Law:

Section:

Section 21(2) of the Wealth-tax Act, 1957 - Representative assessee - Assessment when assets are held by court of wards, trusts etc. - Settlor created three discretionary trusts, for benefit of assessee and, after assessee's marriage, for benefit of his wife and children as well - Trust deeds guaranteed minimum annual payments to beneficiaries out of trust's income for specified number of years - Corpus and accumulated income at end of trust-term were within trustees' discretion to be given to any one or more of surviving beneficiaries - On relevant valuation dates, assessee, still unmarried, was sole beneficiary - Whether assessee's liability to wealth-tax was to be confined only to capitalised value of minimum amounts payable to assessee under aforesaid trust deeds and could not extend to entire value of assets held by trusts - Held, yes FACTS The settlor created three discretionary trusts for the benefit of the assessee and, after the assessee's marriage, for the benefit of his wife and children as well. Under the relevant trust deeds, the beneficiaries were to receive specified minimum annual payments out of the trust income for a specified number of years. The trustees, in their discretion, could make further payments also to the beneficiaries. The corpus and the accumulated income at the end of the prescribed period were to be handed over by the trustees to one or more of surviving beneficiaries in any proportion at their discretion. The WTO made assessment under section 21(2) for the assessment years 1962-63 to 1964-65 and assessed the assessee, who was a bachelor and the sole beneficiary at that time on the entire value of the assets held by the trusts. On appeal, the AAC confined the liability of the assessee to tax on capitalised value of the minimum amounts payable to him under the trust deeds. On second appeal, the Tribunal affirmed the view taken by the AAC. On reference at the instance of the revenue, the Gujarat High Court also decided in favour of the assessee. On appeal to the Supreme Court, the revenue contended that (a) on the valuation dates there was only one beneficiary, his share was determined and known and it extended to the entire…

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