High Court Of Madras
Commissioner Of Wealth Tax vs. K. Santhanam Trust
Sections WT 5, WT 21(4)
Asst. Year 1982-83, 1984-85, 1986-87, 1987-88
N.V. Balasubramanian & K. Raviraja Pandian, JJ.
Tax Case Nos. 255 to 260 of 1997
18th November, 2002
Counsel Appeared
Mrs. Pushya Sitharaman, for the Applicant : J. Narayanaswamy for M/s Subbarya Aiyar, for the Respondent
ORDER
N.V. Balasubramanian, J. :
The Tribunal has stated the case and referred the following question of law in relation to the asst. yrs. 1982-83 to 1987-88 of the assessee :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that since the assessee is to be taxed as an ‘individual’ for the purpose of the WT Act under s. 21(4), the benefit under s. 5 of the Act cannot be denied to the assessee ?”
The brief facts necessary for the disposal of the case are that the assessee is a trust and the individual shares of the beneficiaries of the trust are indeterminate and unknown. It is a discretionary trust and all the authorities have found that the assessee is a discretionary trust and the question that arises in the tax cases is whether the assessee, the trust is entitled to the benefit of s. 5 of the WT Act when the assessment was made invoking s. 21(4) of the WT Act, 1957 (hereinafter referred to as ‘the Act’). We have gone through the provisions of s. 5 and also s. 21 of the Act. It is seen that certain deductions under s. 5 of the WT Act are available only to an individual and one such sub-section is s. 5(1)(xxiii) of the Act, which grants exemption to the shares held by the individual or HUF and s. 5(1A) of the Act also provides maximum ceiling limit of exemption.
The WTO held since the assessee-trust was assessed in the status of AOP, the assessee was not entitled to the exemption available to an individual under s. 5(1) of the WT Act. His view was confirmed by the CIT(A). The Tribunal, however, held that the provisions of s. 21(4) of the Act would apply and the assessee would be entitled to all the exemptions available to an individual and the said order of the Tribunal is the subject-matter of these tax case references. Heard Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue and Mr. J. Narayanaswamy, learned counsel for the assessee. The case raises the question on the interpretation to s. 21(4) of the Act. Sec. 21(4) of the Act deals with a case of an assessment in the case of a discretionary trust and it provides that the tax shall be ‘levied upon’ and recovered from the representative-assessee in the like manner and to the same extent as it would be leviable upon and recoverable from an individual, who is a citizen of India. The section, therefore, provides that the assessment on the representative-assessee shall be made and the tax shall be levied upon and recoverable in the like manner and to the same extent, as it would be leviable upon and recoverable from an individual and the expression “leviable” in s. 21(4) of the Act would rope in all the provisions of the Act applicable to an individual relating to the levy of wealth-tax. Hence, if an individual is entitled to the exemption under s. 5 of the WT Act, then correspondingly the exemption would be available to a representativeassessee in determining the net wealth. In other words, there will be assessment and determination of net wealth of the representative-assessee for the levy of wealth-tax in the like manner and to the same extent as it would be leviable upon an individual. The net wealth in effect has to be determined as if the representativeassessee is an individual and thereafter the rate of tax as prescribed under s. 21(4) shall be applied on the net wealth. We find that there is no express exclusion of exemption clauses found in s. 5 of the Act in levy of wealth-tax on a representative-assessee and s. 21(4) cannot also be construed to mean that it will attract only such of these sections, which provide for the levy of tax and exclude sections which grant exemption. We are of the view that the words ‘to the same extent’ show that the assessee is entitled to all the exemptions that are granted to an individual and there cannot be any pick and choose in the application of statutory provision in the matter of levy of the tax. This Court in CIT vs. Venu Suresh Sheela Trust & Ors. (1998) 233 ITR 99 (Mad) has considered a similar question, which arose under the IT Act and the question that arose was whether the trustee of a discretionary trust was entitled to deduction under s. 80L of the Act which was available only to the individual. This Court held the determination of the total income has to be made under the IT Act taking into account the deduction available under s. 80L of the IT Act and on the income so determined, tax shall be levied. The status of a trustee of a discretionary trust has to be adopted as that of an individual and his income has to be considered as an individual income and the assessee would be entitled to deduction under s. 80L of the IT Act. We are of the view that the ratio laid down in Venu Suresh Sheela Trust & Ors. case (supra) would apply to the provision of s.
21(4) of the WT Act as well and the net wealth of the representative-assessee has to be determined in the same manner and to the same extent as an individual. We, therefore, hold that the Tribunal was correct in holding that the assessee-trust was entitled to all the deductions that are available to the individual under s. 5 of the WT Act. We find no infirmity in the view of the Tribunal. Accordingly, the common question of law referred to us for various assessment years is answered in the affirmative against the Revenue and in favour of the assessee. In the circumstances, there will be no order as to costs.
[Citation : 263 ITR 428]
