Law: Wealth Tax Act, 1957

Section: 27(1),21(3)

Law: Wealth Tax Rules, 1957

Section: 1D

(a) Wealth tax--- ---- Valuation of assets---Valuation of unquoted equity shares---Application of R. 1-D is mandatory---Indian Wealth Tax Rules, 1957, R.1-D. The provisions of rule 1-D of the Wealth Tax Rules, 1957, are not directory but mandatory. They have to be applied when valuing unquoted equity shares. CWT v. India Exchange Traders Association (1992) 197 ITR 356 (Cal.) fol. Subsection (3) of section 21 of the Wealth Tax Act, 1957, directly deals with the case of a minor beneficiary of a trust. The fact situation required is that the assets are held by a guardian or trustee on behalf or for the benefit of the minor. If this be the situation, subsection (3) lays down the method and extent of taxation. The taxation would be on the basis of two fictions. One is that the minor is not a minor but of full age. The second fiction is that even though his interest -is a beneficial interest and not an absolute interest, yet he would be treated as the direct owner of such assets. The expression' "direct ownership" necessarily predicates the interest to be absolute interest. Re Lord Nunburnholme (1912) 1 Ch. 489 (CA); Wilson v. Nunburnholme (1912) 1 Ch. 489 (CA) and CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust (1977) 108 ITR 555 (SC) ref. (b) Wealth tax--- ---Trust---Trust for the benefit of a minor---Subsection (3) of section 21 of the Indian Wealth Tax Act, 1957 applicable---Minor beneficiary to be treated as direct owner of property---Indian Wealth Tax Act, 1957, S.21. Held, that, in the instant case, the minor beneficiary had to be taken as the direct owner of the property and his tax liability should be governed accordingly. JUDGMENT ART K. SENGUPTA, J.---In this reference under section 27(1) of the Wealth Tax Act, 1957, the Tribunal has referred at the instance of the Commissioner of Income-tax, the following questions for determination: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that rule 1-D of the Wealth Tax Rules, 1957, is directory and not mandatory? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the unquoted shares of…

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