COMMISSIONER OF WEALTH TAX, GUJARATversusLOV. S. KINARIWALA

A                 COMMISSIONER OF WEAL TH TAX, GUJARAT
                                     v.
                           LOV. S. KINARIWALA

                               DECEMBER 11, 2002

B     [SYED SHAH MOHAMMED QUADRI AND ARIJIT PASAYAT, JJ.]


            Wealth Tax Act, 1957:

           s.27 (I) and 27(3)-Assessee, a beneficiary of Trust assigned to the trust
C   his share of income received from pa1:tnership firm-The same alongwith
    other income distributed to assessee-Assessee assigned his interest in favour
    of Body of Individuals (80/s) and claimed that it should be assessed as asset
    of 80/s-Claim rejected by Assessing Officer holding that creation of BO/s
    and assignment was a sham and bogus-Commissioner (Appeals) reversed
D   the findings and his decision affirmed by Tribunal-High Court declined to
    direct the Tribunal to state and refer the question holding that decision of
    Tribunal was on the question of fact and no question of law arose-Held,
    once it is found as a fact that creation of 80/s and assignment of interest was
    not sham and bogus activity, the question sought to be referred woulq not
    arise and Tribunal u/s. 27(1) and High Court u/s. 27(3) were right in rejecting
E   the application of Revenue.

         Sunil J. Kinariwala v. Commissioner of Income Tax, (1955) 211 l.T.R
    127 and Commissioner of Income Tax v. Sunil J. Kinariwala, (20031 I SCC
    660, distinguished.

F           CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1858 of
    2002.

         From the Judgment and Order dated 13.4.99 of the Gujarat High Court
    in W.T.A. No. 52 of 1998.

G                                       WITH

         C.A. Nos. 1847-48, 1865,.1869-71, 1873-76, 1877-1881, 1886, 1890,
    1893-98 of 2002 and 2339 of 200 I.

            Preetesh Kapur, Ranbir Chandra, K.C. Kaushik, Ms. Lakshmi Iyengar,
H                                         44
        COMMISSIONER OF WEAL TH TAX v. LOV. S. KINARIW ALA                   45
Ms. Sunita Sharma, Ms. Neera Gupta, B.V.B. Das and Ms. Sushma Suri for            A
the Appellant.

      U.U. Lalit, H.A. Raichura and S. H. Raichura for the Respondents.

      The following order of the Court was delivered:
                                                                                  B
     Civil Appeal No. 1858 of 2002:

      This appeal, by the Revenue, arises from the common order passed by
the High Court of Gujarat on an application under Section 27(3) of the
Wealth Tax Act declining to direct the Income Tax Appellate Tribunal (for
short, 'the Tribunal') to state the case and refer to it the following question   C
of law:

        "Whether the Appellate Tribunal is right in law and on facts in
        confirming the order passed by the Commissioner of Wealth-tax
        (Appeals) directing the Assessing Officer to exclude the value of the
        assets transferred to B. O.ls. from the wealth of the assessee?"          D
      In the order under challenge, the High Court mentioned two grounds
for rejection of the application under Section 27(3) of the Wealth Tax Act,
namely, (I) the decision of the Tribunal is on the question of fact emanating
from the record and no question of law arises out of it; and (2) relied upon
the judgemeni of the Gujarat High Court in Suni/ J. Kinariwa/a v.                 E
Commissioner of Income Tax, (1995) 211 l.T.R. 127.

      Mr. Ranbir Chandra, learned counsel for the Revenue, contends that as
this Court has reversed the judgement of the High Court of Gujarat in Sunil
J. Kinariwala (supra), this appeal has to be allowed. We are afraid, we cannot    F
accede to the submission of the learned counsel.

      It would be useful to refer to the facts giving rise to this appeal.

      The respondent-assessee is a beneficiary of the main Trust. The sum
(being the share income of the assessee from the partnership firm) was assigned   G
to the Trust by the assessee. The same, along with other income of the Trust,
was distributed among all the beneficiaries, including the assessee. They, in
turn, assigned their respective interest in favour of Body of Individuals
(8.0.ls.) and claimed that the beneficial interest derived from the firm should
be assessed as assets of the 8.0.ls. for purposes of valuation and not the
assets of the respondent-assessee. The Assessing Officer of the Wealth Tax        H
    46                           SUPREME COURT REPORTS [2002] SUPP. 5 S.C.R.

A rejected the claim of the assessee taking the view that creation of B.O.ls. and
    assignment was a sham and bogus transaction. That finding was reversed, on
    appeal, by the Commissioner (Appeals) and the same was upheld by the
    Tribunal.

            Once it is found, as a fact, that the creation of the B.0.ls. and assignment
B of assets was not sham and bogus activity, the question sought to be .referred
    would not arise and, therefore, the Tribunal under Section 27(1) of the Wealth
    Tax Act and the High Court under Section 27(3) of the Wealth Tax Act were
    right in rejecting the application of the Revenue.

C       But then the question remains whether the fact that the High Court
  relied upon the judgement in Sunil J. Kinariwala (supra), which was reversed
  by this Court in Civil Appeal No. 1899 of 2002 Commissioner ofIncome Tax
  v. Suni/ J. Kinariwala dated December 10, 2002 would make any difference
  to the result of this appeal. In our view, it does not as ori the facts of the
  present case, that judgement is clearly distinguishable. The point in that case
D was whether there was diversion of income of the assessee to the Trust by
  over-riding title created in favour of the Trust, whereas in the present case,
  the question is whether the 8.0.ls. and assignment of assets to it was sham
  and bogus. In our view, the High Court has erroneously relied on that
  judgement. Be that as it may, we have held above that on the findings recorded
  both by the Commissioner (Appeals) as well as by the Tribunal, the High
E Court was right in rejecting the application under Section 27(3) of the Wealth
  Tax Act.

            We find no merit in the appeal. It is accordingly dismissed.

            No costs.
F
              Civil Appeal Nos. 1847-4812002, 186512002, 1869-7112002, 1873-
              7612002, 1877-188112002, 188612002, 189012002, 1893-9812002 and
              233912001.

            In view of the order passed in Civil Appeal No. 1858 of 2002
G Commissioner of Wealth Tax, Gujarat v. LOV S. Kinariwala, these appeals
    are dismissed.

            No costs.

     R.P.                                                          Appeals dismissed.