M/S BRIJ MOHAN LAL TRUST NO. 1, LUDHIANA vs. COMMR. OF WEALTH TAX, LUDHIANA

WTR/2/1996HC Punjab & HaryanaPHHC01040573199608 January 2010Author: MR. JUSTICE M.S. SULLAR,MR. JUSTICE ASHUTOSH MOHUNTA8 pages
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What were the facts?

The assessee, M/s Brijmohan Lal Trust No.1 Ludhiana, filed wealth tax returns for assessment years 1983-84 and 1984-85. The Assessing Officer (AO) assessed the net wealth on a protective basis. The trust was settled with shares, a deposit, and cash. Initially, beneficiaries for income were M/s Brijmohan Lal & Sons (HUF) (37.5%), Raman Kant Munjal (37.5%), and Smt. Santosh Munjal (25%), designated as primary beneficiaries for income until creditors were paid. After creditor satisfaction, secondary beneficiaries for income were M/s Puja Investment Pvt. Ltd. (87.5%) and M/s Anadi Investment Pvt. Ltd. (12.5%). The corpus beneficiaries were also these two companies. The AO assessed the trust in the status of an Association of Persons (AOP) under Section 21(4) of the Wealth Tax Act, holding beneficiary shares to be indeterminate. The Commissioner (Appeals) and the Income Tax Appellate Tribunal upheld the AO's assessment under Section 21(4).

What did the High Court hold?

The High Court held that the assessment should be made under Section 21(1) of the Wealth Tax Act and not under Section 21(4). The Court reasoned that, following the Kerala High Court's decision in Dr. David Joseph's case, the position had to be viewed on the relevant valuation date considering the trust's final termination, at which point the shares of the secondary beneficiaries were determinate. The Court found that the shares of the beneficiaries of the trust were known and determinate. The mere vesting of discretion in the trustees would not render the position indeterminate. Therefore, the provisions of Section 21(1) of the Wealth Tax Act were attracted. The Court overruled the Tribunal's finding that the shares were indeterminate. The question regarding Section 21(4) covering only official trustees was implicitly addressed by holding that Section 21(1) was applicable, thus not requiring assessment under Section 21(4) for trustees appointed under a trust deed in this context. The questions were answered in favour of the petitioner.

What were the issues?

The High Court had to decide three common questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the shares of the beneficiaries of the trust were not known and determinate as on the relevant valuation date? 2. Whether, on the facts and in the circumstances of the case, the assessment made in the status of AOP was valid? 3. Whether, on the facts and in the circumstances of the case, the assessment made u/s 21(4) of the Wealth Tax Act is valid inspite of the fact that section 21(4) covers only the case of official trustees and not trustees appointed under a trust deed? Assessee's contentions: The assessee argued that assessment should be made under Section 21(1) of the Wealth Tax Act, not Section 21(4). They relied on the Supreme Court decision in CWT vs. Trustees of HEH Nizam's Family (Remainder Wealth) Trust, (1977) 108 ITR 555, and the Kerala High Court judgment in CWT vs. Dr. David Joseph, Executor of Trust No. 1 (1995) 213 ITR 156. The assessee contended that the position should be viewed as if the trust expired on the valuation date, making beneficiaries determinate. They also argued that Section 21(4) applies only to specific categories of persons like official trustees, not trustees appointed under a trust deed. Revenue's contentions: The revenue contended that due to the discretion given to the trustees until primary beneficiaries were paid, the shares of the beneficiaries were indeterminate, justifying assessment under Section 21(4) of the Wealth Tax Act.

Which sections of the Income-tax Act were involved?

Section 21(4),Section 21(1),Section 21

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH DATE OF DECISION: January 8, 2010 M/S BRIJMOHAN LAL TRUST NO.1 LUDHIANA ...PETITIONER VERSUS THE COMMISSIONER OF WEALTH TAX(C) ...RESPONDENT LUDHIANA CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR. PRESENT: MR. AKSHAY BHAN, ADVOCATE FOR THE PETITIONER. MR. KRISHAN MEHTA, SR. STANDING COUNSEL FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J. By mean of these reference application relating to the assessment year 1983-84 and 1984-85 the following common questions have been raised:- “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the shares of the beneficiaries of the trust were not known and determinate as on the relevant valuation date?

2.

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment made in the status of AOP was valid?

3.

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment made u/s -2- 21 (4) of the Wealth tax Act is valid inspite of the fact that section 21(

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