H. H. YESHWANT RAO GHORPADE versus THE COMMISSIONER OF WEALTH TAX, BANGALORE

Citation: [1966] SUPP. 1 S.C.R. 419 · Decided: 06-05-1966 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Appeal(s) allowed

Judgment (excerpt)

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419 
H. H. YESHWANT RAO GHORPADE 
v . 
THE COMMISSIONER OF WEALTH TAX, BANGALORE 
May 6, 1966 
[K. N. WANCHOO, J.C. SHAH ANDS. M. SIKRI, JJ.] 
Wealth Ta:c Act 1957, s. 4(1)(a)(iii)-whether the word "benefit" 
meant '1immediate 01' deferred" benefit or only imm.ediate 
bene-
~ 
. 
Wealth TilJJ: (Amendment) Act 1964, s. 4-effect of-whether only 
declaratory, 
In August 1957 the appellant created two Trusts by two sepa-
rate deeds one of which was a charitable trust and the other a fa-
mily trust'. He then transferred certain shares to the family trust 
the scheme of which was that during the minority of each of three 
children of the appellant the property in Schedules A, B and C' to 
the deed qua each beneficiary was to remain vested ir. the trustees 
for the benefit of the charitable trust, and after the expiry of the 
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period specified in each case, the corpus and income was to be herd 
for the beneficial ownership of the three children. 
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By C'Iause 9 df the family trust deed, it was provided that the 
interests granted or created in the respective beneficiaries shall 
vest in them immediately upon execution of the deed; Clause 21 
conferred upon the trustees power either to use the income accruing 
under the trust for the benefit of the charitable trust during the 
period prescribed in each case upto the time that each of the three 
children attained majority or to accumulate the income and deliver 
it on the expiry of the periods specified to the trustees of the chari-
table trust. Clause 26 provided that notwithstanding anything con-
tained in Clauses 21 to 25 the trustees could expend the income accru• 
ing under the settlement to each of the beneficiaries therein for the 
maintenance, education, health, marriage and1 advancement of 
the 
beneficiaries. 
In computing the nett wealth of the assessee under the Wealth 
Tax Act 1957, as on March 31, 1958 and March 31, 1959, the valuatioo 
dates respectively for the assessment years 1958-59 and 195~60, the 
Wealth Tax Officer and the Appellate Ass'stant Commissioner in-
cluded the value of the shares held by the trustees undet the fami-
ly trust, on the ground that these shares were held by them for the 
benefit of the minor children within the meaning of Section 4(1)(a) 
(iii) of the Act. On appeal the Appellate Tribunal reversed this deci-
sion but. upon a reference, the High Court decided the issue against 
the assessee. 
In the appeal to this court, it was contended on behalf of the 
Revenue that the word "benefit" in the Section meant immediate or 
deferred benefit and the amendment of Section 4(1) (a) (iii) by Act 
46 of 1964 whereby the words "immediate or deferred" were intro-
duced before the word "benefit" in the Section. was in effect only 
declaratory; and that in any event it was clear from the recitals iii 
the preamble and the other terms of the family trust deed that the 
intention of the appellant was to make a settlement for the benefit of 
his minor children within the meaning of the Section prior to its 
amendment, 
4:0 
.<\'Plll'lME COVllT REPORT• 
[1966] SUPP. 8.C.11. 
HELD: (pe!' Wanchoo and Sikri, JJ.): Considering the terms of 
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the family trust deed as a whole, the shares transferred to the t~ 
tt:es were not held for the benefit of the three minor children as on 
?v..~rch 31, 1958 and March 31, 1959 within the mean'ng of s. 4(l)(a) 
(m) and could not therefore be included in the n<!tt wealth of the 
assessce. [428El 
By the terms of the deed, it was the charitable trust which 
was entitled to the inrome of the shares in Schedules A, B and C 
B 
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during the years before the minor children attained majority; upto 
that time the children had no interest whatsoever in that income. 
"'"' 
It could not therefore be said that the settlement was for the imme-
diate benefit of the minor children. r 426s-e1 
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Although the nm-obstante clause 26 purported to override the 
provisions of Clauses 21 to 25, the inclusion of Clause 21 appeared 
to be a typographical error. In any event even assuming that there 
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was a conflict between Clauses 21 and 26, the earlier disposition 
under Clause 21 would prevail over the later directions contained 
in Clause 26. Sahabzada Mohammed Kamaar Shah v. Jaadish Chan-
dra Deo Dhabal Dco (1960) 3 S.C.R. 604, 611. and Ramkishore Lal v. 
Kamal Narain (1963) Supp. 2 S.C.R. 417, 425; referred to. f427B-C] 
(per Shah J. dissenting): The primary intention of the appel-
lant a

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