1998 (6) TMI 104 - AT - Income Tax

Summary

Issues involved:
1. Exemption claim under section 2(e)(2)(ii) of Wealth-tax Act for deposit in compulsory deposit scheme.
2. Contradictory decisions by different Tribunals and High Courts regarding the nature of deposits made under the compulsory deposit scheme.
3. Interpretation of section 2(e)(2)(ii) of the Wealth-tax Act and its applicability to deposits under the Compulsory Deposit Scheme.
4. Relevance of Special Bench decisions and High Court judgments in determining the taxability of deposits under the Wealth-tax Act.

Detailed Analysis:
1. The case involved an appeal by the revenue against an order passed by the Dy. CWT(Appeals) regarding the exemption claim under section 2(e)(2)(ii) of the Wealth-tax Act for the assessment year 1986-87. The assessee claimed exemption based on a Tribunal decision, which the Assessing Officer initially rejected. However, the Dy. CWT(Appeals) allowed the claim, citing the Tribunal decision. The issue was whether the deposits in the compulsory deposit scheme qualified for exemption under the Act.

2. The learned departmental representative challenged the Dy. CWT(Appeals) decision, pointing out contradictory decisions by different Tribunals and High Courts. The representative argued that the decision relied upon by the Dy. CWT(Appeals) had been overruled by a Special Bench of the Tribunal. The representative also cited judgments from Gauhati and Bombay High Courts to support the argument that deposits under the Compulsory Deposit Scheme did not qualify as annuities under section 2(e)(2)(ii) of the Act.

3. The Tribunal analyzed the provisions of section 2(e)(2)(ii) of the Wealth-tax Act, which exempts certain rights to annuities from being considered as assets for wealth tax purposes. The Tribunal discussed the conflicting views on whether deposits under the Compulsory Deposit Scheme should be treated as annuities. It referred to the Special Bench decision, which held that such deposits did not qualify as annuities, contrary to the earlier Tribunal decision. The Tribunal also considered the interpretations by Gauhati and Bombay High Courts on the matter.

4. The Tribunal further examined decisions from different High Courts, such as Patna, Madras, and Allahabad, which had varying opinions on the taxability of deposits under the Compulsory Deposit Scheme. It discussed the exemptions provided under section 5 of the Wealth-tax Act and the relevance of section 7A in granting specific exemptions to such deposits. The Tribunal emphasized the intention of the legislature in providing exemptions and the significance of subsequent Special Bench decisions in interpreting the law.

5. Ultimately, the Tribunal concluded that the revenue's contention was correct, and the relief granted to the assessee based on the earlier Tribunal decision could not be sustained in light of the subsequent Special Bench decision and other High Court judgments. The Tribunal highlighted the entitlement of the assessee to exemption under section 5(1)(xxvi) read with section 7A of the Compulsory Deposit Scheme (Income-tax Payers) Act, subject to the limitations provided in the Act. The appeal was allowed based on these observations.