1968 (9) TMI 22 - HC - Income Tax

Annuity received by the assessee - it was recurring in nature and its source was in the Chief Commissioner s notification read with cl. 30 of the Order relating to jagirs - therefore, it is liable to assessment under the IT Act

Summary

Issues:
1. Whether the amount received by the assessee is income liable to assessment under the Income-tax Act?

Detailed Analysis:
The judgment pertains to a reference made by the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act, 1922, regarding the assessment of an amount received by the assessee. The key question was whether the sum of Rs. 1,07,591 received by the assessee, after the conversion of his jagir into a mansab, is income liable to assessment under the Income-tax Act. The assessee, a member of the royal family of Bhopal, applied for the conversion of his jagir into a mansab under clause 30(i)(c) of the order relating to jagirs. The Chief Commissioner of Bhopal accepted the application, converting the jagir into a cash annuity of Rs. 1,07,591 per year for the assessee's lifetime. The conversion resulted in the jagir being handed over to the State and replaced by yearly sums payable to the assessee. The distinction between an annuity and a capital sum payable in instalments was crucial in determining the nature of the amount received.

The court analyzed the nature of the amount received by the assessee, emphasizing that the conversion of the jagir into a life annuity constituted a revenue receipt in the assessee's hands. The court referenced legal principles to differentiate between an annuity and a capital sum payable in instalments, highlighting that the conversion did not involve a capital sum but rather annual sums unrelated to any capital obligation. The court relied on precedents to support its conclusion, emphasizing that the conversion into a life annuity was not akin to compensation for the acquisition of a jagir under jagir Abolition Acts, as it was initiated by the assessee's application.

Furthermore, the court addressed the argument that the mansab received by the assessee was casual in nature and lacked an enforceable obligation against the State. However, the court disagreed, noting that the conversion into a mansab was ordered by the Chief Commissioner under the law governing jagirs, creating a legally enforceable obligation to pay the annuity. The court highlighted the regularity and recurring nature of the annuity, sourced from the Chief Commissioner's notification and the relevant legal provisions. Ultimately, the court concluded that the sum received by the assessee was indeed income liable to assessment under the Income-tax Act.

Additionally, the court briefly mentioned an argument regarding the placement of the annuity under the disposal of the Controller of Wakfs, but clarified that as the point was not referred for consideration, it was not within the scope of the current analysis. The court answered the question referred to them in the affirmative, holding the assessee liable to pay the costs of the reference.