1987 (11) TMI 54 - HC - Income Tax

Summary

Issues:
1. Taxability of annuity under the Sreepadam Land Enfranchisement Act, 1969.
2. Taxability of income diverted through a power of attorney.

Analysis:

Issue 1: Taxability of annuity under the Sreepadam Land Enfranchisement Act, 1969:
The case involved the assessment of whether the annuity received under the Sreepadam Land Enfranchisement Act, 1969 was liable to be taxed as a revenue receipt. The Sreepadam Palace received compensation in the form of annuity in perpetuity for the lands enfranchised under the Act. The court analyzed the nature of the compensation provided under the Act, emphasizing that the annuity was payable in perpetuity in exchange for the extinguishment of the right, title, and interest of the Sreepadam Palace over certain lands. The court distinguished between annuity and capital sum, citing a Supreme Court precedent that highlighted the taxability of annuity as income. It concluded that the annuity received was a revenue receipt and therefore taxable.

Issue 2: Taxability of income diverted through a power of attorney:
The second question raised in the case pertained to the taxability of income diverted through a power of attorney executed in favor of the Assistant Devaswom Commissioner. The contention was that the diversion of income at the source through the power of attorney precluded the amount from being assessed as income in the hands of the assessee. However, the court rejected this argument, stating that the money diverted through the power of attorney was already due and payable to the assessee under the statute. The court held that the payment to the power of attorney holder did not occur before the income accrued to the assessee, and therefore, the amount was assessable as income in the hands of the assessee.

In conclusion, the court ruled in favor of the Revenue and against the assessee on both issues. The judgment directed the parties to bear their respective costs, and a copy of the judgment was to be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.