1. This reference relates to the assessment year 1958-59 and the relevant date of valuation is the 31st of March, 1958. The question referred to us in this reference is whether, on the facts and circumstances of the case, the inclusion of the sum of Rs. 11,59,137 in the wealth-tax assessment of the assessee by applying section 4(1)(a)(iii) is right in law.
2. The assessee had two sons, Gunwant and Chaitanya. By a deed of trust dated 12th of February, 1957, he transferred certain properties of the value of Rs. 30,13,875 to the three trustees appointed by him therein to hold the same upon trust therein set out. After reciting the various properties situate in Ahmedabad and Bombay, which are the subject-matter of the deed of trust, the deed, inter alia, recites as follows :
'And whereas the settlor is desirous of settling the said lands hereditaments and premises more particularly described in the first, second and third schedules hereunder written for the benefit of his sons Gunwant and Chaitanya both minors under the age of eighteen years ..... in the manner hereinafter appearing...... NOW THIS INDENTURE WITNESS that in pursuance of the said desire and in consideration of the premises the settlor DOTH HEREBY GRANT AND CONVEY unto the trustees ALL THOSE pieces or parcels of lands hereditaments and premises more particularly described in the first, second and third schedules hereunder written TOGETHER WITH ALL building, yards, fences, etc.'
3. The deed provides that out of these, properties, certain properties were to be held by the trustees in the manner provided by clauses 3 and 5 thereof and, in so far as clause 3 deals with the assessee's minor son Chaitanya, it is as follows :
'3. The trustees shall hold the said in hereditaments and premises .... upon trust to pay the net income of the said several lands hereditaments and premises....... to the said Chaitanya for and during his life and on and after the death of the said Chaitanya the trustees shall hold the said severals lands hereditaments and premises ...... in trust absolutely for the child or children of the said Chaitanya and if more than one in equal shares.'
4. Clause 5, inter alia, provides as follows :
'5. If the said Chaitanya shall die without having any child or children at all born to him then and in such case the trustees shall hold the several lands hereditaments and premises hereby settled for the benefit of the said Chaitnaya and his child or children in trust to pay the net income therefore to the said Gunwant for and during his life...... and on and after the death of the said Gunwant for the trustees shall hold the said several lands hereditaments and premises hereby settled for the benefit of the said Chaitanya and his child or children....... in trust absolutely for the child or children of the said Gunwant.'
5. The Wealth-tax Officer, by his order dated the 31st March, 1959, held that the properties covered by the deed of trust were undervalued by the assessee, and valuing them at Rs. 30,13,875, assessed the net wealth of the assessee at Rs. 35,30,932, ignoring altogether the deed of trust, holding that there was no transfer thereunder of any of the said properties. Contesting the inclusion of these properties in his net wealth, the assessee filed an appeal before the Assistant Commissioner. The Assistant Commissioner allowed the appeal, directing that these properties should not be included in the computation of the assessee's net wealth. The Assistant Commissioner took the view that as the sub-Registrar had not objected to the registration of the trust as also the registration of the immovable properties referred to therein, the properties, on the date of which the trust deed was registered, became properties of trust and the assessee, therefore, did not have any right over those properties. He held that as the Wealth-tax Officer had not found any difficulties in trust deed since the provision of the Transfer of Property Act as also the Registration Act had been correctly followed by the assessee, the properties which were the subject-matter of the deed of trust could not be the properties of the assessee and, therefore, should not be assessed in the hands of the assessee. In this view, he directed that the addition of those properties in the net wealth of the assessee should be deleted.
6. It is quite clear from the order passed by the Assistant Commissioner that he did not consider the question whether under section 4(1) of the Act, these properties, in so far they were settled upon trust in relation to the minor son, Chaitanya, were includible or not in the total net wealth of the assessee. On an appeal before the Tribunal by the Commissioner, the department contended that properties of the value of Rs. 11,59,137, which were transferred to the trustees under clauses 3 and 5 of the deed of trust in relation of the minor son, Chaitanya, were includible in the assessee's total net wealth under section 4(1)(a)(ii) or section 4(iii). The Tribunal was of the view that sub-clause (ii) would not apply to the facts of the case and held that the case fell under sub-clause (iii). The Tribunal negatived the plea placed before it on behalf of the assessee, namely, that as the minor, Chaitanya, got only a life interest in the said properties, there was no transfer of the assets for the benefit of the minor child within the meaning of sub-clause (iii). While negativing this contention, the Tribunal observed that the fact that the minor child, namely, Chaitanya, got a benefit as a result of the transfer of the assets to the trust was not capable of any dispute. During the lifetime of Chaitanya, he alone was the beneficiary and that was what was contemplated by the expression 'for the benefit of' in sub-clause (iii). In that view, the Tribunal held that the provisions of section 4(1)(a)(iii) were attracted in this case and the assessee was liable to be taxed in the sum of Rs. 11,59,137.
7. Section 4(1)(a)(iii) provides as follows :
'4. (1) In computing the net wealth of an individual, there shall be included, as belonging to him -
(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 benefit of the individual or his wife or minor child.'
8. In order that property transferred to an individual may still be included under this section in the total net wealth of an assessee, certain conditions are necessary, namely, (1) that the properties are held by a person or an association of persons, (2) that they are transferred to them by the assessee, (3) that the transfer is other than for adequate consideration, that is to say, the consideration is not monetary, and (4) that the assets are transferred for the benefit either of the individual or his wife or his minor child. It is not disputed that the first three conditions necessary for the attraction of this sub-clause are fulfilled and, therefore, the only question that remains to be ascertained is whether these properties have been transferred by the assessee for the benefit of his minor child. Now the expression 'for the benefit of' in this sub-clause has a wide meaning, thereby that if the transfer results in, or is made for the benefit of the minor child, such a transfer would fall within the ambit of sub-clause (a) (iii). The word 'benefit' has not been used in this sub-clause in any technical meaning, and obviously, therefore, it has to be given its ordinary dictionary meaning. The benefit must, therefore, mean any interest created by or under the transfer which is intended to or results in something which benefits the minor child. Such a benefit may result in an absolute transfer or an unlimited interest, and may extend to the enjoyment of the property itself or, on the other hand, it may be restricted to its income only, or for a certain period or may be contingent upon the happening of a certain event or condition. There does not appear to give anything in the section which justifies any restricted meaning to be given to the expression 'for the benefit of'. It appears that the object of the sub-section is to include in the net wealth all the assessee's properties which are transferred by him in favour of his wife or children directly or transferred by him to others for the benefit of himself or his wife or his minor children. The object is not to permit by such transfer the reduction of the assessee's net wealth where, although such transfer may divest ownership in the transferred property in the transferor, the transfer is made by conveying the property to his wife or his minor child or by conveying it to others for the benefit of himself, his wife or his minor child. There is thus no reason why we should give any restricted meaning to the expression 'for the benefit of' occurring in this sub-clause to mean only that the transfer should vest in the minor child absolutely the ownership in the property.
9. Under clause 3 of the trust deed the trustees, as already pointed out, are enjoined upon to pay to the minor son, Chaitanya, during his lifetime, the income arising from the transferred properties. It is only on and after his death that the trustees have to distribute the properties amongst his child or children, as the case may be, and under clause 5 of the trust deed, it is only in the case of his death without leaving any child or children surviving him that the income of the properties is to go to the other son Gunwant and on and after the death of the said Gunwant trustees are to hold the said properties in trust absolutely for the child or children of the said Gunwant. There can be no doubt that under the deed of trust, the minor Chaitanya, can claim the income of half of the transferred properties, and if the trustees were to decline to pay him, he would have the right to enforce his claim by an action. It is clear, therefore, that the deed of transfer transferred and conveyed to the trustees the aforesaid properties and the effect of clauses 3 and 5 in the trust deed was the resultant benefit to Chaitanya, the minor son of the assessee.
10. The only contention that Mr. Thakore on behalf of the assessee could raise was that since the corpus of the trust properties was not transferred to the minor son, Chaitanya, and only the income of the transferred properties was given to him during his lifetime, the transfer was not such as would attract the provisions of section 4(1)(a)(iii) and that, therefore, these properties were not includible in the net wealth of the assessee. There is clearly some misapprehension on the part of Mr. Thakore in urging this contention, for, what sub-clause (iii) seeks to do is to include in the net wealth of the assessee the properties which are transferred by him in favour of a person or an association of persons with the object of benefiting either himself or his wife or his minor child. Whether such transfer results in the transfer of assets or only the income of such assets is not either material or relevant. What is relevant under this sub-clause is whether such assets are transferred for the benefit either of the assessee or his wife or his minor child. There can be no doubt that the object of clauses 3 and 5 of the deed of trust is to benefit Chaitanya, the minor son of the assessee. In the result, it is not possible to say that the properties of the value of Rs. 11,59,137 were not held by a person or association of persons to whom such assets had been transferred by the individual otherwise than for adequate consideration for the benefit of the minor child.
11. Our answer to the question, therefore, has to be in the affirmative.
12. The assessee will pay to the Commissioner the costs of this reference.
13. Question answered in the affirmative.