The Commissioner Of Wealth-Tax v. M/S.aashik Trust

(-1-) IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WEALTH TAX REFERENCE NO.121 OF 1998 The Commissioner of Wealth-Tax...Applicant Vs. M/s.Aashik Trust ..Respondent Mr. P.S. Sahadevan, for the Applicant. None for Respondent. CORAM: F.I. R.S.MOHITE, JJ. DATED: 22nd January, 2009 P.C.: P.C.: . The Tribunal has referred the following questions for determination of this Court:- "1.Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the net wealth of the assessee trust is not taxable? 2.Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not appreciating the fact that by Finance Act, 1970 Section 21(4) was amended specifically for plugging loopholes in the law leading to tax avoidance and special rates were provided for taxing discretionary trusts? (-2-) 2. Admittedly the trust is a discretionary trust. The Wealth Tax Officer charged Wealth Tax in view of the provisions of Section 21(4) of the Wealth Tax Act, 1957 on the net wealth of the assessee trust. The C.W.T. (A), however, held that the assessee was not liable to wealth tax as the net wealth declared for all the years was below taxable limit. The Tribunal upheld the order passed by the C.W.T. (A) and consequently the reference. 3. In our opinion, the issue is directly covered by the judgment of the Supreme Court in Director of Income-Tax vs. Gopal Srinivasan Trust, Director of Income-Tax vs. Gopal Srinivasan Trust, 253 ITR 759. 253 ITR 759. We may gainfully refer to the 253 ITR 759. following observation:- "The question of assessment of tax will arise only if wealth-tax can be validly levied. When section 3 of the Act refers to the levy of wealth-tax at the rate or rates prescribed in the Schedule, it is clear that if under the statute o wealth-tax is payable, wealth-tax cannot be made payable by a non-charging provision like section 21(4). Though section 21(4) refers to two different rates, the question of applying the higher rate of tax will arise only if at the rate of prescribed in the Schedule, the (-3-) Revenue would lose something.Where, however,in terms of the Schedule, no rate is at all applicable and there is an exemption from the applicability of the rate and consequently a case which is exempted is not brought within the charging provision, the question of ascertaining whether the higher rate prescribed in Section 21(4) will benefit the Revenue or not will not at all arise.Before finding out whether wealth-tax can be levied at the higher rate as contemplated under section 21(4),the question of changeability will have to be ascertained." 4. In the instant case considering the schedule as the wealth is less than Rs.1.00 lakh it is not chargeable to tax. In that light of the matter applying the ratio of the judgment in Gopal Srinivasan Trust (supra) the Tribunal correctly upheld the order of the C.W.T. (A). In the light of that we answer the reference as under:- (i) Question No.1 is answered in the affirmative in favour of the assessee and against the Revenue. assessee Question No.2 need not be answered. (ii) In so far as Question No.2 is concerned, having answered Question No.1 in favour of the (-4-) assessee Question No.2 need not be answered. Reference answered accordingly. (R.S.MOHITE, J.) (F.I.REBELLO,J.) (R.S.MOHITE, J.) (F.I.REBELLO,J.)