust under the trust deed dated 31st March, 1960, is not to be included in computing the net wealth of the assessee under Section 4(1)(a)(iii) of the Wealth-tax Act, 1957, on the ground that the assessee had not acquired any material benefit thereunder ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the benefit contemplated in Section 4(1)(a)(iii) of the Wealth-tax Act, 1957, was only a material benefit and would not include a spiritual benefit?'
2. For the assessment of wealth-tax on his Highness Sri Rama Varma Maharaja of Travancore (hereinafter referred to as ' the assessee ') for the assessment years 1965-66 and 1966-67, the question arose whether the properties, of the trust created by the assessee by the trust deed dated 31st March, 1960, annexure ' A ' to the statement of the case, were to be included or not. It may be mentioned here that for the previous years, the properties covered by the trust had not been taken into account for ascertaining the wealth of the assessee. However, for the first time, in the year 1965-66, the Wealth-tax Officer proposed to include the trust properties as well in the wealth of the assessee. This was objected to by the assessee but the Wealth-tax Officer rejected the objections and included the value of the trust properties as well. In appeal, however, the Appellate Assistant Commissioner set aside the order of the Wealth-tax Officer and held that the properties of the trust could not be taken into account. There was an appeal by the department before the Tribunal and it was urged before the Tribunal by the department that, in view of Section 4(1)(a)(iii) of the Wealth-tax Act, 1957, for short, 'the Act', the trust properties should also be included in the assets of the assessee. This contention was negatived by the Tribunal.
3. Section 4(1)(a)(iii) is in these terms:
'4. Net wealth to include certain assets.--(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 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 the individual, his or her spouse or minor child (not being a married daughter) or both, or.........'
It is necessary for the application of the section, (1) that there had been a transfer by the individual to a person or association of persons,
(2) that such transfer was otherwise than for adequate consideration, and
(3) that the transfer was for the immediate or deferred benefit of the individual, his or her spouse or minor child or both.
3. The properties regarding which the trust has been created solely and exclusively belonged, to the assessee. The properties have been transferred to the trustees under the trust deed, annexure ' A ', and this is clear from the terms of the trust deed itself. The trustees appointed are the assessee himself and his younger brother. His Highness Sree Uthradam Tirunal Marthanda Varma, Elayaraja of Travancore. The relevant parts of the trust deed also would show that the trust has been created for the sole benefit and well being ' of the members of the family ' of the assessee. This is sospecifically stated in paragraph 1 of the declaration. The 4th paragraph to the preamble also stated the same thing :
'WHEREAS daily worship and poojas and homams, special poojas and special homams on certain occasions have been and are being performed and conducted in Thevarapura and Homapura according to the prevailing customs and mamool, with all the usual rituals and rites, for the sole benefit and well-being of the members of the family of his Highness Sree Chitra Tirunal Sri Rama Varma, Maharaja of Travancore.'
4. In paragraph 6 of the preamble, however, it is stated that ' poojas and other ceremonies have been and are being performed for the benefit and well-being of the author and members of his family'. On a reading of the trust deed in its entirety giving emphasis to the declaratory portion of the trust deed, which is the operative portion, there can be no doubt that the trust has been created for the benefit of the family of the assessee. As a member of the family, the assessee too will be benefited in the sense in which ' benefits ' have to be understood in cases of this type of trust.
5. One of the questions that was mooted before us and which was also considered by the Tribunal was whether the type of benefit that can arise to the members of a family from poojas and homams performed in accordance with the terms of a trust deed is the type of benefit that is contemplated by Section 4(1)(a)(iii) of the Act. On behalf of the assessee it was contended that there must be a more direct nexus between the assets held and the benefits than a connection that can be said to exist by the utilisation of the income from the assets for the purpose of poojas which poojas in turn may confer the benefits visualised by the trust deed. Spiritual is the object of the trust deed. Mental is the consolation which is sought to be achieved, though one cannot deny that a desire for material prosperity is not unlinked with the objects sought to be achieved by the creation of this trust. The contention raised by counsel on behalf of the department that the benefit in Section 4(1)(a)(iii) is qualified by any such limiting words as material benefit or pecuniary benefit and that, therefore, normally the general common meaning of the word 'benefit'--' advantage; profit; gains; interest; use ; whatever contributes to promote prosperity or add value to property '--must be given to the word, is not without force. We, however, consider that it is unnecessary for the purpose of answering the questions referred to us, to deal with this aspect of the matter further, for we think that the contention on behalf of the assessee that Section 4(1)(a)(iii) is not attracted at all because the properties of the trust are not held for the benefit of the individual, his or her spouse or minor child or both as envisaged by the section has to be accepted. This is only another aspect of the first question referred to us and is a pure question of law relating to the interpretation of Section 4(1)(a)(iii) which we are justified in considering.
6. In understanding the scope of Section 4(1)(a)(iii), apart from understanding the words of the section, one has also to look into the scheme of the Act and in so ascertaining the scheme of the Act, one has to take into account the provision in Section 5(1)(i) and the provision in Section 21 of the Act. Section 5(1)(i) gives exemption from the purview of the Act to property held by an individual under trust or other legal obligation for any public purpose of a charitable or religious nature. Section 21 provides for the imposition of tax on trustees ' in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf or for whose benefit the assets are held '. So, the assessee is liable to be assessed as a trustee o! the trust properties under Section 21 of the Act, the trust not being of public nature. In fact it was so that the assessee had been taxed till and inclusive of the year 1964-65. It is clear that the provisions in Sections 21 and 4(1)(a)(iii) are not mean to be simultaneously applied to the same assets. If it is Section 21 that is to be applied to this case, the entire trust properties which are held in trust for the benefit of the family of the assessee will have to be assessed in the hands of the assessee and his co-trustees in the like manner and to the same extent as those properties would have been taxed in the hands of the .beneficiaries, that is, the members of the family of the assessee. If the properties are held for the benefit of the assessee only partly, then the share of the benefit of the assessee will have to be assessed by applying Sub-section (4) of Section 21 and in such an event Section 4(1)(a)(iii) can have no application. But Sub-section (4) of Section 21 can have no application, we think, in the case of a composite trust in favour of the family as in this case. If Section 21 is the section to be applied, we think that Section 4(1)(a)(iii) will have no application, conversely if Section 4(1)(a)(iii) is applicable, we think, Section 21 will have no application. If this view is not taken, the same assets can be taxed twice, once under Section 21, taking the trust properties alone, and again by applying Section 4(1)(a)(iii) along with the trustees' other properties. It is clear that such an imposition of double taxation on the same assets is not intended by the statute. The two sections are, therefore, mutually exclusive. If any properties are dealt with under Section 4(1)(a)(iii), there will be no assessment in regard to those properties under Section 21 and if those properties are to be dealt with under Section 21, they will not be included in the assets of the trustee by applying Section 4(1)(a)(iii).
7. The wording of Section 4(1)(a)(iii) indicates that it has limited application. However wide an interpretation is placed on the section, we think that it will not apply to a case where the properties are held not for the benefit of the individual and not for the benefit of his or her spouse or of his minor child or of any conceivable combination of these persons, but by other entries which fall outside those mentioned in the section. To be moreexplicit, if properties are held for the benefit of the family of the transferor --we are assuming here that the sort of benefit arising from the provisions of the trust deed in question is a benefit that would fall within the meaning of Section 4(1)(a)(iii) without deciding the matter--the properties cannot be said to be held for the benefit of the individual or his or her spouse or minor child or both. The section is apparently meant for the purpose of covering transfers made by an individual for his own benefit or for the benefit of his wife when the transferor is a male or of his minor child or for a combination of any two or more of the above. We do not think that the section can be extended further. If that be so, a transfer by an individual for the benefit of his family cannot fall under the section.
8. Counsel on behalf of the assessee contended before us that that section will apply only to cases of a father or husband and not to a bachelor. The assessee has never been married. We do not think that we must express any opinion on this contention as it is unnecessary for deciding this case.
9. The only other question which we may advert to is that arising out of the contention on behalf of the assessee that the principle of estoppel or res judicata is applicable in view of the practice that have been followed by the department of not including the value of the trust properties in the previous years in assessing the wealth of the assessee. Counsel for the assessee invited our attention to pages 731 to 733 of the Commentaries to the Income-tax Act, 1961, by Sri J.B. Kanga and N. A. Palkhivala, 6th edition, volume I, and submitted that no fresh facts have come to light, that the earlier decisions have been rendered after taking into consideration all material evidence and that, therefore, the departure made by the department from the old practice was arbitrary and was merely based on the opinion of the officer who differed from the view that had been earlier accepted. We do not think that we should deal with this aspect either in these tax referred cases.
10. We answer question No. 1 referred to us in the affirmative, that is, in favour of the assessee and against the department. In view of our answer to question No. 1 based on our finding that Section 4(1)(a)(iii) is not attracted, we consider it unnecessary to answer the second question. We direct the parties to bear their respective costs.
11. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.