CMAI FAMILY TRUST Vs. NINTH WEALTH TAX OFFICER
LAWS(IT)-1985-4-14
INCOME TAX APPELLATE TRIBUNAL
Decided on April 19,1985

Appellant
VERSUS
Respondents

JUDGEMENT

K.S. Viswanathan, Accountant Member - (1.)WE find it convenient to dispose of the above two appeals together. The main issue is whether the department was justified in assessing the value of the assets held by the trust in the hands of the trustees instead of assessing a highly discounted value as returned by the assessee.
(2.)The assessees are trustees of a private trust which was created on 24-3-1966. The settlor is Champabai Bhogilal. She had transferred some properties to the trustees. The beneficiaries of the trust had been divided into two categories (i) income beneficiaries and (ii) corpus beneficiaries. The term 'corpus beneficiaries' is not used in the trust deed but we find it convenient to refer so to those persons who are to be considered for distribution of the corpus on the determination of the trust. The trustees have been given absolute discretion in applying the net income of the trust fund every year. It is also open for the trustees not to apply the income at all but to accumulate the same.
Now, the determination of the trust would be on what is referred to as the 'vesting day'. There are two contingencies visualized in the trust deed and the earlier of the two contingencies would determine the vesting date. The first of the contingencies is the date on which the eldest of the beneficiaries mentioned in the trust deed and named as qualifying individuals reach the age of 71. The second contingency is when the income beneficiaries get reduced to two persons either by death, renunciation or otherwise. On the happening of any of these events, clause 8 of the trust deed provides that the trustees shall transfer and hand over to such of the beneficiaries of the first group referred to in the trust deed who would be living on the vesting date absolutely in such shares as the trustees shall in their discretion determine. In case there were no beneficiaries of the first group, then the trustees shall distribute the corpus at their discretion to those person or persons living on the vesting day among the beneficiaries of the second group. Failing any beneficiaries of the second group, the trustees can choose any from the third group. But it is clear that they have clear discretion in deciding who the beneficiaries are and their shares.

(3.)WE are concerned with the assessments to wealth-tax for the assessment years 1978-79 and 1979-80. The trustees had invested in certain shares of limited companies. The trustees had referred the question of determining the value? of the interest of the beneficiaries to an actuary. The actuary took into account the number of beneficiaries given on the various beneficiary groups in the trust deed, determined their respective ages and arrived at a finding that the property would vest only after a period of 31 years. According to him, the value of the corpus was Rs. 4,28,903. Since the beneficiaries would have these properties vesting on them only after 31 years, he arrived at the present value of the property at Rs. 19,608. This was the figure returned in the assessment.


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