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Issues:
1. Whether the annuity of Rs. 1,000 per month under annexure 'C' was exempt under section 2(e)(iv) of the Wealth-tax Act, 1957? Analysis: The judgment pertains to a wealth-tax assessment for the assessment years 1962-63 and 1963-64. The original assessee, a well-known economist, entered into agreements regarding a plot of land leased for constructing a cinema theatre. Subsequently, an agreement dated May 20, 1958, was made, where the original assessee was to receive Rs. 1,000 per month for his lifetime from another party. The Wealth-tax Officer valued this life interest at Rs. 51,000 and Rs. 48,960 for the respective years. The Appellate Assistant Commissioner rejected the claim of exemption under section 2(e)(iv) of the Wealth-tax Act, stating that the terms did not preclude commutation. However, the Appellate Tribunal accepted the claim, emphasizing the preclusion of commutation in the agreement. The Tribunal held that the annuity was exempt under section 2(e)(iv). The key issue revolved around the interpretation of section 2(e)(iv) of the Wealth-tax Act, 1957. The provision excludes a right to an annuity if the terms preclude commutation into a lump sum grant. The Court analyzed the agreement dated May 20, 1958, which indicated that the annuity was in exchange for a lump sum payment due under a previous agreement. The terms of the agreement explicitly stated that the annuity was for the lifetime of the original assessee and did not allow for commutation. The Court found that the annuity was a simple grant, with no provision for commutation, thereby falling within the exemption under section 2(e)(iv) of the Act. The Court emphasized that the terms and conditions of the agreement were crucial in determining the applicability of the exemption. The agreement clearly outlined the monthly payments for the lifetime of the original assessee and the consequences of default. It also highlighted that the annuity was granted in lieu of a lump sum payment, indicating an implied preclusion of commutation. The Court concluded that the agreement did not allow for commutation of any part of the annuity into a lump sum grant, thus meeting the criteria for exemption under section 2(e)(iv) of the Wealth-tax Act, 1957. In conclusion, the Court ruled in favor of the assessee, stating that the annuity of Rs. 1,000 per month under the agreement dated May 20, 1958, was exempt under section 2(e)(iv) of the Wealth-tax Act, 1957. The revenue was directed to pay the costs of the reference to the assessee.
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