Judgment

BHAGWATI, J.- These appeals by special leave are directed against a judgment of the High Court of Andhra Pradesh answering certain questions referred to it by the Tribunal in favour of the assessee. The questions are of some importance and complexity and they turn on the true interpretation of Sections 3 and 21 of the Wealth Tax Act, 1957 but since they can be answered only by applying the correct interpretation to the facts of the case, it is necessary to briefly recapitulate the facts giving rise to these appeals.

2. In the year 1950 the late Nawab Sir Mir Osman Ali Khan Bahadur, The Nizam of Hyderabad and Berar created several trusts out of which we are concerned in these appeals with the trust known as the Family Trust. The Nizam, by a Deed of Trust dated 16th May, 1950, created the Family Trust by transferring a corpus of Rs. nine crores in Government securities to the trustees constituted by him. The corpus was nationally divided into 175 equal units, out of which five units constituted a Fund called the Reserve Fund, 31/2 units constituted a Family Trust Expenses Fund and the remaining 166 1/2 units were allocated amongst the relatives mentioned in the first column of the Second Schedule in the manner specified in that Schedule, the number of units allocated to each individual relative being that mentioned in the second column. The Second Schedule was divided into two parts. Part I specified the names of the Nizams wife Laila Begum, her five sons and two daughters and his another wife Jani Begum and her minor son as beneficiaries and in Part II were mentioned the names of the other wives, sons, daughters, daughters-in-law, sons-in-law, would-be sons-in-law and certain other ladies of the Palace. None of the beneficiaries mentioned in the Second Schedule, whether in Part I or Part II, was to be entitled to the corpus of the units allocated to him or her. Each was entitled to be paid the income from the units allocated to him or her and detailed provisions were made for the manner in which the units were to devolve after his or her death, Clause (4) of the Trust Deed provided that 30 out of 168 1/2 units shall be allocated amongst the relatives mentioned in Part I of the Second Schedule in such manner that one unit each shall be allocated to Laila Begum and Jani Begum, two units each shall be allocated to the daughters of Laila Begum and four units each shall be allocated to five sons of Laila Begum and the minor son of Jani Begum, So far as one unit allocated to Laila Begum was concerned, the trustees were directed by sub-clause (a) of Cl. (4) to pay the income of this one unit to Laila Begum during her lifetime and after her death, it was to be divided into 12 equal parts and 2 equal parts each were to be added to the four units allocated to each of her five sons and one equal part each was to be added to the two units allocated to each of her two daughters to be held upon the same trusts as those declared in respect of the original units allocated to each son or daughter as the case may be. Each of the five sons of Laila Begum was allocated four units and under sub-clause (b) of Cl. (4) it was provided that the income from these four units, supplemented by parts out of Laila Begums unit on her death, shall be paid to the respective son during his lifetime and on and after his death, the corpus of the four units allocated to him together with the parts out of Laila Begums unit added to it, shall be divided amongst his children or remoter issues per stripes in the proportion of two shares for every male child to one share for every female child standing in the same degree of relationship. If such son died without leaving any child or remoter issue him surviving. sub-cl. (b) of Clause (4) provided that the trustees shall divided the four units allocated to him together with the sub-sequently added parts our of Laila Begums unit into such sub-parts and in such manner that they shall allocate two equal sub-parts each