ORDER
S. Kannan, Accountant Member
1. All the four appeals by the assessee are centered on a common issue. They were, therefore, heard together and are disposed of by a common order.
2. The assessee-trust was created by MRF Ltd., a well-known tyre manufacturing company. The said trust was created by the said company in the course of its business and for the benefit of its employees. The assessee-trust held, inter alia, shares of MRF Ltd., an Indian company and in the assessments for the assessment years 1983-84 to 1986-87 it claimed exemption under Section 5(1)(xxiii) of the Wealth-tax Act, 1957 in respect of the value of the said shares as detailed below :-
Assessment year Value
1983-84 Rs. 1,65,000
1984-85 Rs. 1,65,000
1985-86 Rs. 2,65,000
1986-87 Rs. 5,00,000
In the original assessments for the said assessment years the assessee's claim was allowed by the Assessing Officer.
3. Subsequently, taking the line that the status of the assessee being A.O.P., the assessee was not entitled to exemption under the said section, the Assessing Officer passed rectification order under Section 35 of the Act and withdrew the exemption earlier allowed to the assessee-trust.
4. The first appellate authority declined to interfere in the matter. In this regard the following considerations weighed with him: (1) exemption under Section 5(1)(xxiii) of the Act is available only in the case of an individual or an HUF. The assessee was assessed in the status of A.O.P. and consequently, the assessee is not eligible to the said exemption. (2) True, the assessee’s case is covered by the provisions of Section 21(4) of the Act. Even so, by virtue of Explanation 2 to that section, the assessee’s claim for exemption under Section 5(1)(xxxiii) cannot be allowed. (3) The assessee’s case does not fall under the proviso to Section 21(4).
5. It is in these circumstances that the assessee-trust is now before us.
6. Shri S.K. Nagachandra, the learned representative of the assessee, took us through the facts and circumstances of the case and contended that the lower authorities were not justified in withdrawing the exemption earlier granted to the assessee under Section 5(1)(xxiii) of the Act. He drew our attention to the fact that the assessee’s case is fully covered by Section 21(4) of the Act read with proviso (Hi) and Explanation 2 to that section. In this regard, he also referred to and relied upon the Andhra Pradesh case of CWT v. Trustees of HEM. the Nizam’s Family Pocket Money Trust [1982] 134 ITR 444.
7. On his part, Shri P.A. Iyengar, the learned Departmental Representative, strongly supported the impugned order of the first appellate authority.
8. We have looked into the facts of the case. We have considered the rival submissions. It cannot be disputed that the trust or fund in question was created bona fide by MRF Ltd. exclusively for the benefit of the persons employed by it in its tyre manufacturing business.
9. Secondly, unlike under the Income-tax Act, 1961, under the Wealth-tax Act, 1957 an A.O.P. is not identified as a separate taxable entity. Section 3 of the Act, which is the charging section, lists only three taxable entities, namely, individual, HUF and Company.
10. But this does not mean that a trust or other A.O.P. holding taxable assets is totally exempt from wealth-tax-See Sections 21 and 21AA of the Act. Under the scheme of the Act, in the case of a trust, if the shares of the beneficiaries are determinate or known, assessment is made in the hands of the trustees in the like manner and to the same extent as it would be made in the hands of the beneficiaries. Where, on the contrary, the shares of the beneficiaries are indeterminate or unknown, then the assessment is made in the hands of the trustees in the manner specified in the Act. In such cases the scheme of the Act is to levy wealth-tax as though the trust were an individual.
11. Again, the fact that a trust or other A.O.P. is charged to wealth-tax as though it were an individual does not mean that the trust or other A.O.P. is entitled to all the exemptions which are normally available to an individual proper. Conversely, simply because the holder of taxable assets is a trust or other A.O.P., it does not follow that it is not entitled to some of the exemptions which are available to an individual proper. The availability of the exemption depends upon the specific provisions of the Act.
12. The assessee-trust before us is governed by the provisions of Section 21(4) of the Act. Considered de hors the proviso and the Explanations added to it, Section 21(4) simply says that in the case of an assessee of the type under consideration wealth-tax would be leviable upon and recoverable from it in the like manner and to the same extent as it would be leviable upon and recoverable from an individual, who is a citizen of India and resident in India for the purposes of the Act-
(a) at the rates specified in Part-I of Schedule-I to the Act; or
(b) at the rate of 3%;
whichever course would be more beneficial to the revenue.
In other words, considered by itself, Section 21(4) of the Act stipulates the rates at which wealth-tax would be levied on entities of the type under consideration.
13. But the matter does not rest there. Proviso (iii), which governs cases of the type under consideration, stipulates that wealth-tax shall be charged at the rates specified in Part-I of Schedule-I of the Act. Thus, the said proviso does away with the concept of benefit to the revenue incorporated in the main part of Section 21(4).
14. We then have Explanation 2, which essentially limits the scope of exemption otherwise available to an individual under Section 5 of the Act. But an important rider is incorporated into or lies burried in, if you like the said Explanation and that is that the Explanation is not applicable to a case to which the, proviso to Section 21(4) applies. The result of this rider is that in a case of the type under consideration, which is governed by proviso (iii) to Section 21(4), exemption available, inter alia, under Section 5(1)(xxiii) is not withdrawn but is available to the assessee in question.
15. The position in law may be summarised thus :
(1) The assessee-trust is governed by the provisions of Section 21(4) of the Act.
(2) But it falls within the pale of proviso (iii) to that section.
(3) It also falls under the beneficial umbrella of the rider incorporated in Explanation 2 to Section 21(4).
(4) Consequently, the assessee cannot be denied the benefit of exemption under Section 5(1)(xxiii) of the Wealth-tax Act.
16. In view of the foregoing, therefore, we set aside not only the impugned order of the first appellate authority but also the four rectification orders passed by the Assessing Officer and restore the original assessment orders on this issue.
17. In the result, all the four appeals of the assessee are allowed.