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HIGH COURT OF CALCUTTA
SINHA, J.
Suhasini Karuri - Appellant
Versus
Wealth Tax Officer District 1 2 D Ward Calcutta And Union Of India – Respondent
Decided on : Nov 23, 1961
WEALTH TAX ACT - Section 3, 21 - Assessment of wealth tax on the estate of a deceased person - Whether the assessment should be made on the basis of the individual income of the beneficiaries or on the income in the hands of the trustees - Interpretation of section 21(1) of the Wealth Tax Act - Whether the trustees hold the property "on behalf of" the beneficiaries - Meaning of "on behalf of" and "for the benefit of" - Whether the shares of the beneficiaries are indeterminate or unknown - Whether joint trustees can be assessed as an association of persons - Whether the petitioners are holding property as executors or as trustees.
Fact of the Case:
The petitioners were the executors and trustees of the estate of a deceased person. The Wealth Tax Officer assessed the petitioners as representing the estate of the deceased person and computed the total net wealth at Rs. 14,02,703/-, Rs. 14,04,084/- and Rs.14,10,007/- for the assessment years 1957-58, 1958-59 and 1959-60 respectively. The petitioners contended that the assessment was not proper and should have been made on the basis of the individual income of the beneficiaries.
Finding of the Court:
The court held that the assessment should have been made on the basis of the individual income of the beneficiaries. The court interpreted section 21(1) of the Wealth Tax Act and held that the trustees hold the property "on behalf of" the beneficiaries and that the shares of the beneficiaries are not indeterminate or unknown. The court also held that joint trustees can be assessed as an association of persons and that the petitioners were holding property as trustees and not as executors.
Issues: 1. Whether the assessment of wealth tax should be made on the basis of the individual income of the beneficiaries or on the income in the hands of the trustees? 2. Whether the trustees hold the property "on behalf of" the beneficiaries? 3. Whether the shares of the beneficiaries are indeterminate or unknown? 4. Whether joint trustees can be assessed as an association of persons? 5. Whether the petitioners are holding property as executors or as trustees?
Ratio Decidendi: 1. Section 21(1) of the Wealth Tax Act provides that where assets chargeable to tax under the Act are held by any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise, the wealth-tax shall be levied upon and recoverable from the trustees in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf the assets are held. 2. The expression "on behalf of" in section 21(1) of the Wealth Tax Act is synonymous with the expression "for the benefit of". 3. The shares of the beneficiaries are not indeterminate or unknown if they can be determined at the relevant time. 4. Joint trustees can be assessed as an association of persons under section 3 of the Wealth Tax Act. 5. The petitioners were holding property as trustees and not as executors.
Final Decision: The court quashed the impugned assessment orders and issued a writ of mandamus directing the respondents not to give effect to the same. The respondents were directed to make assessments in accordance with law.
1. This is an application concerned with the Wealth Tax Act, 1957 being Central Act No. 27 of 1937. It came into operation on the 12th September, 1957 and is an Act, the object of which is to provide for the levy of Wealth Tax. Under section 3 of the said Act, which is the charging section,-subject to the other previsions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax known as the wealth-tax, in respect of the net wealth on the corresponding valuation date, of every individual, Hindu undivided family and company specified in the Schedule annexed to the said Act. The word "net wealth" has been defined to mean the amount by which the aggregate value computed in accordance with the provisions of the said Act of all the assets, wherever located, belonging to the assessee on the valuation date, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date.
2. Now we come to the facts of this case. One Sri Nandalal Karuri died on May 21, 1944 after having made and published his Will on April 24, 1944 whereby he appointed Sm. Suhasini Karuri his wife, and Sri Sudhir Prosad Karuri his eldest son, both of whom are petitioners in this case, as Executors and Trustees. The testator had 8 sons, of whom 7 are alive and one is dead. He has also grandsons. The petitioners obtained Probate of the said Will from this Court on or about July 25, 1945. A copy of the Will is annexed to the petition and marked with the letter "a". Actually there are very few bequests in the Will, which in reality creates a Trust. The petitioners were made the first Trustees and there are elaborate provisions for the appointment and succession of Trustees. The estate is described as the "trust Estate". The trustees are to perform the pujas of the deities mentioned in clause (5) of the Will. The cost thereof was to be defrayed from out of the income of certain properties mentioned therein. The residue is to be distributed in the following manner:-
"7. The amount of surplus left of the income of the said Bowbazar property after defraying all the aforesaid expenses and the entire amount of income from the other properties the trustees shall divide in equal shares amongst my eight sons. If any son die then his share shall be divided equally amongst his sons and in the event of death of any of those sons his share shall be divided amongst his sons. As to any minor son or grandson (son's son) of mine the trustees shall make over the income allotted to his share to his guardian during the period of his minority. If after my death, any of my sons or sons' sons renounce Hindu religion and custom, he shall not get the aforesaid share of the income mentioned in this paragraph. The entire income shall be divided amongst the remaining heirs. "
This is followed by clause 13 the relevant part whereof is in the following terms:-
"at present seven sons and ten grandsons (sons' sons) of mine are alive. I am executing this Deed of Trust for the benefit of the provisions (made) with regard to the worship of the deities and (for the benefit) of my said sons and grandsons (sons' sons). It is only my said sons and grandsons (sons' sons) and those sons that will be born to them in future shall be beneficiaries under this trust deed. As long as they and those other grandsons (sons' sons) that will be born during my life time will remain alive and then during the minority of the sons of them all those properties shall remain under the charge of the Trustees according to the rules of this Trust Deed. This trust shall come to an end when all my sons and (any) son born in my life time and the grandsons (sons' sons) die and when all the sons of theirs will attain majority and my the then heirs at that time shall be competent to make any arrangement regarding these properties as they will think proper. But it is my earnest desire that ever thereafter they shall-be executing a
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