Law: Wealth Tax Act, 1957

Section: 2,2(e)(iv)

[Indian Wealth Tax Act, 1957].......Section 2(e)(iv)-Wealth Tax-Net wealth-Exemption-Annuity-Assets-Exchange of principal sum due under mortgaga with Annuity-Implied preclusian of commutation Annuity, whether exempt-Held yes. The definition of "assets" as given in Section 2(e)(iv) brings out two things very clearly. lf an annuity is such that by its terms and conditions commutation of any part thereof into a lump sum grant is not precluded, it will be included in the expression "assets". Conversely, in the case of any annuity where the terms and conditions relating thereto preclude commutation thereof into a lump sum grant, it will not be included in the expression "assets". Such preclusion may be by the express terms of the contract or may arise by implication. There was an agreement whereby M gave up and released H from a debt remaining due under a deed of mortgage. M agreed to reconvey the property separately. The operative part of the deed contained the following principal terms: under the first term H agreed to pay Rs.1,000 per month to M for his lifetime : under the second term it was agreed that if any default in payment of the monthly payment for any two months was committed, M was entitled to recover from H an amount at the enhanced rate of Rs. 1,500 per month together with interest at 9 per cent. in respect of each month of the default : the third term was quite explicit that in consideration of the annuity M released H from the debt (principal sum and interest) due under the deed of mortgage 2 Held, that the recitals in the deed clearly showed that there was an implied preclusion from commutation of the lump sum grant. The contract was one for a simple grant of annuity. Section 2(e)(iv) was attracted and the annuity received by the assessee was exempt. Case referred to: CWT V. Dr. E.D. Anklesaria [1964] 53 ITR 393 (Guj). ORDER TULZAPURKAR J-The question that has been referred to us for our determination in this reference under Section 27(1) of the Wealth Tax Act, 1957, runs as under : "Whether, on the facts and in the circumstances of the case, the annuity of Rs. 1,000 per month arising to the assessee under Annexure C was exempt under Section…

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