SIXTH WEALTH-TAX OFFICER v. SMT. KUSUMRANI JAIN
[Citation -1987-LL-0121-4]

Citation 1987-LL-0121-4
Appellant Name SIXTH WEALTH-TAX OFFICER
Respondent Name SMT. KUSUMRANI JAIN
Court ITAT-Mumbai
Relevant Act Wealth-tax
Date of Order 21/01/1987
Assessment Year 1979-80 TO 1982-83
Judgment View Judgment
Keyword Tags right to receive compensation • legislative intention • written down value • rate of interest • commuted value • special bench • market value • net wealth • donee
Bot Summary: The first controversy is regarding the inclusion in assessee's wealth of deposits under CDS Act, 1974. Spl. Bench had held that as a fixed proportion of the deposit under CDS was returnable every year after a lapse of two years of deposit, the said return of deposit was not an annuity. The Special Bench further noted the introduction of s. 7A of CDS Act, granting exemption under s. 5 of WT Act to CDS deposits as bank deposits which clearly showed legislative intention of treating CDS deposit as a bank deposit. In view of our agreeing with the Special Bench decision that the deposit under CDS was not an annuity it is not necessary to consider the assessee's further contention before us that an annuity was not purchased as it was forced on the assessee under the CDS statute. We accordingly hold that deposit under CDS is a deposit and is not an annuity and is therefore includible in assessee's net wealth. The Special Bench had rejected this submission vide para 26 after noting that deposit under CDS was a bank deposit and was earning a high rate of interest and the amount was repayable in instalments of 1/5th of each deposit after a lapse of 2 year and that in exceptional circumstances the ITO could refund the whole deposit. In the present case, there are no hazards of recovery of deposit under CDS. We accordingly agree with the Special Bench that there is no reason for discounting the said deposits under CDS for inclusion in the assessee's net wealth.


As common points are involved in Revenue's appeals for asst. yr. 1979-80 to 1982-83 they were heard together and are disposed of by consolidated order. first controversy is regarding inclusion in assessee's wealth of deposits under CDS (IT payers) Act, 1974. CWT (A), for four years, deleted said deposits, following WTO vs. S.D. Nargolwala (!984) 18 TTJ (Del) 473: (1983) 5 ITD 690 (Del). Revenue urged that said decision was no longer good law after decision of Tribunal (Spl. Bench) Bombay in Smt. Sushilaben . Mafatlal vs. WTO (1986)18 ITD 189 (Bom) (SB) where it was held that deposit under CDS was not annuity and was only deposit in bank. ld. counsel for assessee, however, urged that aforesaid Spl. Bench decision needed reconsideration. His contention was that Spl. Bench was not right in holding that annuity was fixed sum of money payable annually or periodically (as per para 17 of Spl. Bench). Spl. Bench had noted definition "an annuity cannot be related to fixed proportion of capital". Spl. Bench had held that as fixed proportion (1/5th) of deposit under CDS was returnable every year after lapse of two years of deposit, said return of deposit was not annuity. Bench had relied on CWT vs. Mrs. Dorothy Marin (1968) 69 ITR 586 at 592 (Cal) which was approved by Supreme Court in CWT vs. Arundhati Balkrishna (1970) 77 ITR 505 at 510 (SC) by observing that annuity is money payment of fixed sum annually made and is charged personally on granter. Supreme Court in CWT vs. P.K. Banerji (1980) 19 CTR (SC) 376: (1980) 125 ITR 641 (SC) had similarly observed that in order to constitute annuity, payment to be made periodically should be fixed or predetermined one and it should not be liable to variation. Spl. Bench, after extracting passage from said judgment, observed, that only fixed part of CDS repayment is 1/5th of deposit actually made by assessee but interest part is variable and is actually varied from year to year. Spl. Bench had also noted that even repayment of instalment due on 1st April, 1985 was postponed by year which militates against concept of annuity. Special Bench (vide para 20) further noted introduction of s. 7A of CDS Act, granting exemption under s. 5 of WT Act to CDS deposits as bank deposits which clearly showed legislative intention of treating CDS deposit as bank deposit. ld. counsel for assessee, however, urged that annuity need not be fixed sum and could fluctuate. He relied on Ahmed G.H. Ariff vs. CWT (1986) 59 CTR 230 at 236 (Cal) where High Court, for holding that aliquot share o f net income of properties was not annuity referred to certain English decisions. Court extracted Evershed M.R.'s observations in re. Duke of Norfolk Public Trustee vs. England Revenue Commissioners (1950) Ch 467, as under: "Both two last mentioned cases were instances of dispositions of aliquot shares of general income of estate to be enjoyed in succession, as distinct from annuity or yearly sum, which even though variable........ is in on way dependent upon or related to general income of estate." ld. counsel for assessee thus highlighted that annuity could be variable. His submission are, however, contradicted by subsequent discussion in Ahmed G.H. Ariff (1966) 59 ITR 230 at 234 (Cal): "Instances of annuity are given in illustration to s. 173 of Indian Succession Act and it will be noticed that in each specified sum is mentioned. So far as English law is concerned "an annuity is right to receive de anno, in annum, certain sum that may be given for life, or for series of years; it may be given during any particular period, or in per petuity": Per Kindersley, V.C. in Bignold vs. Giles. Where sum mentioned was 100 (sterling), Lord Cottenham CJ said in Blewitt vs. Roberts, that:it is gift of annual sum of 100 (sterling); that is of as many sums of 100 (sterling) as donee shall live years". This meaning of word "annuity" was adverted upon in CWT vs. E.D. Anklesaria." upshot of whole discussion is that annuity is fixed sum of money payable periodically. Supreme Court in Nawad Sir Mir Osman Ali Khan vs. CWT (1986) 57 CTR (SC) 89: (1986) 162 ITR 888 (SC) has reiterated that annuity i s fixed sum payable periodically. In para 39 at page 652, Supreme Court noted, hallmark of annuity according to Jarman on Wills (page 1113) is (i) it is money, (ii) paid annually, (iii) in fixed sum, and (iv) usually it is charge personally on granter. Supreme Court has thus reiterated that annuity is fixed sum payable periodically. We therefore, cannot accept assessee's contentions based on stray observation extracted in aforesaid Calcutta case. In view of our agreeing with Special Bench decision that deposit under CDS was not annuity it is not necessary to consider assessee's further contention before us that annuity was not "purchased" as it was forced on assessee under CDS statute. Special Bench in para 25 had made similar observations relying on CIT vs. T.N. Arvinda Reddy (1979) 12 CTR (SC) 423: (1979) 120 ITR 46 (SC) where it was held that plain meaning of 'purchase' is buy for price or equivalent of price. We, therefore, are unable to accept assessee's contention that buying under compulsion was not buying. For this submission, assessee had relied on certain decisions under s. 10(2)(vii) of IT Act, 1922, where it was held in case of acquisition/requisition by Government that there was no sale and therefore excess of price over written down value was not assessable Calcutta Electric Supply Corpn. Ltd. vs. CIT (1951) 19 ITR 406 (Cal), and Fazilka Electric Supply Co. Ltd. vs. CIT (1959) 36 ITR 411 (Punj). We, therefore, reject assessee's contention based on said decisions. We accordingly hold that deposit under CDS is "deposit" and is not "annuity" and is therefore includible in assessee's net wealth. next controversy was whether said deposit under CDS should be discounted for inclusion in assessee's net wealth. Special Bench had rejected this submission vide para 26 after noting that deposit under CDS was bank deposit and was earning high rate of interest and amount was repayable in instalments of 1/5th of each deposit after lapse of 2 year and that in exceptional circumstances ITO could refund whole deposit. ld. counsel for assessee, however, relied on CWT vs. Sadiquali Samsuddin (1984) 41 CTR (Guj) 282: (1985) 152 ITR 190 (Guj) where fixed deposit held in Ceylon Bank was directed to be discounted in view of restraint prohibiting repatriation and permitting repatriation, if at all, of balance amount only after certain deductions. said case is clearly distinguishable because on repayment of CDS there are no such onerous restrictions. Similarly, assessee's reliance on cases directing discounting of compensation under Land Reforms Acts is of no avail. Assessee had relied on CWT vs. Maharajah Kumar Kamal Singh (1984) 39 CTR (SC) 147: (1984) 146 ITR 202 (SC) and CWT vs. Raghubar Narain Singh (1984) 39 CTR (SC) 153: (1984) 146 ITR 223 (SC). In both cases, Supreme Court noted hazards of litigation and of recovery of compensation and directed that market value of right to receive compensation should be arrived at. In present case, there are no hazards of recovery of deposit under CDS. We accordingly agree with Special Bench that there is no reason for discounting said deposits under CDS for inclusion in assessee's net wealth. We also reject (following Special Bench) assessee's contention that deposit under CDS is comparable to "annuity deposit" under Chapter XXIIA o f IT Act. Therefore, we do not further go into assessee's reliance on table of commuted value of annuities by CBDT vide its Circular dt. 27th July, 1986. next ground in Revenue's appeal for asst. yr. 1979-80 is regarding CWT (A)'s direction that loan from LIC of Rs. 37,863 be allowed as debt. Revenue contends that said loan was utilised for acquiring non-taxable assets. CWT(A) in para 5 has indicated that said investment was made with Nityananda Steel Rolling Mills in earlier years. computation of wealth does not indicate whether said deposit has been included in net wealth for asst. yr. 1979-80. It is accepted position of law that in case LIC debt has been incurred in relation to any property in respect of wealth-tax is not chargeable, then said debt is not allowable as deduction under s. 2(m)(ii) as was held in D. Basappa vs. CWT (1986) 54 CTR (Kar) 407: (1986) 160 ITR 826 (Kar), CIT vs. K.S. Vaidyanathan and Ors. (1985) 47 CTR (Mad) 101 (FB): (1985) 153 ITR 11 (Mad) (FB), Appoorva Shantilal (HUF) and Ors. vs. CWT (1982) 28 CTR (Guj) 123: (1982) 135 ITR 182 (Guj) and Raj Kumar Singh Kasliwal vs. CWT (1983) 37 CTR (MP) 248: (1983) 143 ITR 597 (MP). Under these circumstances, we restore this matter to file of WTO to examine facts afresh and then to decide matter in light of aforesaid decisions. In result, Revenue's appeal are partly allowed. *** SIXTH WEALTH-TAX OFFICER v. SMT. KUSUMRANI JAIN
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