1983 (12) TMI 129 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of the refund of annuity deposit.
2. Applicability of the Madras High Court decision in CIT v. S.M. Ebrahim.
3. Determination of whether the depositor and the recipient of the refund are the same entity.
4. Role of the Tribunal in interfering with concurrent findings of lower authorities.
5. Onus of proof on the assessee to substantiate claims.

Detailed Analysis:

1. Taxability of the Refund of Annuity Deposit:
The primary issue was whether the refund of annuity deposit amounting to Rs. 19,770 was taxable in the hands of the assessee, the estate of late Shri T.S. Srinivasa Iyer, represented by Shri S. Balasubramanian. The ITO included this amount in the total income, which was contested by the assessee. The Commissioner (Appeals) upheld the addition, leading to the present appeal.

2. Applicability of the Madras High Court Decision in CIT v. S.M. Ebrahim:
The Commissioner (Appeals) and the Tribunal's Judicial Member relied on the decision of the Madras High Court in CIT v. S.M. Ebrahim, which held that the refund of annuity deposit could be taxed only in the hands of the original depositor if alive. Since the original depositor, Shri T.S. Srinivasa Iyer, was deceased, the refund could not be taxed in the hands of his executor or legal representative. However, the Judicial Member argued that since Shri S. Balasubramanian, the executor, received the refund, it should be taxed in his hands.

3. Determination of Whether the Depositor and the Recipient of the Refund are the Same Entity:
The Tribunal needed to ascertain whether the person who made the annuity deposit and the person who received the refund were the same entity. The Judicial Member concluded that the assessee failed to provide proof that the deposit was made by the deceased or on his behalf, thereby justifying the taxability of the refund in the hands of the executor. Conversely, the Accountant Member argued that the deposit was made by Shri S. Balasubramanian as the legal representative of the estate, and the refund was received in the same capacity, thus making it exempt from tax.

4. Role of the Tribunal in Interfering with Concurrent Findings of Lower Authorities:
The Judicial Member raised the issue of whether the Tribunal could interfere with concurrent findings of the lower authorities. He argued that the Tribunal should not disturb such findings unless there is evidence of misreading or misconceiving the material on record. The Accountant Member, however, emphasized that the Tribunal has the authority to re-examine facts to ensure justice, especially when the lower authorities' findings are based on incorrect premises.

5. Onus of Proof on the Assessee to Substantiate Claims:
The Tribunal had earlier remanded the case to the ITO to verify the identity of the depositor and the recipient. The Judicial Member noted that the assessee failed to provide the necessary proof, such as the copy of the application for payment of annuity or the letter of refund from the RBI, to substantiate his claim. The Accountant Member, however, found that the ITO's report sufficiently established that the deposit was made by the legal representative of the estate and not in an individual capacity.

Conclusion:
The Third Member, Vice President (WZ), agreed with the Accountant Member, holding that the refund of annuity deposit could not be taxed in the hands of the estate of late Shri T.S. Srinivasa Iyer. The Third Member emphasized that the person who paid the annuity deposit (the representative assessee) and the person who received the refund (the agent of the heirs) were different entities, thereby applying the Madras High Court's decision in M.M. Muthiah's case. Consequently, the appeal was allowed, and the addition of Rs. 19,770 was deleted from the total income of the estate.