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TMI Blog1962 (11) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the case that the assessee owns house properties and shares in limited companies and is entitled to communication amounts under the Hyderabad (Abolition of Jagirs) Regulation, 1358 F. (No. LXIX of 1958F.) and the Hyderabad Jagirs (Commutation) Regulation 1359 F. (No. XXV of 1359F.). In respect of the inclusion of the shares of the limited companies and the communication amount in the assessment for wealth-tax for the two relevant years, the contention of the assessee was that since the shares of the company held by him represent the wealth of the limited company, the limited company was liable to pay tax on the same and the wealth as represented by the shares could not once again be included in his net wealth. This contention was negatived throughout by the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal, the last of which holding that the wealth of the limited companies was not conterminous with, or the same as, the wealth of a shareholder as represented by the value of the shares and that as there was no denial that the assessee was the owner of the shares it was properly included in his net wealth. At the time of hearing of the appeal, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set has been defined in section 2(e) as including property of every description, movable or immovable, but does not include agricultural land and growing crops, etc., or any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land or animals or a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; or any interest in property where the interest is available to an assessee for a period not exceeding six years. Net wealth has been defined under section 2(m) as meaning the amount by which the aggregate value computed in accordance with the provision of the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the Act is in excess of the aggregate value of all the debts owned by the assessee on the valuation date other than debts which under section 6 are not to be taken into account and debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under the Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Schedule in considering whether the value of the shares is to be included in the net wealth of the assessee is germane to the determination of the question No. 1 as amended by us and consequently we must hold that the shares owned by the assessee in the limited companies are properly includible in its net wealth subject to the relief if applicable to him under the rules of the Schedule to the Wealth-Tax Act. 4. The answer to the second question would depend upon the nature of the commutation and the extent of the interest which the assessee has in that commutation amount under the Jagir Abolition Regulation and the Jagirs Commutation Regulation. It has to be noticed that under the definitions of "assets" and "net wealth" every kind of property, i.e., movable or immovable, the valuation of which is computable under the provisions of the Act wherever situated and on the valuation date which is in excess of the aggregate value of all the assets other than those specified in section 2(m) would constitute the net wealth which is assessable under section 3. The question is whether commutation amounts are "assets" within the meaning of section 2(e) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 7) and after payment of the balance under section 10 how the amount of the net income should be distributed under section 11 and and deductions permissible under section 12 from that amount. Section 14 states that the amounts payable to jagirdars and hissedars under the Jagirs Abolition Regulation shall be deemed to be interim maintenance allowances payable until such time as the term for the commutation of jagirs are determined, so that the amount which is paid as interim maintenance was treated as income of the jagirdar till such date as the commutation amount was paid. That this is so is clear from section 7(2) of the Jagirs Commutation Regulation, which is in the following terms : "The payment to a jagirdar or hissedar of his appropriate share in the commutation sum of the jagir shall constitute the final commutation as from the 1st April, 1950, of his rights in the jagir and if any payment by way of an interim maintenance allowance under the said Regulation is made in respect of a period the whole or part of which is subsequent to the said date, the amount of such payment or, as the case may be, the appropriate proportion of such amount shall be recovered from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . & N. 769 ; 117 E.R. 967.] to which reference is made invariably in dealing with this aspect of the matter may be usefully noticed : "An annuity means where an income is purchased with a sum of money, and the capital has gone and has ceased to exist, the principal having been converted into an annuity." 8. The fine distinction between the two ideas, namely, an annuity properly so called and an annual capital payment, is always difficult and has been such as to exclude any definition by which one or the other can be determined with any certainty. The true nature and character of each transaction has to be looked into. A simple way of putting it, though we hesitate to simplify a matter, which is best with difficulty, is that if it is the purchase of any income the annual payment is exigible to Income Tax but if it is a payment of a capital by annual instalment or in other words if the annual sum receivable represents a payment or return of the capital, the amount thus paid would form part of the capital assets. Romer L.J. in Commissioners of Inland Revenue v. Ramsay [[1935] 20 Tax Cas. 79] has given this lucid example to illustrate the principle involved : "A man h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is exemption, in our view, has no application to the commutation amount. Firstly, because the amount of commutation is not received by an assessee from the Government in pursuance of any gallantry or merit award which is either instituted or approved by the Central Government. The commutation amount is not granted for either gallantry or merit nor is it an award instituted or approved by the Central Government. As we have pointed out, commutation amount is the value of the jagir which is being taken over by the Government in much the same way as compensation payable to a person whose asset is taken over. If it was a voluntary surrender on terms to be determined between the parties, the commutation amount would represent the amount of consideration fixed for the surrender of that asset and if it was a compulsory acquisition, the value fixed in accordance with the law authorising such acquisition; secondly, the exemption has been obviously granted to stimulate encouragement to armed and police forces and is not even remotely referable to commutations of jagirs whatever the reasons for their grant may have been. 12. Before concluding we may at this stage cite a decision of a Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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