1980 (7) TMI 79 - HC - Income Tax

Summary

Issues:
1. Whether the sum received by the assessee by way of refund of annuity deposit is assessable in his hands under section 2(24)(viii) of the Income-tax Act, 1961, for the assessment years 1971-72 and 1972-73.

Analysis:
The judgment revolves around the assessment of the sum received by the assessee as a refund of annuity deposit under the Income-tax Act, 1961. The assessee, a partner of a firm, made an annuity deposit and later declared it as joint family property. The Income Tax Officer (ITO) assessed the refund as income in the hands of the assessee despite the declaration. The Appellate Assistant Commissioner (AAC) and the Tribunal differed on whether the refund should be considered as individual or Hindu Undivided Family (HUF) income. The key issue was the interpretation of the annuity deposit schemes framed under s. 280W, which prohibited transfer. The Tribunal held that the declaration was ineffective, leading to the refund being treated as the assessee's income. However, the High Court disagreed, emphasizing that the declaration did not violate the schemes as it was a unilateral act, not a transfer, and the refund should be assessed as HUF income.

2. Whether the annuity deposit instalments repaid to the assessee are assessable in his hands.

Analysis:
The second issue focused on whether the entire annuity deposit instalments repaid to the assessee should be assessed in his hands. The revenue argued that the refund should be treated as income from converted property under s. 2(24)(viii) and s. 64(2) of the Act. However, the High Court highlighted that the refund, though received by the assessee, was held in trust for the HUF due to the declaration made. The court interpreted s. 64(2) to deem the income from converted property as arising to the individual, not the family, and emphasized that the computation of income should align with s. 64(2) provisions. It clarified that the refund, when realized by the HUF, should not be considered income under s. 2(24)(viii) and should be assessed in accordance with s. 64(2). The court rejected the revenue's contention that the declaration was against the taxation scheme, ruling in favor of the assessee.

The High Court's judgment clarified the treatment of annuity deposit refunds in the context of individual and HUF income assessments under the Income-tax Act, 1961, emphasizing the importance of statutory provisions and unilateral acts in determining tax liabilities.