ITAT - HYDERABAD

ASSISTANT COMMISSIONER OF ... VS TRUSTEES OF PRINCE MOAZAM JAH ... ON 28 NOVEMBER, 1994

Summarised Judgement (Scroll for Complete Judgement)

Introduction:

These eleven appeals by the Revenue are against the order of the Commissioner of Wealth-tax (Appeals) for assessment years 1978-79 to 1988-89. For the sake of convenience, they are being disposed of by this common order.

The common question in all these appeals concerns the assessment made under Section 21(4) of the W.T. Act. The common grounds raised in the appeals are as under :

The CWT (Appeals)-I should have held that the provisions of Section 21(4) are clearly applicable in this case in view of the disputes amongst the children of Prince Moazam Jah leading to a court litigation and also in view of the fact that the ITAT held that the interest of Prince Shahmat Ali Khan was remote and contingent;

The CWT (Appeals should have appreciated the fact that in the light of the Supreme Court's decision reported in 108 ITR 555 matter relating to an assessment should be based on facts only existing as on the relevant date and accordingly he should have held that the beneficiaries in this trust are unknown and that their shares are indeterminate.

Facts of the Case:

In pursuance of an agreement with Government of India and out of natural love and affection, HEH Nawab Sir Mir Osman Ali Khan, Nizam of Hyderabad, created a trust depositing Rs. 1.82 crores with the Government of India with tax-free interest at the rate of 1 per cent per annum on 8-10-1949 for the benefit of his son Walashan Prince Moazam Jah (hereinafter referred to as "the Prince") and his daughter-in-law princess Niloufer, wife of the said Prince.

The Trustees filed the return offering the interest of the beneficiaries under Section 21 (1) of the W.T. Act declaring the value of interest of the Prince stating therein that the interest of the Prince is offered in his assessment directly under Section 21(2). No value seems to have been declared in the returns for the interest of the remainder man, Prince Shahmat Ali Khan and of the residuary interest under Section 21(lA) of the WT Act. The assessments of Prince Shahmat Ali Khan were reopened to include the remainder man's interest. Similarly, the assessments of the Trust were reopened to include the residuary interest under Section 21 (4) of the Act.

Observation of Court:

We have heard the parties and considered their rival submissions. We are concerned in these appeals only with the validity of the protective assessments under Section 21(4) of the WT Act which are made on the ground that there was an alleged dispute regarding remaindermen, raised by the assessee before the Commissioner (Appeals) in the case of Prince Shahmat Ali Khan. The dispute is stated to be that a part of the property was gifted by the Prince to his daughter Sb. Fatima Fouzia born through Razia Begum who was not recognised by the Nizam as wife of the Prince.

Judgement:

Taking into consideration the aforesaid, we are of the opinion that the Wealth-tax Officer was not justified in invoking the provisions of Section 21(4) of the WT Act by treating the Trust to be non-specific wherein the shares of the beneficiaries were not identifiable or were indeterminate on the alleged dispute raised by the daughter of the Prince, Sb. Fatima Fouzia. The CWT (Appeals) was, therefore, justified in cancelling the assessments made on the Trustees under Section 21(4) of the Act. His order is upheld.

In the result, the appeals are dismissed.

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Complete Judgement

ITAT - Hyderabad

Assistant Commissioner Of ... vs Trustees Of Prince Moazam Jah ... on 28 November, 1994

Equivalent citations: 1995 53 ITD 109 Hyd

Bench: R Garg, M Ramakrishna

ORDER R.P. Garg, Accountant Member

1. These eleven appeals by the Revenue are against the order of the Commissioner of Wealth-tax (Appeals) for assessment years 1978-79 to 1988-89. For the sake of convenience, they are being disposed of by this common order.

2. The common question in all these appeals concerns the assessment made under Section 21(4) of the W.T. Act. The common grounds raised in the appeals are as under :

1. The CWT (Appeals)-I should have held that the provisions of Section 21(4) are clearly applicable in this case in view of the disputes amongst the children of Prince Moazam Jah leading to a court litigation and also in view of the fact that the ITAT held that the interest of Prince Shahmat Ali Khan was remote and contingent;

2. The CWT (Appeals should have appreciated the fact that in the light of the Supreme Court's decision reported in 108 ITR 555 matter relating to an assessment should be based on facts only existing as on the relevant date and accordingly he should have held that the beneficiaries in this trust are unknown and that their shares are indeterminate.

3. The facts of the case are as follows : In pursuance of an agreement with Government of India and out of natural love and affection, HEH Nawab Sir Mir Osman Ali Khan, Nizam of Hyderabad, created a trust depositing Rs. 1.82 crores with the Government of India with tax-free interest at the rate of 1 per cent per annum on 8-10-1949 for the benefit of his son Walashan Prince Moazam Jah (hereinafter referred to as "the Prince") and his daughter-in-law princess Niloufer, wife of the said Prince. As per Clause 2 of Trust Deed, the Trustees are to hold and stand possessed of the Trust Fund upon trust:

(a) To deposit the same forthwith with the Government of India pursuant to the arrangement arrived at with the Government of India as aforesaid and to recover from the Government of India the interest thereon and to pay out of such interest the charges for collection thereof and all other costs, charges, expenses and all other outgoings relating to this trust and the administration thereof.

(b) To pay the net interest of the Trust Fund or of the balance thereof for the time being to the said Prince free of Income-tax, super-tax and all other taxes whatsoever until his death.

(c) During the life-time of the said Prince to recover and receive from the Government of India and to pay to the said Prince out of the corpus of the Trust Fund as long as the same shall be available such sum every year as together with the net interest of the Trust Fund payable to him as aforesaid, will in all make up the sum of Rs. 5,00,000 (Rupees five lacs) per annum, the first of such payments to be made on the 1st day of November, 1949 and each of the subsequent payments to be made on the first day of October in each and every year thereafter TO THE INTENT that the whole of the said sum of Rs. 5,00,000 (Rupees five lacs) shall be paid to the said Prince free of income-tax, super-tax and all other taxes whatsoever provided that nothing contained in this clause shall be deemed to give to the said Prince or vest in him or be deemed to vest or have the effect of vesting in him any amount in excess of the said sum of Rs. 5,00,000 (Rupees five lacs) in any year during his life-time out of the income and corpus of the Trust Fund nor shall anything contained in these presents be deemed to give to or vest or have the effect of vesting in the said Prince either immediately or at any time hereafter any moneys or interest otherwise than as provided in this sub-clause and in Sub-clauses (d) and (e) hereof, the intention of the Settlor expressly being that under no circumstances whatsoever shall the Prince under or by virtue of these presents be paid or be entitled to receive out of the interest and corpus of the Trust Fund any sum whatsoever in excess of the said sum of Rs. 5,00,000 (Rupees five lacs) in any one year during his life-time pursuant to this sub-clause and the benefit of the sums of Rs. 1,00,000 (Rupees one lac) per annum during his life-time and the sum of Rs. 20,00,000 (Rupees twenty lacs) in a lump sum in the manner as provided in Sub-clauses (d) and (e) hereof.

(d) During the life-time of the said Prince to further recover and receive from the Government of India out of the corpus of the Trust Fund as long as the same shall be available a sum of Rs. 1,00,000 (Rupees one lac) every year to meet unforeseen or emergent expenses of the said Prince and to set aside and invest the sums so recovered and received in any of the securities authorized by these presents and to add the income thereof to the principal sum so set aside and to pay to the said Prince the corpus of such sums as also the accumulations of the income thereof or such part or parts of the corpus or the income thereof as the Trustees may deem fit from time to time for any urgent necessity or unforeseen circumstances or emergent expenses of the said Prince such as his illness, his tour to Europe or other foreign countries or otherwise for the benefit of the said Prince. The trustees shall be at liberty to invest any of the sum or sums so set aside as aforesaid or the balance thereof in promissory notes, Debentures, stocks or other Securities of the Government of India or of the Hyderabad State or of the United Kingdom or in Fixed Deposits with any Scheduled Bank as the Trustees may in their absolute discretion deem fit with full power to the Trustees in their absolute discretion to alter, vary or transfer the investments from time to time in such manner as they may think proper into or for others of the same or a like nature without being responsible or accountable to any one for the same or for any loss or diminution in the price thereof.

(e) During the life-time of the said Prince to further recover and receive from the Government of India out of the corpus of the Trust Fund as long as the same shall be available a sum or sums not exceeding in all Rs. 20,00,000 (Rupees twenty lacs) for the purpose of providing a suitable residence for the said Prince in Bombay and on receipt thereof to purchase land and building suitable for the residence of the said Prince in Bombay or to purchase land in Bombay and erect a suitable building or buildings thereon for the residence of the said Prince and to purchase furniture and fittings for any such building and to otherwise furnish, fit up and decorate any such building with full power to the Trustees to pull down any such structure and to re-erect any new structure or to make additions or alterations to any existing structure but so that the total capital expenditure incurred for the aforesaid purposes shall not exceed Rs. 20,00,000 (Rupees twenty lacs) in all AND if and when such property is purchased or erected in Bombay, the Trustees shall allow the said Prince to use and occupy the same free of rent so long as the said Prince carries out all ordinary repairs to such property and pays all Municipal, Property and other taxes and outgoing that may be payable from time to time in respect of such property PROVIDED FURTHER that in the event of the said Prince failing to carry out such repairs or to pay such taxes or other outgoings in respect of the said property as aforesaid the Trustees shall be at liberty to themselves carry out the repairs and pay all such taxes and outgoings in respect of such property and to deduct the amount of moneys so expended or paid out of the moneys receivable by the Trustees from the Government of India out of the interest of the Trust Fund and payable to the said Prince under these presents PROVIDED FURTHER that in the event of the death of the said Prince leaving the said Princess as his wife surviving, then on the death of the said Prince and until the death or remarriage of the said Princess, whichever event shall take place first, the Trustees shall similarly allow the said Princess to use and occupy such property (including furniture and fittings therein) free of rent and all expenses of and incidental to the said property (including all Municipal, Property and other taxes) during the period the said Princess shall use and occupy the property shall be paid by the Trustees out of the interest of the Trust Fund, if and so long as the same shall be available to the Trustees.

(f) On and after the death of the said Prince and if he has left a widow surviving other than the said Princess Niloufer, to pay out of the interest of the then balance (if any) of the corpus of the Trust Fund, as and when recovered from the Government of India as aforesaid, a sum of Rs. 24,000 (Rupees twenty four thousand) free of income-tax, super-tax and all other taxes whatsoever per annum to such widow of the Prince in advance on the first day of October in each and every year, the first of such payments to be made on the first day of October following the date of the death of the said Prince and each of the subsequent payments to be made on the first day of October of each and every year thereafter, until her death or re-marriage whichever event shall occur first PROVIDED however that-if the amount of the net interest accrued on the Trust Fund or the balance thereof for the time being in any year be less than the said sum of Rs. 24,000 (Rupees twenty four thousand) the Trustees shall in that year pay the amount of such interest (instead of the said sum of Rs. 24,000) to such widow of the said Prince as aforesaid PROVIDED FURTHER that such widow shall be a person who shall have been born at the date of these presents and shall be a member of a respectable Muslim Family of good status and her marriage to the said Prince shall have been recognised by the Settlor, or, in case the Settlor be not alive at the time of the marriage, then if such marriage to the said Prince shall have been recognized by the Government of India and the Nizam of Hyderabad living at the time of such marriage.

(g) Subject to the provisions of Sub-clauses (a), (b), (c), (d), (e) and (f) hereof, if the said Prince shall have left issue him surviving either by the said Princess Niloufer or by any other widow satisfying the qualifications laid down in Sub-clause (f) thereof, then on and after the death of the said Prince, to divide, transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees amongst and to all the issues of the said Prince then living in accordance with the provisions of the law of succession governing Sunni Muslims as if the said prince had died intestate leaving the said corpus or the balance thereof, as the case may be, as his sole and absolute property.

(h) Subject to the provisions of Sub-clauses (a), (b), (c), (d), (e), (f) and (g) to transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees, as the case may be, to the Settlor if he be then living and in the event of the Settlor predeceasing the said Prince, to transfer and hand over the corpus of the Trust Fund or the balance thereof then remaining in the hands of the Trustees, as the case may be, to the Nizam of Hyderabad living at that time.

4. On a bare reading of the aforesaid Sub-clauses (a), (b) and (c), it is evident that the Trustees are to receive the income/corpus and give a net sum of Rs. 5,00,000 every year to the Prince free of income-tax, super-tax and all other taxes. As per Sub-clause (d), the Trustees are to receive a sum of Rs. 1,00,000 per annum from the Government of India out of the corpus to meet unforeseen or emergent expenses of the Prince and set aside and invest with accretion in certain securities and to pay to the Prince from time to time for any urgent necessities/unforeseen circumstances like illness, tour to Europe, or other foreign countries or otherwise. Sub-clause (e) provides for a further receipt of Rs. 20 lakhs in lump sum from the Government of India out of the aforesaid corpus for providing a suitable residence in Bombay to the Prince and allow him for life to use and occupy the said residence with an obligation on the Prince to carry out ordinary repairs and pay Municipal, Property and other taxes and outgoings payable from time to time. Princess Niloufer is given a similar right of residence after the death of the Prince until her death or re-marriage whichever is earlier, with similar obligations regarding repairs and payment of taxes. Sub-clause (f) provides for a right to the lower amount of Rs. 24,000 per annum or the accrued interest from the remaining corpus, if any, to a widow of the recognised marriage of the Prince other than Princess Niloufer, until her death or re-marriage whichever is earlier. Sub-clause (g) provides Yor a division, transfer and hand-over of the balance corpus amongst and to all the issues of the Prince then living in accordance with the Sunni Muslim Law of Succession as if the Prince died intestate and the property was his sole and absolute property. Sub-clause (h) provides for a residuary transfer of the corpus to the Settlor or to the Nizam of Hyderabad living at that time.

5. By a supplementary deed dated 8-1-1950, it was clarified that: (i) the trustees are to pay from the income of the Fund the cost, charges, expenditure and all other outgoings of the Trust including the remuneration of the Trustees and recover the same from the corpus in addition to the amount mentioned in Sub-clauses (c), (d) and (e) of Clause 2 of the main Trust Deed; (ii) the payment can be made at any place in India; (iii) the payments are to be made free of Indian taxes; and (iv) to sell, transfer etc. the residential premises acquired under Sub-clause (e) of Clause 2 of the main Trust Deed to provide a substituted residence and pending the purchase, invest the proceeds and pay the net income to the Prince and then to Princess Niloufer until death or re-marriage whichever is earlier and deem the same to be part of Sub-clause (e) of Clause 2 of the main Trust Deed. Pursuance to Sub-clause (e) of Clause 2 of the main Trust Deed, the palace Mount Pleasant at Banjara Hills, Hyderabad, was acquired for the residence of the Prince.

6. The Trustees filed the return offering the interest of the beneficiaries under Section 21 (1) of the W.T. Act declaring the value of interest of the Prince stating therein that the interest of the Prince is offered in his assessment directly under Section 21(2). No value seems to have been declared in the returns for the interest of the remainder man, Prince Shahmat Ali Khan and of the residuary interest under Section 21(lA) of the WT Act. The assessments of Prince Shahmat Ali Khan were reopened to include the remainder man's interest. Similarly, the assessments of the Trust were reopened to include the residuary interest under Section 21 (4) of the Act. The assessments of the Trust were also reopened to include the residuary value of the corpus under Section 21(1A) of the Act. The re-assessments in the case of Prince Shahmat Ali Khan were cancelled by the Tribunal vide order dated 30-4-1990 in WTA Nos. 208 to 217/Hyd/1988 for assessment years 1974-75 to 1979-80, 1981-82 and 1982-83. It was also stated therein that so long as the Prince was alive, his son, Prince Shahmat Ali Khan, did not derive any right and even the right to residence from remainderman's angle was illusory and cannot be included in his net wealth.

7. The assessments under Section 21(1A) in respect of the residuary value of the corpus were made from assessment year 1980-81 excluding from the value of the entire corpus the value of life interest of the Prince and the value of remainderman's interest of Prince Shahmat Ali Khan. These assessments under Section 21(1A) were made on 21-12-1988, at a time when the Tribunal's decision in the case of Pr. Shahmat Ali Khan was not delivered. The present assessments were made on the Trustees proceeding under Section 21(4) on the net value of the corpus, i.e., after excluding from the value of the entire corpus the value of life-interest of the Prince. The assessments under Section 21(4) were made protectively and on the ground that there was an alleged dispute regarding the beneficiaries raised by the assessee in the assessment of Prince Shahmat Ali Khan before the Commissioner (Appeals) and it is stated in the assessment order as under:

Thus, it is clear that Prince Shahmat Ali Khan is the only remainderman in the Trust property and the stand taken by the Trustees and the letter filed by M/s S.G. Dastagir & Co. before CIT (Appeals) is, therefore, correct. However, when the assessments were made in the hands of Prince Shamat Ali Khan treating him as the sole beneficiary, it was contended before the Appellate Authorities that the three ladies, viz., Sb. Fatima Fouzia, Sb. Amina Marzia and Sb. Oolia Kulsum are also the remaindermen in the Trust properties. It was also claimed that the ladies also disposed of a part of the property claiming themselves as remaindermen and the matter is pending litigation. It is, therefore, likely that the ladies would not agree at the same time to be treated as remaindermen, on the ground that the matter is still pending in the City Civil Court. Thus, the remainder wealth in this Trust remains the property of the unknown beneficiaries and the owners indeterminate. The provisions of Section 21(4) are, therefore, attracted and the assessment on the Trustees under Section 21(4) would rightly lie.

The CWT (Appeals) cancelled the assessments made under Section 21 (4) by observing in paragraph 4 of his order as under :-

I find merit in the contentions of the appellant that the shares of the beneficiaries in this Trust cannot be regarded as indeterminate. The disputes among the family members are, to my mind, altogether a different matter. There is no ambiguity about the Clause 2(g) of the Deed reproduced above. In terms of the letter of the learned representative reproduced above, it has to be held that Prince Shahmat Ali Khan who is the only son of Prince Moazam Jah, became entitled to the corpus. So, the provisions of Section 21(4) are not attracted in this case and as such, the re-opening of the assessment by issuing notice under Section 17 is not valid.

8. We have heard the parties and considered their rival submissions. We are concerned in these appeals only with the validity of the protective assessments under Section 21(4) of the WT Act which are made on the ground that there was an alleged dispute regarding remaindermen, raised by the assessee before the Commissioner (Appeals) in the case of Prince Shahmat Ali Khan. The dispute is stated to be that a part of the property was gifted by the Prince to his daughter Sb. Fatima Fouzia born through Razia Begum who was not recognised by the Nizam as wife of the Prince. It is stated in O.S. 92 of 1979 filed by Princess Fatima Fouzia in the City Civil Court that under an oral gift (Hiba) which was acknowledged on 5-3-1971 by the Prince by executing a document, 6 acres of land within the compound wall of Mount Pleasant including the well facing Road No. 3, Banjara Hills, out of 15 acres 28 guntas, was gifted by the Prince, the possession of which was handed over to her on 30-12-1970, the date of the oral gift, by breaking the compound wall for entrance to the land. On the basis of the aforesaid dispute, it appears that a claim was raised vide letter dated 28-5-1987 that they were also entitled to remainderman's interest. The relevant portion of this letter reads as under:

It appears that huge amounts were included in the Wealth-tax assessment of Prince Shahmat Ali Khan relating to Prince Moazam Jah Trust. It is a fact that Prince Shahmat Ali Khan has not derived any benefits from this Trust till date. As per the terms of the Trust Deed, Prince Moazam Jah Bahadur is the only beneficiary as long as he is alive. It is also a fact that Sb. Fatima Fouzia is claiming a portion of the property of Prince Moazam Jah Trust and the matter is pending litigation before the City Civil Court for past several years. In the light of these facts, Mr. P. Muralikrish.na, A.R. of Prince Shahmat Ali Khan, submitted before the Commissioner of Wealth-tax (Appeals) that his interest is contingent and what he ultimately gets as per the terms of the Trust Deed is anybody's guess. We understand that you have brought to the notice of the learned Commissioner (Appeals) a letter written by M/s S.G.Dastagir & Co., CAs, wherein the Trustees have stated that Prince Shahmat Ali Khan is the sole remainderman as on date. They have accepted this position. Therefore, it is clear that the notice under Section 17 of the Wealth-tax Act, 1957 was issued under an erroneous impression.

On a reading of this letter, it is clear that the dispute was raised only by Sb. Fatima Fouzia and not by the other two daughters, viz. Sb. Amina Marzia and Sb. Oolia Kulsum, as stated by the Wealth-tax Officer. The dispute, in our opinion, is not such which could convert the trust into an unspecified trust. The shares are to be determined with regard to the provisions of the Trust Deed. It is also admitted in letter dated 8-2-1991 filed by the assessee before the CWT (Appeals) which reads as under :-

Sir, Sub: Trustees of Prince Moazam Jah Trust - W.T. assessments for the assessment years 1978-79 to 1988-89 made under Section 21(4) of the W.T. Act, 1957 - Regarding.

This has reference to the above appeals filed by the trustees wherein it is submitted that the provisions of Section 21(4) of the WT Act, 1957, are not applicable to the facts of this Trust as the beneficiaries are known and determinate on each of the valuation dates. In this connection kind attention of the learned Commissioner is also invited to the fact that the trustees by their letter dated 19-3-1982 written by M/s S.G. Dastagir & Co., CAs, who were representing the matter at the relevant time communicated to the Department that Prince Shahmat Ali Khan is the ultimate beneficiary in the case of the above Trust. This fact is not disputed even in the present appeals. The learned Commissioner may kindly take on record that Prince Shahmat Ali Khan is the ultimate beneficiary of the above Trust as per the interpretation of the Trust by the trustees of the above Trust.

Please acknowledge and do the needful.

9. As regards the property, Sub-clause (e) of Clause 2 of the Trust Deed clearly provides that the premises is provided for the suitable residence of the Prince during his lifetime and in the event of his death, leaving behind Princess Niloufer as his wife surviving him, for her residence until her death or re-marriage whichever is earlier. Sub-clause (g) of Clause 2 provides for the remainderman's interest and states that on and after the death of the Prince, the corpus of the trust fund or the balance thereof remaining in the hands of the Trustees shall be divided, transferred and handed over to all the issues of the Prince then living, in accordance with the provisions of the law of succession governing Sunni Muslims as if the Prince had died intestate.

10. Princess Niloufer is stated to have been divorced by the Prince and the only issue of the Prince through Sb. Anwar Begum, wife of the Prince satisfying the qualification laid down in Sub-clause (f) of Clause 2 of the Trust Deed, is Prince Shahmat Ali Khan. The qualification provided in the said Sub-clause (f) is that she should be a person born at the date of the execution of the Trust Deed and a member of a respectable Muslim family of good status and her marriage to the Prince should have been recognised by the Settlor or, in case the Settlor be not alive at the time of the marriage, then if such marriage to the Prince is recognised by Government of India and the Nizam of Hyderabad living at the time of such marriage. Thus, the provisions of the Trust Deed are clear and provide for no discretion to the Trustees either with regard to the selection of the beneficiaries or their shares. It is a case where the beneficiaries and their shares are determinate and specific, if the event on the happening of which the distribution is to take place occurred on the valuation date.

11. In these circumstances, in our opinion, no cognizance of the dispute stated to have been raised in the case of Prince Shahmat Ali Khan can be taken in deciding the nature of the remainderman's interest insofar as the assessee-Trust is concerned. We are not concerned in these cases as to whether the value of the corpus as reduced by the value of the life interest of the Prince is or is not includible or to be included and assessed under Section 21(1A) of the WT Act. We are informed that separate assessments were made under that section and the appeals thereagainst are pending. As held by the Supreme Court in the case of CWT v. Trustees of H.E.H. Nizam's Family (Remainder Wealth) Trust [1977] 108 ITR 555, the Trustees are to be assessed only with regard to the beneficial interest of the beneficiaries in the like manner and to the same extent as if the assessments were to be made in the hands of the beneficiaries directly. Under the scheme of the WT Act, the assessment which is contemplated to be made on the Trustees under Sub-section (1) or Sub-section (4) of Section 21 is the assessment in a representative capacity. It is really the beneficiaries who were sought to be assessed in respect of their interest in the trust property through the Trustees. The assessment under Sub-section (1) of Section 21 is made on the Trustee in respect of the trust properties held by him and wealth-tax is levied upon him "in the like manner and to the same extent" as it would be leviable on the beneficiaries for whose benefit the trust properties are held. The assessment under Sub-section (1) of Section 21 can only be in a case where the trust properties are held by the Trustee for the benefit of a single beneficiary or where there are more beneficiaries than one, the individual shares of the beneficiaries in the trust properties are determinate or not. No such assessment is made in the present case on the Trustees either for the life interest of the Prince or the remainderman's interest of his son Prince Shahmat Ali Khan. Sub-section(2) of Section 21 makes it clear that Sub-section (1) of Section 21 shall not prevent either the direct assessment of the beneficiaries for whose benefit the trust properties are held or the recovery of the wealth-tax in respect of the interest in the trust property which is assessed in his hands. The Revenue has thus two modes of assessment available for assessing the interest of the beneficiaries in the trust property. The latter procedure is adopted by the Revenue in this case, i.e., the life interest of the Prince was assessed directly in his hands and the remainderman's interest of his son Prince Shahmat Ali Khan was attempted to be assessed directly in his hands though it was deleted by the Tribunal in WTA Nos. 208 to 217/Hyd./1988 by stating that his interest in Mount Pleasant was illusory so long as the Prince was alive and, therefore, was not assessable. Paragraph 7 of the order of the Tribunal dated 30-4-1990 in those appeals is as under :-

We have carefully gone through the order of the learned CWT (Appeals) after taking note of the written submissions before him and before us. We are satisfied that the CWT (Appeals) in accepting the contentions of the learned counsel for the assessee has only followed the decision of the Tribunal, the jurisdictional High Court and also the decision of the Bombay High Court in the cases cited supra and we do not find any infirmity in his reasoning. So long as Pr. Moazam Jah Bahadur was alive (he passed away in the year 1987) and so long as his right in Mount Pleasant property extended only to the right of residence while alive, the assessee did not derive any right and even the right to residence from remainderman's angle is illusory which cannot be included in the net wealth of the assessee. Thus, the CWT (Appeals) has rightly deleted the inclusion of the assessee's contingent and remote interest in Mount Pleasant property.

12. The residuary value of the corpus in the hands of the Trustees, le. the value of the corpus as reduced by the value of life interest of the life beneficiary and the interest of the remainderman, was not assessable either in the hands of the beneficiary or in the hands of the Trustees, because in either case the beneficial interest of the beneficiary alone would be subject to tax under the W.T Act. From assessment year 1980-81 onwards, however, the residuary interest is made assessable in the hands of the Trustees by inserting a sub-section, viz., Sub-section (1A) of Section 21 of the Act. Such assessments are made by the Revenue from assessment year 1980-81 onwards and they are stated to be pending adjudication.

13. Taking into consideration the aforesaid, we are of the opinion that the Wealth-tax Officer was not justified in invoking the provisions of Section 21(4) of the WT Act by treating the Trust to be non-specific wherein the shares of the beneficiaries were not identifiable or were indeterminate on the alleged dispute raised by the daughter of the Prince, Sb. Fatima Fouzia. The CWT (Appeals) was, therefore, justified in cancelling the assessments made on the Trustees under Section 21(4) of the Act. His order is upheld.

14. In the result, the appeals are dismissed.

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