MASTER JHAN A. WADIA v. WEALTH-TAX OFFICER
[Citation -1986-LL-1231-3]

Citation 1986-LL-1231-3
Appellant Name MASTER JHAN A. WADIA
Respondent Name WEALTH-TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 31/12/1986
Assessment Year 1973-74, 1975-76, 1978-79, 1979-80
Judgment View Judgment
Keyword Tags construction company • discounted value • natural guardian • trust property • valuation date • market value • estate duty • future date • trust deed
Bot Summary: 16th Jan., 1985 whereby the AAC of IT has upheld 5th WTO s orders valuing appellant s 4/13th share in a certain trust property at Rs. 8,00,000 rejecting appellant s claim for taking discounting value thereof at a lower figure. The case of the appellant before the WTO as also before the AAC has been that in valuing appellant s interest in the Trust property, the market value as on the relevant valuation dates should be suitably discounted because of the fact that the corpus of the Trust was receivable by him only at a future date, being 31st Jan., 1982 in appellant s case and not on the relevant valuation dates. As against it, the authorities below have taken the view that appellant s interest in the Trust being not separately assessed, the appellant was a de facto user of the Trust property in as much as that the income from the Trust property as per terms of the Trust Deed and the directions of the High Court, were applied for his sole benefit. Counsel for the assessee appellant has vehemently urged that not only in the cases of WT assessments of co-beneficiaries of the original Trust but also in appellant s own cases for earlier years, the interest of the minor-beneficiary in the Trust property has been valued at discounted value thereof. In the first place Mr. Vohra submitted that a study of the Trust Deed as also of the order of the Hon ble High Court would go to show that the subject-matter of trust forming appellant s interest was directed to be put to investment and earn income, which was applied and utilised for the benefit of the minor. Where the subject-matter of the Trust has actually benefitted the minor beneficiary that he was not to get possession of the Trust property during the period of his minority should make no case for discounted valuation. Mr. Vohra urged that in its wisdom and in the interest of Trust, the law provided that the Trust property should be invested in specified securities.


M.A.A. KHAN, J.M. All these five appeals by assessee are directed against consolidated order dt. 16th Jan., 1985 whereby AAC of IT has upheld 5th WTO s orders valuing appellant s 4/13th share in certain trust property at Rs. 8,00,000 rejecting appellant s claim for taking discounting value thereof at lower figure. assessment years involved are 1973-74, 1974-75, 1975-76, 1978-79 and 1979-80. Ground of appeals being common, these all are disposed of by this common order. Briefly stated, relevant facts are that late Mr. Jehangir Ardheshir Wadia, grand father of appellant, had obtained certain leasehold properties situated at 5 Marine Lines, Bombay, from Govt. for term of 99 years from 21st Nov., 1901 under Indenture of Lease. said Jehangir Ardeshir Wadia died intestate at Mysore on or near about 15th June, 1935. Letters of Administration to his property and Credits were granted to his widow, Mrs. Ratanbai by Bombay High Court on 11th Nov., 1935. By Indenture of Assignment dt. 25th May, 1936 executed between Mrs. Ratan Bai aforesaid administrator of estate of late Mr. Jehangir A. Wadia and her son Mr. Ardesher Jehangir Wadia, as settlor of said estate, they agreed to hold said property as tenants-in-common, (the share of Mrs. Ratan Bai being 1/4th and that of Mr. Ardeshir Jehangir Wadia being 3/4th) for residue of term o f 99 years. However, by Indenture of Settlement, dt. 7th Jan, 1937 (called hereinafter as Trust Deed), Mrs Ratan Bai and her aforesaid son Mr. Ardesher Jehangir Wadia, settled upon trust said properties for use and benefit of their respective heirs. Official Trustee of Bombay was appointed as trustee under this Trust Deed. terms of said Trust Deed, as are relevant for our purposes, inter alia provided that in case Ardeshir Jehangir Wadia died intestate leaving behind him some minors amongst his heirs, then Trustee was to administer property and to hand over corpus thereof to such descendants as and when, she or he became major and by time of attaining majority by him or her, income from property was to be applied and utilised for his or her maintenance, education, advancement and betterment in life either by Trustee or by natural guardian of such minor to whom income-tax amount might have been paid for aforesaid purpose by Trustee. It was also provided that balance of income, if any, shall be invested in or upon any investment authorised by Indian Trust Act (Act II of 1982) and income, dividend or interest therefrom was to be accumulated and finally to be paid and handed over along with corpus of Trust property to minor on his/her attaining majority. Mr. Ardeshir Jehangir Wadia, co-settlor, died intestate on 2nd Feb., 1973 leaving behind him minor appellant as one of his heirs. Letter of Administrations of his estate remained with Trustee as provided in Trust Deed. On 17th Sept., 1973 Trustee entered into agreement with M/s Ellora Construction Company to sell Trust property for Rs. 15,00,000. As minor s interest was involved in sale, matter went up to High Court at Bombay in Misc. Petition No. 189 of 1975. By its order dt. 4th March, 1975 Hon ble High Court directed that out of sale proceeds of Rs. 15,00,000 sum of Rs. 8,00,000 being appellant s 4/13th share therein, subject to his proportionate share of outgoings, expenses, taxes and Estate Duty, shall be earmarked and Trustee (Official Trustee) shall keep same in account in name of minor, who was born on 31st Jan., 1964, shall invest same as provided in Trust Deed dt. 7th Jan., 1937 and pay income of such investment to natural guardian Mrs. Bikoo Wadia, of minor. It is under these circumstances that question of valuation of minor s interest in Trust property (now Rs. 8,00,000 or more) as on relevant valuation date has arisen in these appeals. case of appellant before WTO as also before AAC has been that in valuing appellant s interest in Trust property, market value as on relevant valuation dates should be suitably discounted because of fact that corpus of Trust was receivable by him only at future date, being 31st Jan., 1982 in appellant s case and not on relevant valuation dates. As against it, authorities below have taken view that appellant s interest in Trust being not separately assessed, appellant was de facto user of Trust property in as much as that income from Trust property as per terms of Trust Deed and directions of High Court, were applied for his sole benefit. Holding thus, authorities below rejected appellant s contention sole benefit. Holding thus, authorities below rejected appellant s contention for discounted value and valued interest of appellant in trust property at Rs. 8,00,000 as on relevant valuation dates. Before us, ld. counsel for assessee appellant has vehemently urged that not only in cases of WT assessments of co-beneficiaries of original Trust but also in appellant s own cases for earlier years, interest of minor-beneficiary in Trust property has been valued at discounted value thereof. ld. counsel, in this behalf invited our attention to assessee appellant s own assessment for asst. yr. 1976-77 in WTA No. 62/Bom/83 decided by Bombay Bench (D) of this Tribunal on 14th Dec., 1984 and submitted that issue stands covered by that order and consistency in views of Tribunal on same point and under same circumstances must be maintained. On contrary, Mr. C.K. Vohra, ld. Sr. departmental representative h s seriously objected to appellant s claim for "discounted valuation" of his interest in Trust property. In first place Mr. Vohra submitted that study of Trust Deed as also of order of Hon ble High Court would go to show that subject-matter of trust forming appellant s interest was directed to be put to investment and earn income, which was applied and utilised for benefit of minor. It means that Trust property has been as good as in appellant s own hands. Therefore, where subject-matter of Trust has actually benefitted minor beneficiary that he was not to get possession of Trust property during period of his minority should make no case for discounted valuation. In second place. Mr. Vohra urged that in its wisdom and in interest of Trust, law provided that Trust property should be invested in specified securities. Such legitimate restriction should be read alongwith fact that investment in that way resulted in constant benefit to minor. Thus, present case was not case of absolute restriction in sense that minor beneficiary was getting all benefits from Trust property and finally was going to get much more than trust property itself. Mr. Vohra, further submitted that these points were not raised before Tribunal at earlier occasion and, therefore, order of Bombay Bench D dt. 14th Dec., 1984 (supra) makes no precedent for present case. We have given our thoughtful considerations to rival contentions of ld. counsel for parties, but, though we appreciate Mr. Vohra s point of view, we find it difficult to record departure from view expressed by Tribunal in appellant s own case for asst. yr. 1976-77, on same point, between same parties over same subject-matter and under same circumstances. At that time too, Trust Deed was there, High Court order was there and almost similar objection was raised. After having considered all pros and cons of case, Tribunal expressed thus in para 5 of its order. We have considered contentions of both parties as well as facts on record. We find force in contentions raised by assessee. Under similar circumstances, discounting has been allowed in case of assessee in earlier year as well as in case of other beneficiaries of same trust. mere fact that time lag between valuation date and date of attaining majority was small, does not mean that discounting should be dispensed with though it may reduce rate of discount. For above reasons, we hold that assessee is entitled to succeed in his claim. Hence, we direct that market value of asset under consideration should be taken at figure arrived at after discounting it suitably according to accepted actual method. We direct that assessment be modified accordingly. Since objection raised by Department before us almost stand and answered in above observations of Tribunal, we find no escape from conclusion that we must maintain consistency in our view which is not likely to result it any substantial harm to either of parties. Therefore, following with respect order of Tribunal (supra), we hold that market value of appellant s asset in cases under consideration should be taken at such figures as are arrived at after discounting same suitably in each of five years according to accepted actuarial methods. assessment for all assessment years under consideration shall stand modified accordingly. In result, all appeals are allowed. *** MASTER JHAN A. WADIA v. WEALTH-TAX OFFICER
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