Commissioner of Wealth Tax vs K. Kachradas Patel Specific Family Trust

R.K. Abichandani, J.—The Revenue has suggested the following questions seeking a direction on the Tribunal for forwarding statement of case in respect thereof under the provisions of s. 27(3) of the WT Act, 1957 :

"1. Whether, the Tribunal is right in law and on facts, in holding that the assessee-trust in which shares of beneficiaries are indeterminate or unknown should be considered as specific trust chargeable under s. 21(1) and therefore, maximum marginal rate cannot be applied ?

Whether, the Tribunal is right in law and on facts in directing the AO to allow the liabilities of the beneficiaries ?"

The Tribunal came to a finding that the shares of beneficiaries of the assessee-trust were determinate and known and further that the wealth assessable being only Rs. 31,000, was below the marginal relief.

As per the relevant clause III(b)(i) and (ii), the persons mentioned in Sch. I to the trust deed were given a right to receive the income to be divided amongst them as per the shares mentioned against each of them in that schedule and the remaining moiety of income was to be divided as per the shares specified against the beneficiaries mentioned in Sch. II, attached to the trust deed. The Tribunal took note of the fact that in the Income Tax case of the same assessee decided by the Tribunal, Mumbai on 7th October, 1994, it was held by the Tribunal after a detailed discussion that the assessee-trust was a specific trust from all angles and, therefore, entitled to be assessed under s. 161 of the IT Act. This finding is recorded in para 27 of that decision, which was rendered in respect of the asst. yrs. 1984-85, 1985-86 and 1986-87 in the assessee''s case. In para 26 of its order, the Tribunal had held that there were significant pointers to the assessee''s plea of a genuine specific trust rather than creation of a colourable device to evade tax. It appears from para 4 of the order of the Tribunal that the said decision of the Bombay Tribunal was read in extenso during the proceedings. Having regard to the contents of the trust deed which are reproduced in the record and the findings in the Income Tax case of the very assessee by the Bombay Tribunal, which is not shown to have been questioned, it cannot be said that the Tribunal committed any error in holding that the assessee trust was a specific trust.

As regards the finding by the Tribunal that the assessee wealth would only be Rs. 31,000 which was below the marginal relief after the liabilities standing in the name of different beneficiaries were excluded, it will be noted that the Tribunal had placed reliance on the decision of this Court in Commissioner of Income Tax Vs. Tanvi Sajni Family Trust, in which it was held that the Tribunal was right in holding that the trust was entitled to deduction of interest paid to the beneficiaries on the income from the trust, which was kept by the beneficiaries as a loan. In the present case also, the only liability which was in question was that of interest. Thus, even on this count, no question of law arises since the matter stands concluded by the decision of this Court in Tanvi Sajni Family Trust''s case (supra). The application is therefore, rejected. Rule is discharged with no order as to costs.