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TMI Blog1967 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... lth 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 benefit of his two sons, Arvind and Yogendra, and his daughter, the assessee. By another deed of settlement, dated October 12, 1945, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 after she gave birth to one child, corpus to the extent of one-half of the entire corpus covered by each of these two Bombay trusts and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 objection therefore must be decided, in the light of the authorities as they stand against the Commissioner and in favour of the assessee and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts 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 shares all costs and expenses incurred in or about the administration of the trust, were directed to pay the whole residue of the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee and under another trust created by the mother-in-law of the assessee, the income of each of these trusts is to be paid to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision fully bears out that particular definition as set out in Halsbury. In In re Duke of Norfolk: Public Trustee v. Inland Revenue Commissioners the Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.J. at page 488 of the report has observed : " An annuity charged on property is not, nor is it in any way equivalent to, an interest in a proportion of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 upon or related to the general income of the estate. In Shaw public Trustees , the House of Lords was dealing with the construction of a will and in the content of the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, even though the sum may not be absolutely fixed and may be variable from year to year, if the variation in the amount to be received is in no way dependent upon or related to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 re Ellis : Nettleton v. Crimmins , Farwell J. followed the decisions of Eve J. in In re Richardson and held that, where the estate of a testator proved insufficient to meet all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 in the computation of the assets of the assessee in the light of this conclusion of ours, it is not necessary for us to consider whether under clause (3)(e) in each of the two Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment 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 ownership. Under clause (viii), the test to be considered is whether the articles in respect of which exemption is claimed are intended for the personal use of the assessee. Since section 5 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 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, the assessee kept these articles in a glass show-case for display in his drawing room. It was clear, therefore, that these articles could never be said to be intended for the personal use of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 on all other metals not enumerated, for every $ 10 value 10d. and it was held that the words " all other metals " did not include gold and silver ; and, therefore, the Commissioners were not entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 of adornment such as a brooch. I cannot see any justification in this case for excluding from the meaning of the word that of jewels collectively or gems sold by jewellers. The word is wide enough to cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms, 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 by clause 5(1)(xv) of the Act. In our opinion, the decision in In re Whitby cannot be of any assistance to us in deciding the particular question before us and we must decide the matter by interpreting the st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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