TMI Blog1967 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ecluded the commutation of any portion thereof into a lump sum grant and as a consequence had to be excluded from that the net wealth of the assessee ? (3) Whether, on the facts and in the circumstances of the case the life interest of the assessee in the two Bombay trusts to the extent of one-half of such interest was a right to an annuity, the terms and conditions relating to which did not preclude the commutation of any portion thereof into a lump sum grant and was in consequence includible in the net wealth of the assessee ? (4) Whether, on the facts and in the circumstances of the case, the assessee was entitled to exemption under section 5(1)(viii) in respect of ornaments and jewellery worth Rs. 55,003? " The assessee is an individual and the questions have arisen in respect of her assessment for wealth-tax for assessment years 1957-58, and 1958-59, the corresponding valuation dates being December 31, 1956, and December 31, 1957. By a deed of settlement, dated September 7, 1945, the father of the assessee settled certain shares of the estimated value of Rs. 5,50,325 of certain Indian companies upon the trusts mentioned in the deed of settlement. The trusts were for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an appeal and the Appellate Assistant Commissioner rejected all the contentions urged on behalf of the assessee. The Appellate Assistant Commissioner held that the interest which the assessee had got under the two Bombay trusts and the Ahmedabad trust was not entitled to exemption under section 2(e)(iv) of the Wealth-tax Act; and as regrads the ornaments, he confirmed the decision of the Wealth-tax Officer. In the further appeals before the Tribunal, the same contentions were urged on behalf of the assessee as had been urged before the Wealth-tax Officer and the Appellate Assistant Commissioner. The Tribunal came to the conclusion that the interest of the assessee in the Ahmedabad trust was a right to on annuity, the terms and conditions relating to which precluded the commutation of any portion thereof into a lump sum grant and hence was entitled to exemption under section 2(e)(iv) of the Act. As regards the two Bombay trusts, the Tribunal came to the conclusion that under the different clauses of the two deeds of settlement pertaining to the two Bombay trusts, the assessee was entitled to withdraw from the trusts, at her own discretion after she attained majority and af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bombay High Court in Girdhardas Co.'s case, which is binding on this High Court, the learned Advocate-General has not pressed that preliminary objection though he has not given it up. In Income-tax Reference No. 23 of 1965, which we decided on July 10, 1967, the same question arose before us in a slightly different form and there, following the decision of Chagla C.J. in Girdhardas Co.'s case we held that even a losing party might ask for a reference on questions of law which arise from the same order of the Tribunal as that from which the other party had asked for a reference on some other questions of law, even though this particular losing party so asking has not filed an application which the period of limitation prescribed under the Income-tax Act and satisfied the other conditions laid down by that section. In our decision in Income-tax Reference No. 23 of 1965, we have referred to an unreported decision of the Madhya Pradesh High Court and have observed that we are bound by the decision of the Bombay High Court in Girdhardas Co.'s case, which was delivered prior to the partition of the bilingual Bombay State and hence is binding on us. This preliminary objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een argued before us in this reference is whether the right which the assessee has got under each of the three trusts, viz., the two Bombay trusts and the Ahmedabad trust, can be said to be an annuity. It is clear that only if her right under each of these three deeds of trust can be said to be an annuity that the further question would require consideration whether under the terms and conditions relating to her right under these different trust deeds, the commutation of any portion of this annuity into a lump sum grant is precluded. We will, therefore, first examine the provisions of the three deeds of trust under each of which the assessee has got a right to receive certain payments from year to year. The first of the two Bombay trusts was executed on September 7, 1945. The trust deed was executed by the father of the assessee and her two brothers were appointed as the trustees of the deed of trust. By the deed of trust, shares described in the schedule to the deed of trust and of the estimated market value of Rs. 5,50,325 were settled upon trust. Under clause 3(a) of the trust deed, until the first day of January, 1948, the trustees, after deducting from the income of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust deed was also on the same lines as the first Bombay trust deed. It is, therefore, not necessary for us to set out in detail the provisions of the second Bombay trust deed. By the Ahmedabed trust deed, which was executed on December 30, 1945, the mother-in-law of the assessee settled upon trust for the benefit of the assessee and others a sum of Rs. 3,28,931, and shares of the aggregate market value of Rs. 11,81,670. The husband of the assessee and her two brothers-in-law were the trustees under this trust deed, Under clause (a), this trust deed provides that the trustees should pay the income of the trust funds to the assessee during the assessee's lifetime for her sole and separate use. The rest of the clauses of the Ahmedabad trust deed relate to the disposition of the trust fund to different beneficiaries after the lifetime of the assessee ; and provision is made in these other clauses for all the different eventualities which might happen after the lifetime of the assessee. It is not necessary for the purposes of this judgment to refer to those other clauses of the Ahmedabad trust deed. It is, therefore, clear that under the two Bombay trusts created by the father of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edition, page 1113, second volume, annuity " has been defined thus: " An annuity is a right to receive de anno its annum a certain sum that may be given for life, or for a series of years; it may be given during any particular period, or in perpetuity; and there is also this singularity about annuities, that, although payable out of the personal assets, they are capable of being given for the purpose of devolution, as real estate; they may be given to a man and his heirs, and may go to the heir as real estate." The distinction which prevailed in English law between personal estate and real estate does not apply in India and, therefore, it is not necessary for us to consider the distinction between real estate and personal estate while considering the law as to annuities in India. In Bignold v. Giles , Kindersley, V.C., has stated that the annuities were to endure till the death of the survivor, and the representative of a deceased annuitant was entitled till the death of the surviving annuitant. The definition which we have set out above from Halsbury has been set out by Kindersley, V.C. ; and Halsbury cites this decision in support of the proposition and the report of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and second of Lord Russell himself as a member of the House of Lords in Christie v. Lord Advocate. Both the two last mentioned cases were instances of dispositions of aliquot shares of the general income of an estate to be enjoyed in succession, as distinct from an annuity or yearly sum, which, even though variable (as in the case of In re Cassal ) is in no way dependent upon or related to the general income of the estate ; and they constitute authority for the proposition that on the death of the first taker of the aliquot share of income there is a ' passing' within section 1 of the Act of a like share of the corpus. But they are, in my judgment and for reasons which I will later give, no authority for the view that on the death of the first taker of a continuing annuity there is a passing of any part of the corpus of the property out of which the annuity is raised or on which it may be charged." It was while considering the different English decisions on the point that Evershed M.R. observed, as pointed out above, that an annuity or a yearly sum may be variable but it can be an annuity if it is in no way dependent upon or related to the general income of the estate. Jenkins L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preservation shall always be paid by my trustees out of the income of my residuary personal estate. " Mrs. C., the first tenant for life of Brook House, died on September 16, 1925, and was succeeded as tenant for life by Lady L. The question then arose as to how the estate duty payable on Mrs. C.'s death in respect of the benefit of the annual expenditure on Brook House should be borne as between Lady L and the testator's residuary estate, and how assessed ; and it was under these circumstances that the question whether the interest received by Mrs. C. during her lifetime was an annuity arose for consideration. At page 280 of the report, Russell J. has observed : " In substance, the trustees are bound for a period of time to apply an annual sum of varying amount for the benefit of the person for the time being entitled under the will to the enjoyment of Brook House and contents. What passes is the right to enjoy the benefit of that annual sum. That is, the property which passed on the death of Mrs. Cassel. " It was in the light of this decision in In re Cassel that Evershed M.R. stated in In re Duke of Norfolk, that an annuity may be variable but must be in no way dependent upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the wakf was an annuity and was, therefore, capable of being excluded from the operation of the Act by reason of section 2(e)(iv) of the Act; and it was held that it could not be excluded under section 2(e)(iv) and it was an asset within the meaning of the Act. At page 236 of the report, Mitter J. observed : " That there is a clear distinction between an aliquot share of income and an annuity is illustrated by the observations of the Court of Appeal in England in the case of In re Duke of Norfolk : Public Trustee v. Inland Revenue Commissioners, where a question arose in respect of estate duty payable in the case of grant of an annuity to A and after his death to B." Then the above-quoted passage from the said decision of Evershed M.R. has been set out. Thus these different decisions which we have referred to above have been followed in India while considering the question as to what is the meaning to be attached to the word " annuity". Ordinarily, as shown by illustrations to section 173 of the Indian Succession Act, an annuity indicates a specified sum; but in the light of the decision in In re Cassel and as pointed out by Evershed M.R. in In re Duke of Norfolk, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legatees to fall into the ultimate residue, the other four sums being settled. The estate was insufficient to provide the eight sums; and it was held on the authority of Arnold v. Arnold that the four legatees, the capital of whose legacies was at their respective deaths to fall into residue, ought to be treated as annuitants in accordance with the rule in In re Cottrell, their annuities and the other four legacies ought to be put on a level and abate rateably ; and that, accordingly, the annuities must be valued as at a year from the testator's death and the four amounts so ascertained must be treated as pecuniary legacies, and each of those amounts and of the other four legacies must bear its rateable proportion of the total abatement. Thus, this decision lays down that when an income of a definite sum of money has been given by way of life interest to any particular individual and the entire estate is insufficient to pay off the legacies, there is an ademption of the legacies paid to such life tenants and for the purposes of ademption, the life tenant is to be treated as an annuitant; but this is far from saying that such a life tenant is in effect an annuitant. In In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent upon and related to the general income of the estate under each of the three trust deeds. It is not as if the income from any one of these bree trust deeds were at all a fixed sum and the amount of variation were the amount of the deduction by way of costs, charges and expenses payable in connection with the administration of the trust. Whetever the variation in the income, the variation itself arises, because the income is nothing else but the not income of the estate and is dependent upon and related to the general income of the trust. Under these circumstances, it is clear that the interest of the assessee under the two Bombay trusts and under the Ahmedabad trust is a life interest in each of the three cases and cannot be designated an annuity. Under these circumstances, it is clear that her interest in each of the three trusts is not a right to an annuity at all. Therefore, the further question whether under the terms and conditions relating, thereto, the commutation of any portion of the annuity into lump sum grant has or has not been prescribed does not arise for consideration. Therefore, the right to receive the income in each of the three trust deeds cannot be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (xv) was in these terms: " (xv) jewellery belonging to the assessee, subject to a maximum of twenty-five thousand rupees in value ; . . . " It was contended on behalf of the department before us that what the assessee claims in the instant case is exemption in respect of the articles shown in the list furnished by the assessee, viz., jewellery and ornaments, and, therefore, the only clause which can be applied in the instant case is clause (xv) of section 5(1) and, therefore, the Tribunal has rightly exempted jewellery and ornaments to the extent of Rs. 25,000 and brought to charge the assets worth Rs. 55,030, under the head " jewellery ornaments " in excess of Rs. 25,000. In our opinion, under the scheme of section 5, it any particular asset or assets of the assessee fall within any one of the different clauses of section 5(1), such asset or assets must not be included in the net wealth of the assessee. Under clause (xv) of section 5(1), the jewellery belonging to the assessee up to the maximum limit of Rs. 25,000 is not to be included in the net wealth of the assessee; and thus, under that clause, the only test which is required to be considered is the test of own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the articles are intended for personal or household use must be considered with reference to facts as they exist at the time when the question has to be determined. In that particular case before the Bombay High Court, an exemption was claimed under section 5(1)(viii) in respect of the value of certain gold utensils like cups, trays, etc., and it was found, as a matter of fact, that the articles were kept in a show-case in the drawing-room of the assessee; and the High Court held that, as the articles though having shapes of household aritcles were neither regarded as household utensils by the assessee nor used or intended to be used as such, the assessee was not entitled to the exemption under section 5(1)(viii). In that case, the assessee was connected with the business in cloth manufactured by the textile mills under the management of Messrs. Tata Sons Ltd. In 1943, the assessee was appointed a justice of the peace, and the occasion was celebrated by the dealers and brokers in cloth manufactured by the mills, with whose business the assessee was connected, and on the occasion of that celebration, these articles were presented to the assessee as souvenirs. Ever since that time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Coke in Archibishop of Canterbury's case where he says as to 31 Hon. 8, c. 13, which discharged from payment of tithes all lands which came to the Crown by dissolution, renouncing, relinquishing, forfeiture, giving up, or by any other means, that this statutes only discharged from tithes lands which came to the Crown by these or by any other inferior means, but did not discharge from tithes land which came to the Crown by virtue of an Act of Parliament, which is the highest manner of conveyance that can be. And in commenting upon the Statute of Westminster II, Coke says: 'Seeing this Act beginneth with abbots and concludeth with other religious houses, bishops are not comprehended within this Act, for they are superior to abbots, and these words other religious houses shall extend to houses inferior to them that were mentioned before. " Then Craies has cited the case of Casher v. Holmes . In that case, the court was concerned with an Act for keeping in repair a harbour, imposing certain duties enumerated in a schedule annexed, on goods exported and imported. In the schedule, under the head " metals ", certain specified duties were imposed on copper, brass, pewter, and tin ; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re now deposited for safe custody at a named safe deposit; and it was held by the Court of Appeal in England that the word " jewellery " in the definition of " personal chattels " in the Act of 1925 included cut, but unmounted diamonds belonging to the testator and that the chattels excluded from the gift in the first codicil were those deposited at the safe deposit at the date of the fourth codicil and not those deposited there at the date of the testator's death (certain additions having been made after June 13, 1940), the words used being sufficient to show a " contrary intention " within the meaning of section 24 of the Wills Act. Lord Greene M.R. observed at page 213 of the report as follows : " The definition of ' jewellery ' in the Shorter Oxford Dictionary--and for present purposes the definition in the larger dictionary is the same--is as follows: ' jewller's work, gems or ornaments made or sold by jewellers ; jewels collectively or as a form of adjournment'. From that definition it seems to me clear that in the ordinary use of English language the word 'jewellery,' would cover jewels collectively and gems sold by jewellers just as it covers jewels made up into articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rank in the instant case in which the four different things specifically enumerated can possibly fall. Moreover, in the case of each assessee, depending upon his personal status, class of society, habits, customs, notions, usages, etc., the category of articles intended for personal use will have to be decided ; but simply because some articles which can be described as jewellery and ornaments, are valuable articles and are per se things of value, it cannot be said to be excluded purely on the ground of interpretation of statute from the category of articles intended for personal use of the assessee. We must emphasize that the legislature has used the words " intended for the personal use of the assessee " and not " the articles of personal use of the assessee ". Therefore the intention to use the article in question for the personal use of the assessee must govern the exemption under section 5(1)(viii) of the Act. So far as the dictionary definitions is concerned, even according to the dictionary meaning, " jewellery and ornaments" though they can be collectively described as " jewellery", can, if they fall within section 5(1)(viii), be excluded and are not necessarily governed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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