2001 PLP 1885 (PTD)

Assessee could not be said to be the owner of the monies which she had gifted to the trust and, hence, the gifted amounts were not includible in the computation of her net wealth for wealth tax purposes. CIT v. M.C. Sathiyavathi (Smt.) (1997) 225 ITR 109 (Mad.) ref. (b) Income‑tax‑‑‑ ‑‑‑‑Total income‑‑‑Inclusions in total income‑‑‑Contributions made by assessee to trust created by her husband‑‑‑Contributions considered, by High Court as gift with no power of revocation‑‑‑Interest attributable to contributions made by assessee not includible in income of assessee‑‑‑Indian Income Tax Act, 1961, S.61. The contributions made by the assessee to the trust were in the nature of gift with no power of revocation and, therefore, the interest income attributable to the contributions made by the assessee to the revocable trust created by her husband for the benefit of his would be son‑in‑law could not be assessed to tax in her hands in terms of section 61 of the Income Tax Act, 1961. R. Meenakshisundaram for the ‑Assessee. R. JAYASIMHA BABU, J.‑‑‑The Revenue has caused this reference to be made. It concerns the assessment years 1977‑78 to 1980‑81 and arises under the Wealth Tax Act, 1957, as also under the Income Tax Act, 1961. The questions referred to us are: "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding and had valid materials to hold that the funds transferred by the assessee to the revocable trust created by her husband for the benefit of his would be son‑in‑law cannot be assessed to tax in her hands in terms of section 4(1)(a)(iv) of the Wealth Tax Act, 1957? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the interest income attributable in the contributions made by the assessee to the revocable trust created by her husband for the benefit of his would be son‑in‑law/daughter‑in‑law cannot be assessed to tax in her hands in terms of section 61 of the Income‑tax Act?" Similar questions arose concerning the same assessee and those questions were considered by this Court in the case of CIT v. Smt. M.C. Sathiyavathi (1997) 225 ITR

109. It was held by this Court that the contributions made by the assessee to the trust were in the nature of gifts with no power of revocation, and, therefore, the interest income attributable to the contributions made by the assessee to the revocable trust created by her husband for the benefit of his would be son‑in‑law could not be assessed to tax in her hands in terms of section 61 of the Income Tax Act, 1961. If the income cannot be assessed in her hands, so also the corpus from out of which income had been derived, as the monies gifted by her to the revocable trust were, so far as the assessee is concerned, an absolute gift and not revocable gift. The assessee cannot, therefore; be said to be the owner of the monies, which she had gifted away to ,the trust. The amounts so gifted, therefore, were not includible in the computation of her wealth. The two questions referred to us, one under the Wealth Tax Act, and the other under the Income‑tax Act, are, therefore, answered in favour of the assessee and against the Revenue. No costs. M.B.A./450/FC Reference answered.