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Issues: Interpretation of section 2(e)(2)(ii) of the Wealth-tax Act, 1957 regarding the exemption of a compulsory deposit under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 as an annuity.
Analysis: The judgment delivered by the High Court of GAUHATI involved the interpretation of whether a deposit of Rs. 3,69,320 under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 qualifies as an annuity exempt from wealth tax under section 2(e)(2)(ii) of the Wealth-tax Act, 1957. The court heard arguments from both parties' counsels, Mr. G. K. Joshi for the Revenue and Dr. A. K. Saraf for the assessee. Mr. Joshi contended that a compulsory deposit is not an annuity, while Dr. Saraf argued the opposite, citing a decision by the apex court in CWT v. Arundhati Balkrishna [1970] 77 ITR 505 to support his position. The court noted that the term "annuity" is not explicitly defined in the Act but referred to various legal sources for its meaning. It was highlighted that an annuity generally refers to a fixed sum of money payable periodically, either for life or a term of years. The court examined definitions from Halsbury's Laws of England, Jarman on Wills, Black's Law Dictionary, and Webster's New Twentieth Century Dictionary to understand the concept of an annuity. Further, the court analyzed the nature of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, which mandates individuals or entities with certain income levels to make compulsory deposits to be returned with interest after a specified period. The court emphasized that this scheme does not involve payments to the government. Section 7A of the 1974 Act was highlighted, which deems the compulsory deposit as an asset for exemption under the Wealth-tax Act, indicating that it is not akin to an annuity. Based on the above analysis, the court concluded that a compulsory deposit cannot be categorized as an annuity as per the definition under section 2(e)(2)(ii) of the Wealth-tax Act. Therefore, the court answered the referred question in the negative, ruling against the assessee and in favor of the Revenue. The judgment directed the transmission of a copy to the Income-tax Appellate Tribunal, Guwahati for further action.
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