UDAI CHAND JAIN VS COMMISSIONER OF WEALTH TAX, 1998 PTD-ALLAHABAD-HIGH-COURT-INDIA 1456 (1997)

Wealth tax---

---Exemption---Asset---"Annuity"---Meaning of---Amount standing to credit of subscriber under Compulsory Deposit Scheme (Income-tax Payers) Act, 1974---Constitutes "annuity" within the meaning of S.2(e)(2)(ii)---Is not an asset---Is entitled to exemption---Indian Wealth Tax Act, 1957, S.2(e)(2)(ii).

The amount standing to the credit of a subscriber under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, and which is to be received, back by the subscriber in five equal installments every year together with interest constitutes "annuity" within the meaning of section 2(e)(2)(ii) of the Wealth Tax Act, 1957.and hence is not an "asset" within the meaning of section 2(e) and is, entitled to. exemption, under section 2(e)(2)(ii) of the Act.

CWT v. Banerjee (P.K.) (1980) 125 ITR 641 (SC) ref.

Vikram Gulati for Petitioners.

Shekar Srivastava for Respondents.

JUDGMENT

By this petition, the petitioners have challenged the order passed by the Commissioner of Wealth Tax, Kanpur, under the provisions -of section 25(1) of the Wealth Tax Act, 1957 (hereinafter referred to as the Act), whereby the Commissioner has refused to entertain the application for revision filed by petitioners.

The case of the petitioners is that under the provisions of theCompulsory Deposit Scheme (Income-tax Payers) Act, 1974, the petitioners are liable to make deposit and they have been making such deposits under the said Act regularly with their bankers and the said amounts were to be received back by the petitioners in five equal installments, every year together with interest. The said amounts were shown standing to their credit in the compulsory deposit scheme and have been considered as one of the assets while making assessment of income. The Inspecting Assistant Commissioner, A Range, Kanpur, had taken into account the said amount as their wealth tax assets. However, the petitioners filed a revision application under section 25 of the Wealth Tax Act, 1957, on noticing that an order has been passed by the Income-tax Appellate Tribunal in the case of CWT v. S.D. Nargolwala in 5 ITD 690, wherein Tribunal has held that the aforesaid amounts were not taxable nor were liable to be assessed under the Wealth Tax Act standing to the credit of a subscriber under the compulsory deposit scheme which constitutes "annuity" within the meaning of section 2(e)(2)(ii) of the Act and, as such, the said balances are not assets within the meaning of section 2(e) of the Wealth Tax Act, 1957. Learned counsel for the petitioners placed reliance on the said order passed by the Tribunal. The petitioners moved 'an application for revision before the Commissioner of Wealth Tax, who in his revisional order, disagreed with the decision rendered by the Appellate Tribunal and has held that the said amount deposited in the compulsory deposit scheme cannot constitute "annuity" and the petitioners were not entitled to any exemption.

I have considered the submission of learned counsel for both the parties. It is an admitted fact that the petitioners are liable to deposit certain specified amounts as mentioned in sections 2 and 3 of the Act and in case of failure to do so, there is a provision for penalty prescribed under the said Act. The said amounts were repayable under section 8 of the said Act in five equal instalments commencing from the expiry of two years from the end of that financial year, together with interest due on the whole or, as the case may be, part of the amount of the compulsory deposit which has remained unpaid.

The word annuity has been defined by the Supreme Court in the Banerjee (1980) 125 ITR 641, wherein "annuity" has payment to be made periodically and should be a fixed or amount would amount to "annuity". In the instant case, the petitioners were entitled to receive back the said amount in five equal instalments by way of repayment under the compulsory deposit scheme under section 8 of the Act. In any view of the matter, such repayment was fixed and was in the nature of annuity receivable by the petitioners in five equal instalments every year. The amount of annuity has been exempted as a part of the assets of the petitioners under section 2(e)(2)(ii) of the Wealth Tax Act, 1957, which reads as follows:

"aright to any annuity not being an annuity purchased by the assessee or purchased by any other person in pursuance of a contract with the assessee in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant."

I hold that the said amount deposited in the compulsory deposit scheme is to be repaid in five equal instalments and the petitioners are entitled to get exemption. As such, the order passed by the Commissioner of Wealth Tax under section 25(1) the said Act, dated March 29, 1995, is hereby quashed and set aside.

In the result, the petition succeeds and is allowed. The order dated March 29, 1995, passed by the Commissioner of Wealth Tax, Kanpur, is quashed. There will be no order as to costs.

M.B.A./1686/FCPetition admitted.