ivil Appeal Nos
2034 2036 of 1974
From the Judgment and Order dated 1101973 of the Gujarat High Court in Wealth Tax Reference No 16 of 1971
Dr Gauri Shankar Miss A Subhashini for the Appellant
Harish Salve and Mrs AK Verma for the Respondent
The following Judgments of the Court were delivered PATHAK CJ
These appeals by certificate granted by the Gujarat High Court are directed against the judgment of the High Court disposing of three wealth tax References
The three trust deeds were executed by Narottam Lalbhai for the benefit of the assessee his wife and his children and grand children The deed dated March 19
1955 created a trust known as the Arvind Narottam Trust
The deed dated April 9 1955 created a trust called the Arvind Family Trust
And the deed dated March 18 1961 created a trust described as the Arvind Kalyan Trust
All the three trust deeds are couched in identical terms except in regard to the minimum amounts payable to the beneficiaries out of the income of each year
There was one further difference in detail
The first two deeds
specified a period of 18 years from the date of execution as the period during which the net income could be distributed to the assessee
his wife and children while the third specified a period of 30 years
The minimum annual payments to be made under the three trust deeds to the assessee by way of maintenance were Rs 250 Rs 150 and Rs250 respectively
Under each of the trust deeds the settlor specified the interest of the beneficiaries in the trusts
The pertinent terms of one of them the Arvind Narottam Trust Deed may be set forth here
Clauses 7 and 8 of that Trust Deed provide 7a Whatever income by way of interest or otherwise is received each year by the trustees from the trust fund should be first applied in meeting with the expenses of the PG NO 269 management of the trust and the payment of taxes thereof
For a period of 18 years hereafter the trustees may pay to Arvind or if Arvind gets married during the period to Arvind his wife and children or to one or more of these persons such portion of the net income remaining thereafter as the trustees deem fit
However the trustees shall pay to Arvind or if Arvind gets married during the period to each Arvind and his wife at least Rs150 every year
After such distribution if there remains any surplus from the income of any year it shall be added to the corpus of the fund
if in any year the net income accuring to the fund is less than Rs300 the whole amount should be paid to Arvind and if Arvind gets married during the period to Arvind and his wife in equal shares
If Arvind expires during the period of 18 years hereafter or if Arvind gets married during the period and both Arvind and his wife expire the whole of the net income of the trust fund should be added to the corpus for a period of 18 years hereafter
b Whatever may be the corpus and the accumulated balance remaining undistributed out of the income of each year shall be paid as capital at the end of 18 years hereafter to Arvind his wife and his children or survivor or such of them in such proportion as the trustees deem fit
If the trustees are not able to decide Upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind his wife and his children
If none of the said persons are alive at the time of distribution then the distribution will be made to Niranjan
his wife and children or survivors
all or such of them and in such proportion as the trustees deem fit
If none of the said persons are alive at the time of distribution then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other educational institution or an institution giving medical aid or attending to the health of public in general
PG NO 270 8
If the trustees so think fit the trustees are hereby 74 to distribute as capital even before the expiry of 18 years whatever property and income is at the particular time accumulated in the trust fund to Arvind his wife and his children or survivor or such of them in such proportion as the trustees deem fit
If the trustees are not able to decide upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind his wife and his children
If none of the said persons are alive at the time of distribution then the distribution will be made to Niranjan his wife and his children or survivors all or such of them and in such proportion as the trustees deem fit
If none of the said persons are alive at the time of distribution then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other educational institution or an institution giving medical aid or attending to the health of public in general
But if Arvind and his wife are the trustees at that time then they have no right to give vote in the above matter
But if the other trustees unanimously agree to allow them to vote then they can
 The Wealth Tax Officer made assessment orders for the assessment years 1963 63 1963 64 and 1964 65 under the Wealth Tax Act the relevant valuation dates being December 31 1961 December 31 1962 and December 31 1963
He assessed the assessee under sub section
2 of section 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 capitalised value of the minimum amounts payable under the trust deeds for his maintenance
that is to say say Rs250 Rs150 and Rs250 respectively per year
The Appellate Tribunal on second appeal affirmed the view taken by the Appellate Assistant Commissioner
At the instance of the Revenue
the three cases were carried in reference to the High Court for its opinion in each case on the following questionn of law Whether on the facts and in the circumstances of the case the finding that it is only the capitalised value of the interest of the assessee that has to be included in the net wealth of the assessee is in law justified PG NO 271 The High Court answered the question in each case in the affirmative in favour of the assessee and against the Revenue
And now these appeals
Admittedly on all relevant dates of these assessment years the assessee was a bachelor and was alone entitled therefor to the benefit of the three trusts
It is accepted also that the trusts are discretionary trusts
The controversy between the parties arises on the application of section 21 of the Wealth Tax Act
Section 21 as it stood at the relevant time provided section 21
Assessment when assets are held by courts of wards administrators general etc 1 In the case of assets chargeable to tax under this Act which are held by a court of wards or an administrator general or an official trustee or any receiver or manager or any other person by whatever name called appointed under any order of a court to manage property on behalf of another or any trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise including a trustee under a valid deed of wakf the wealth tax shall be levied upon and recoverable from the court of wards administrator genera1 official trustee receiver manager or trustee as the case may be in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf or for whose benefit the assets are held and the provisions of this Act shall apply accordingly
2 Nothing contained in sub section
1 shall prevent either the direct assessment of the person on whose behalf or for whose benefit the assets above referred to are held
or the recovery from such person of the tax payable in respect of such assets
3 xx xx xx xx 4 Notwithstanding anything contained in the foregoing provisions of this section where the shares of the persons on whose behalf or for whose benefit any such assets are PG NO 272 held are indeterminate or unKnown the wealthtax shall be levied upon and recovered from the court of wards administrator genera1 official trustee receiver manager or other person aforesaid as the case may be 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 purpose of this Act
The contention of Dr V Gauri Shankar on behalf of the Revenue is that the settlor had specifically made these three trusts for the benefit of his son Arvind the assesee and has declared unequivocally that the settlement is for the benefit of the assessee and on the asses see s marriage also for the benefit of his wife and children
It is urged that the High Court has erred in failing to collect the real intention of the settlor from the entire document and has erroneously confined itself to paragraph 7 of the deed
According to learned counsel what the High Court should have done was to ascertain the state of affairs existing on the relevant valuation date
It should not have been influenced by what could possibly happen in the indefinite future on the happening of certain contingencies
The submission is that on the valuation dates there was only one beneficiary the assessee his share was determined and known and it extended to the entire interest in the trust properties
It is urged that in the case of a discretionary trust the interest of the beneficiary extends not only to the actual share paid to him but to his right to be considered as a potential recipient of the net income remaining after defraying the managment expenses and paying the taxes
It extends he says to an interest in the Trust accumulation both before or after the expiry of the stipulated period when the Trustees are empowered to distribute the accumulated balance as capital
Learned counsel urges that the whole deed of settlement in each case should be read and understood comprehensively and only thereupon can a true answer be returned to the question framed in the reference
Considerable emphasis has been on the submission that the capital value of the contingent intereset in the entire property must be kept in view
I have no difficulty in accepting the submission of Dr Gauri Shankar that for a proper understanding of a case before us we must consider the entire deed of settlement
That however does not lead to the conclusion which learned counsel wishes us to accept
What is the interest of the assessee under the deed of settlement on the relevant valuation date We are concerned with the capital value of that interest
It is apparent that the assessee was entitled only to the minimum prescribed in each of the deeds of settlement
Whether or not be received any further amount PG NO 273 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 members of the family as they chose
In support of the proposition that the expression property  is a term of the widest amplitude and that every possible interest is includible therein we are referred to Ahmed GH Ariff and Others vs Commissioner of Wealth Tax Calcutta I have no doubt that the expression property  must bear a comprehensive import
The question remains whether what is conveyed under the three deeds of settlement to the assessee is a right to anything more than the prescribed minimum under each deed
I may reiterate that the interest extends to no more than that minimum
It is contended on behalf of the Revenue that the fact that a beneficiary may change on the happening of certain contingencies will not make the share of the beneficiary un determined or unknown
and reliance has been placed on Padmavati Jaykrishna Trust  Another vs Commissioner of Wealth Tax Gujarat l966  Commissioner of Wealth Tax Bombay vs Trustees of Mrs Hansbai Tribhuwandas Trust l968  Commissioner of Wealth Tax A P vs Trustees of HEH Nizam s Family Remainder Wealth Trust
and Commissioner of Wealth Tax AP vs Trustees of HEH
The Nizam s Sahebzadi Anwar Begum Trust These cases can be of no assistance to us for unlike the facts in each of those cases the instant case is one where beyond the specified minimum the assessee was not entitled to anything more
There must be a right present or contingent before it can be said that an assessee has an interest and I am supported in this by what was said by the House of Lords in Gartside  Anr
vs Inland Revenue Commissioners
LR 1968 Appeal Cases 553 where it was also observed that a mere right to be considered for distribution of the income or of the corpus of the Trust Fund cannot be regarded as an interest  since it was not capable of valuation
Dr Gauri Shankar relies on Leedale Inspector of Taxes vs Lewis l982 3 All ER 808
But the decision in that case turned on the principle language of the English Statute where an approximation of the value is permitted by the just and reasonable clause and by the words as near as may be in section 422 of the Finance Act
PG NO 274 It is vehemently urged by Dr Gauri Shankar that the approach to be adopted in this case is not that which finds favour under the Income tax law and different considerations prevail under the Wealth Tax Act
As I am proceeding on the basis of the true construction of the Deeds of Settlement I fail to see any substance in that contention
Reliance war also placed by learned counsel for the Revenue on McDowell and Co Ltd vs Commercial Tax Officer That decision cannot advance the case of the Revenue because the language of the deeds of settlement is plain and admits of no ambiguity
In the result I endorse the view taken by the High Court and dismiss these appeals with costs
SABYASACHI MUKHARJI J
I agree with the judgment of the learned Chief Justice
There is however one aspect of the matter on which some arguments were advanced at the time of hearing of this case to which I would like to advert
Dr V Gauri Shankar appearing on behalf of the revenue made an appeal before us stating 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 for the sole and exclusive benefit of the assessee
He drew our attention to the observations of Justice Chinnappa Reddy with which other learned Judges of the Full Bench agreed in McDowell  Co Ltd vs Commercial Tax Officer He invited us to hold that having regard to the taxing Statute the tax avoidance device should be exposed
Justice Chinnappa Reddy has noticed the change in judicial attitude to the tax avoidance devices
Justice Reddy mentioned that in the country of its birth the principles of Westminister of condoning tax avoidance have been given a decent burial
In that very country the phrase taxavoidance  is no longer condoned or looked upon with sympathy
It is true that tax avoidance in an under developed developing economy should not be encouraged on practical as well as ideological grounds
One would wish as noted by Reddy J that one could get the enthusiasm of Justice Holmes that taxes are the price of civilization and one would 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 PG NO 275 deprivation for the large masses ask is does he with taxes buy civilization or does he facilitate the wastes and ostentiousness of the few
Unless wastes and ostentiousness in Government s spendings are avoided or eschewed no amount of moral sermons would change people s attitude to tax avoidance
In any event however where the true effect on the construction of the Deeds is clear as in this case the appeal to discourage tax avoidance is not a relevant consideration
But since it was made it has to be noted and rejected
With these observations I agree
HLC Appeals dismissed


Summary:
The terms and conditions of service including the rates of wages and other allied matters were decided and settled through mutual negotiations between the trade union represented by respondent No 3 its General Secretary and respondent No 4 President of the Employers Association
Respondent Nos 1 and 2 were workers and were members of the trade union
Under an agreement entered into in October 1973 an amount equivalent to 10 paise out of every rupee earned by the workers was deducted by the management towards the gratuity fund and transferred to the trade union for and on behalf of the workers
Under another agreement a sum equivalent to 10 paise per rupee in the wages of the workers was paid by the management to the trade union towards accident benefit fund of which the workers were the beneficiaries
The amounts so collected were entrusted to the petitioner who was also the treasurer and custodian of these funds of the trade union
The petitioner deposited the amounts received by him in his personal name in his bank account and no account of these amounts was rendered by him to the members of the trade union
He did not call any general body meeting and the members of the trade union could not ventilate their grievance regarding mismanagement of the funds
In view of the aforesaid difficulty 85 workers including Respon PG NO 258 PG NO 259 dent Nos 1 and 2 and three others resigned from this trade union on January 13 1976 and formed a separate trade union of their own and A registered the same under the 
Respondent Nos 1  2 and three other persons instituted five suits in the Munsiff Court against the petitioner and respondent No 3 for a decree directing the petitioner and respondent No 3 to render an account of the amounts collected on their behalf from December 1969 towards the accident benefit fund and from October 1973 towards the gratuity fund
The petitioner who was the President and the Treasurer of the trade union resisted the suits and contended that since the plaintiffs had resigned and ceased to be members of the trade union they had no right to claim the refund of the sums due to them from out of the funds of the trade union and that the suits were not maintainable in the Civil Courts in view of the provisions of the and the 
All these suits were tried together and the Munsiff passed a preliminary decree against the petitioner and respondent No 3 directing them to render an account of the amounts received by them and further directed that each of the plaintiffs was entitled to get his proportionate share of the amount due to him from out of the total amount received by the petitioner and respondent No 3
The petitioner filed an appeal and the Additional Sub Judge found that the petitioner and respondent No 3 had received from the management amounts on behalf of the workmen but held that the plaintiffs were not entitled to any decree at the hands of the Civil Court since the suits were not maintainable in view of the provisions of the  l972 and the 
Second Appeals were filed in the High Court by respondent Nos 1  2 and the High Court by a common judgment set aside the judgment and decree passed by the First Appellate Court and restored the judgment and decree passed by the Trial Court
In the appeal by Special Leave to this Court it was contended that the provisions of the and the have debarred the filing of the suit that respondent Nos 1  2 could not claim the amount after resigning from the PG NO 260 membership of the trade union as the said amounts formed part of the general fund of the trade union and that only on the dissolution of the trade union its funds could be distributed as per the rules of the trade union and where the rules did not provide for the same then the fund was liable to be distributed as per Rule 111 of the Central Trade Union Regulations l938
On the question whether a member of the trade union is entitled to ask for an account and to claim refund of sums received by the trade union from the management for and on his behalf on his ceasing to be a member
Dismissing the Special Leave Petition HELD 1
The civil suits filed by the workers Respondent Nos 1  2 were not barred under the provisions of the and the 
264C 2
The amounts were received by the trade union from the employer concerned towards the gratuity and accident benefit to which the workers were entitled
There was no scheme drawn up by the trade union regarding the payment of the gratuity amount and the accident benefit fund received on behalf of the workmen to the workmen concerned
There was no agreement between the trade union and its members that the amount received towards gratuity and accident benefit should form part of funds of the trade union
Any amount received for and on behalf of the members is liable to be refunded to the workmen concerned
264D In the instant Case the amount which had been received on behalf of Respondent Nos 1  2 by the petitioner and Respondent No 3 had therefore to be refunded to them on their resignation from the membership of the trade union
264E 3
There is no warrant for the view that only on the dissolution of the trade union its funds could be distributed as per the rules of the trade union and that where the rules did not provide for the same the fund was liable to be distributed as per Rule 111 of the Central Trade Union Regulations 1938
264B Balmer Lawrie Workers Union
Bombay and Anr
vs Balmer Lawrie and Co Ltd and Ors l985 2 SCR 492 distinguished
PG NO 261