MAJ. KAPIL MOHAN VS COMMISSIONER OF INCOME-TAX, 1998 PTD-DELHI-HIGH-COURT-INDIA 1089 (1996)

Income-tax----

----Income---Annuity deposit ---Refund--Assessee executor of estate-- Amount deposited by deceased under annuity deposit scheme---Annuity with interest repaid in regular instalments---Income assessable in hands of assessee----Indian Income Tax Act, 1961, S.280-D.

As the executor of an estate the assessee received amounts of instalments of annuity along with interest relating to the assessment years 1971-72 to 1975-76 and 1977-78. The deceased has deposited a certain sum under the Annuity Deposit Scheme, which along with interest was repaid in 10 equal instalments to the assessee. The assessee in the assessment proceedings contended that these sums were not taxable as income in his hands. Though on appeal, the Appellate Assistant Commissioner accepted the assessee's stand, the Tribunal held the amount to be taxable as income in the hands of the assessee. On a reference:

Held, that the refund of the annuity deposit received by the assessee as executor of the estate of the deceased depositor was income assessable in the hands of the assessee.

Padam Shree N.N. Mohan v. CIfi (1984) 150 ITR 92 (Delhi) fol.

CIT v. Rodhan H. Shroff (Dr.) (1994) 207 ITR 957 (Bom.) and CIT v. Talwar (O.N.) (1980) 123 ITR 80 (Delhi) ref.

P.N. Monga and Manu Monga for the Assessee.

Rajendra with R.K. Chaufla for the Commissioner.

JUDGMENT

D.K. JAIN, J.---In these references under section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), pertaining to the assessment years 1971-72 to 1975-76 and 1977-78, at the instance of the assessee, the following questions of law have been referred for the opinion of this Court:

For assessment years 1971-72 to 1974-75:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the refund of annuity of Rs.19,656 to the assessee (as the executor of the estate of the late Shri N. N. Mohan) was income assessable in his hands as such executor, for each of the assessment years 1971-72, 1972-73, 1973-74, and 1974-75?"

For assessment years 1975-76 and 1977-78:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the refund of annuity of Rs.19,656 for the assessment year 1975-76 and Rs. 11, 586 for the assessment year 1977-78 to the assessee as an executor of the estate of his late father, Padam Shree N.N. Mohan, was his income and Y' was assessable in his hands as executor of the estate of the deceased?"

Since, in substance, the issue involved in all the references is the same, these are being disposed of by this common judgment.

The assessee is the executor of the estate of the late Shri N.N. Mohan. The late Shri N.N. Mohan had deposited a sum of Rs. 1,57,250 under the Annuity Deposit Scheme under Chapter XXII-A of the Act, which, along with interest was refundable in ten equal instalments under section 280-D of the Act. Shri N.N. Mohan having died on July 15, 1969, the repayment of instalments of annuity along with interest, amounting to Rs.19,656 and Rs. 11.586, were received by the assessee as the executor of his estate in each of the years, relevant to the assessment years 1971-72 to 1975-76 and 1977-78, respectively.

According to the assessee, these sums were not taxable as income in the hands of the executor but his stand was not accepted and these amounts were included as income in the hands of the assessee for the respective assessment years. On appeal, the Appellate Assistant Commissioner accepted the view point of the assessee and deleted the addition. On further appeal by the Revenue, the Income-tax Appellate Tribunal, following its earlier order in respect of the assessment year 1970-71, held that the said amounts were taxable in the hands of the executor. At the instance of the assessee, therefore, the aforenoted question have been referred.

At the outset, Mr. Rajendra, learned counsel for the Revenue, has invited our attention to an earlier decision of this Court in the case of the assessee, reported as Padam Shree N.N. Mohan v. CIT (19841 150 ITR 92, wherein it has been held that the refund of annuity deposit received by the executor of the estate of the deceased depositor in income assessable in the hands of the executor.

On the other hand, Mr. P.N. Monga, learned counsel for the assessee, has contended that the said decision requires reconsideration because it is based on another decision of this Court in CIT v. O.N. Talwar (1980) 123 ITR 80, which has no application to a case like the present one. He sought to distinguish the decision in O.N. Talwar's case (1980) 123 ITR 80 (Delhi) on the facts on the ground that in that case the assessee was a Karta of the Hindu undivided family and prior to the partition of this Hindu undivided family he had made certain annuity deposits on behalf of the Hindu undivided family as Karta. After the partition of the family, he received his share of the repayment of annuity deposits as an erstwhile member of the family and on these fact this Court held that the assessee was a "depositor" to whom the annuity was due to be repaid and, therefore, the receipt of instalments of the annuity by a person, as a Karta of an erstwhile family, was a receipt by the "depositor" within the meaning of section 280-D of the Act. He has also urged that under the charging section 2(24)(viii) of the Act what is included in the definition of income is the annuity due or the commuted value of any annuity paid to a "depositor" under section 280D and not the repayment to any person other than the depositor and, therefore, the repayment of instalments of annuity to an executor cannot be treated as income. He, thus, asserts that we should not drop the earlier view taken by this Court in the case of the assessee himself and instead the matter may be referred to a larger Bench for reconsideration.

Though, prima facie, there appears to be some merit in the argument of Mr. Monga and in fact he is supported by a decision of the Bombay High Court in CIT v. Dr. Rdhan H. Shroff (1994) 207 ITR 957, having regard to the fact that the tax effect on the amounts involved is very small and the issue is also of non-recurring nature in view of the omission of section 280-D along with other sections of Chapter XXII-A by the Finance Act, 1988, with effect April 1, 1988, we feel that it would not be worthwhile to refer the case to a larger Bench particularly when for the earlier year the issue stands concluded against the assessee by the aforementioned decision of this Court which has not been challenged further.

In this view of the matter, following the decision of this Court in the assessee's own case Padam Shree N.N. Mohan v. CIT [1984] 150 ITR 92 in respect of the assessment year 1970-71, we answer the questions in the affirmative, i.e., in favour of the Revenue and against the assessee.

There will, however, be no order as to costs.

M.B.A./1272/FC.Reference answered.