Law:

Section:

Section 2(e)(1)(iv) of the Wealth-tax Act, 1957 - Assets - Annuity - Settlor created two trusts, one on 19-11-1941 and another by will on 30-5-1938 - Assessee, inter alia, entitled under former trust to net income from trust property and under latter to income of residuary movable estate and accumulation - Whether assessee entitled to exemption under section 2(e)(1)(iv) - Held, on facts, no Facts The assessee K was the son of DC who created two trusts - one on 19-11-1941 and another by a will on 30-5-1938. Under the former trust, K, after settlor's death, was entitled, during his lifetime, to the net income from trust property. Under the latter, K's guardian was entitled to get a monthly sum of Rs. 300 for K's education and maintenance during his minority, and, on his attaining majority, K and other children of DC were entitled, during their lifetime, to "residuary movable estate and accumulation" and his mother AD was eligible to get a monthly payment of Rs. 400, during lifetime or widowhood for her own maintenance. The WTO included the value of the life interests in the net wealth of both K and AD. The AAC sustained the WTO's order. On further appeal, the Tribunal held (i) that the terms and conditions under which the assessee was entitled to the income from the trust funds precluded commutation of such income or any part thereof into a lump sum grant; and (ii) that the income flowing from the trust clearly fell within the category of "annuity" which was classified as an exempted asset under section 2(e )(1)(iv). On reference: Held In the instant case, the relevant terms and conditions stipulated in the two trust deeds clearly indicated that what was available to the assessee was the life interest and not the annuity within the meaning of section 2(e)(1)(iv). Hence, the assessee was not entitled to exemption under section 2(e)(1)(iv). An annuity is a money payment of a fixed sum annually made and is a charge personally on the grantor. Where certain sums of money are required to be paid under a trust or the trustees are required to pay the income of the trust fund after deducting the expenses to the assessee during his or her lifetime, then such payments are…

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