COMMISSIONER OF WEALTH TAX, ALLAHABAD versus ARVIND NAROTTAM (INDL.)

Citation: [1988] SUPP. 2 S.C.R. 266 · Decided: 09-08-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF WEALTH TAX, ALLAHABAD 
v. 
ARVIND .NAROTTAM (INDL.) 
AUGUST 9, 1988 
B. 
[R.S. PATHAK, CJ. AND SABYASACHI MUKHARJI, J.) 
c 
Wealth Tax Act, 1957-S. 21(2)-Assets held under Trusts-Mere 
right to be considered for distribution of income or corpus cannot be 
regarded as an 'interest'-There must be a right, present or contingent, 
before it can be said that an assessee has an interest. 
The respondent who was entitled to minimum annual payments of 
specified amounts under the three trust deeds in question was assessed 
to tax under sub-s. (2) of s. 21 of the Wealth Tax Act, on the entire value 
of the assets held by the trusts. On appeal, the Appellate Assistant 
Commissioner confined the liability of the assessee to wealth tax on the 
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capitalised value of the minimum amounts payable under the trust 
deeds, and his decision was affirmed, on second appeal, by the Appel-
late Tribunal. At the instance of the Revenue, the opinion of the High 
Court was sought on the question whether the finding that it was only 
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the capitalised ~alue of the interest of the assessee that had to be 
included in the·net wealth of the asse.See was justified. The High Court 
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answered the question in the affirmative, in favour of the assessee and 
against the Revenue. 
Dismissing the appeals, 
HELD: A mere right to be considered for distribution of the in· 
F come or of the corpus of the Trust Fund cannot be regarded as an 
'interest' since it is not capable of valuation. There must be a right, 
present or cont~ngent, before it can be said that an assessee has an 
interest. The instant case is one where beyond the specified minimum 
the assessee was not entitled to anything more. [273F'-G I 
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Gartside & Anr. v. Inland Revenue Commissioners, LR, [1968] 
Appeal Cases 553, relied 0n. 
Padmavati Jaykrishna Trust & Another v. Commissioner of 
Wealth Tax, Gujarat, [1966] 61l.T.R.66; Commissioner of Wealth-Tax 
Bombay v. Trustees of Mrs. Hansbai Tribhuwandas Trust, ll968J 68 
ff I. T.R. 527; Commissioner of Wealth-Tax, A.P. v .. Trustees of H.E.H. 
266 
COMMR. OF WEALTH TAX '· A. NAROTTAM 
267 
Nizam's Family (Remainder Wealth) Trust, [1977l 108 I.T.R SSS; Com-
missioner of Wealth-1ax, A.P. v. Trustees of H.E.H. The Nizdm's 
Sahabzadi Anwar Begwn Trust, [1981) 129 I.T.R. 796; Leedale 
(Inspector of Taxes) v. Lewis, [1982) 3 All E.R. 808 and McDowell and 
Co. Ltd. v. Commer'cict! Tax Officer, [198S) IS4 I.T.R. 148, 
distinguished. 
2. There is no doubt that the expression 'property' iimst hear a 
con1prehensive import. The question remains whether what is conveyed 
under the three deeds of settlement to the assessee is a right to anything 
ntore than the prescribed minimum under each deed. It is apparent that 
the assesse~ was entitled only to the minimum prescribed in each of the 
deeds of settlement. Whether or not he received any further amount out 
of the net income of the Trust Fund was left entirely in the discretion of 
the Trustees. There was no right in the assessee to any portion of the .net 
income in excess of the minimum guaranteed to him. It is the minimum 
alone which he could claim as his property. So also, on the distribution 
of the accumulated balance as capital at the end of the stipulated period 
there was no right in him to receive any part thereof. It was open to the 
Trustees to ignore him altogether and they could pay it to such other 
men1bers of the family as they chose. [272H; 273A-B) 
Ahmed G.H. Ariff and Others v. Commissioner of Wealth-tax, 
Calcutta, [1970] 76 I.T.R. 471, referred to. 
Per Sabyasachi Mukharji, J: 
On behalf of the Revenue an appeal was made before us that we 
should really construe the three Trust-Deeds together and see 'the game 
of the hidden purpose' behind these Trust-Deeds which were, in fact, 
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for the sole and exclusive benefit of the assessee. It is true that tax 
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avoidance in an under-developed developing economy .should not be 
encouraged on ·practical as well as ideological grounds. One . would 
wish; that one-tould get the enthusiasm of Justice Holmes that' taxes are 
the price of civilization and one woutd like to pay that price to buy 
civilization. But the question which many ordinary tax-payers very 
often in a country of shortages with ostentious consumption and depri-
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vat16n for the large masseii ask, is does he with taxes buy civilization or 
does he facilitate the wastes and ostentiousness of the few. Unless waste 
and ostent

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