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TMI Blog1971 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... trustee, and the securities were transferred to it. By virtue of a power to modify or alter the trust reserved by the settlor the trust deed was subsequently modified. A supplementary deed of trust dated April 28, 1950, was executed. Reading the two deeds together, the terms of the trust appear to be as follows : The trustee would pay the net income of the trust fund to the settlor during his life. Upon his death, the net income would go to his son, Pranab Kumar, during his life. If Pranab Kumar died before the settlor, then from the date of the settlor's death the net income would be paid in equal shares to the settlor's other son, Sonab Kumar, and his daughter-in-law, Shakuntala, wife of Pranab Kumar, during their life or entirely to the survivor of them. That would also follow if Pranab Kumar survived the settlor, in which case upon the death of Pranab Kumar the net income would be paid to Sonab Kumar and Shakuntala or their survivor. In case the two sons and daughter-in-law died before the settlor, then, on and from the death of the settlor, and in case any one or more of them survived the settlor then from the death of the last survivor of them, the trustee would stand possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v). The assessee says that the income received by him from the trust fund constitutes an annuity and the terms and conditions of the amended trust deed preclude the commutation of any portion of the annuity into a lump sum grant. When this reference was first heard by this court, it was found that the Appellate Tribunal had held that the income received by the assessee could not be described as an annuity and, therefore, on that ground alone refused exemption. It did not consider it necessary to find whether the terms and conditions of the trust deed precluded the commutation of any portion of the annuity into a lump sum grant. The court sent for a supplementary statement of the case observing : " The Tribunal held that the assessee had only 'a life estate in the trust fund and as such life estate was to enure for more than six years, the exemption allowable under section 2(e)(iv) was not available to the assessee.' Evidently, the finding given by the Tribunal, on the materials presented before it, are incomplete and it is not possible to answer the question under reference on the basis thereof. The mere fact that the assessee had only a life estate in the trust fund is not a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of law which has been propounded by the Commissioner it is necessary to descend from the realm of hypothesis to the region of fact. The Commissioner has taken pains to state some matters very fully, but he has not found the material facts as he should have done. It is necessary to know as regards : (a) the business, machinery, plant and other movables ; (b) the factory buildings and land whether they were before 1931 the self-acquired property of the father or his ancestral property or joint family property or whether they fall into sonic other and what category according to the customary law. It is necessary that the customary law of the family should be found is a fact so as to show what right if any the father had to partition or transfer the movable or immovable property above-mentioned, to whatever category it may be found to belong in whole or in part. The riwa-ji-am is evidence of the custom but it is not conclusive and a finding as to custom is required. When the rights of the members of the family have been ascertained, it will be necessary to ascertain whether in fact the fattier did at any time purport to give shares or interest in any of the above-mentioiie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills Co. Ltd. v. Commisioner of Income-tax. The Tribunal has referred to some of these cases, but has failed to appreciate the true intent of this court's order. The court has made it clear that no fresh material should be taken on the record for the purpose of giving findings on the questions framed by it. As regards the point whether the terms and conditions of the deed of trust precluded the commutation of the annuity or any portion of it into a lump sum grant, that was never considered by the Tribunal at all in its appellate order. In view of the considerations mentioned above, we felt that we should send the matter back again to the Tribunal for a proper compliance of this court's order under section 66(4). But learned counsel for the parties jointly state that they would be satisfied if this court proceeded to dispose of the reference on the material which is already contained in the existing statement of the case. Accordingly, we shall now proceed to decide the question referred on the basis of what is before us. Two points arise for consideration. Firsly, whether the right of the assessee under the deed of trust dated October 26, 1937, as amended by the supplementary de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grantor. The difference between an annuity and a life interest was examined by the Gujarat High Court in Commissioner of Wealth-tax v. Mrs. Arundhati Balkrishna. The court pointed out that the amount of an annuity may not be absolutely fixed and may be variable from year to year, but so long as the variation in the amount to be received is in no way dependent upon or related to the general income of the estate it can still be described as an annuity. In the cases mentioned above, reference was made to Northcliffe, In re : Christie v. Lord Advocate and Duke of Norfolk, In re : Public Trustee v. Inland Revenue Commissioners. It will be of advantage to notice what was said by the learned judges in the last case. Evershed M. R. pointed out that an annuity, even though, variable, as in the case of In re Cassel, was in no way dependent upon or related to the general income of the estate. Jenkins L. J., in an illuminating passage, observed : "An annuity charged on property is not, nor is it in any way equivalent to, an interest in a proportion of the capital of the property charged sufficient to produce its yearly amount. It is nothing more or less than a right to receive the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is entitled to is a definite and certain sum. Also, having regard to the terms of the trust deed, it is not possible to say that the interest of the assessee constitutes an interest in the capital of the trust fund. Therefore, upon the test laid down by Jenkins L. J. in Duke of Norfolk, In re: Public Trustee v. Commissioners of Inland Revenue, it cannot be described as a life interest. We are fortified in the view we are taking by the decision, on somewhat comparable facts, of the Andhra Pradesh High Court in Commissioner of Wealth-tax v. Nawab Fareed Nawaz Jung. It is true that the assessee is entitled to the net income only and that because the trustee has the right to deduct from the gross income its remuneration, its annual income fee and the expenses in managing the trust estate, the net income may vary from year to year. Yet even here the remuneration and the annual income fee can be charged by the trustee at a fixed rate only, and any variation in the net income may be attributed to the varying expenses from year to year in managing the trust estate. We have already pointed out that freedom from variation is not an absolute test determining the character of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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