# JI AHMED ABAD v. MRS. ARUNDBATI BALKRISHNA February 25, 1970

- **Citation:** [1970] 3 S.C.R. 819
- **Court:** Supreme Court of India
- **Decided:** 1970-02-25
- **Case number:** Civil Appeals Nos. 1991 1992, 2010 and 2011 of 1968
- **Bench:** J. C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ji-ahmed-abad-v-mrs-arundbati-balkrishna-february-25-1970-4970
- **Pages:** 7

## Headnote

Wealth Tax Act (27 of 1957), ss. 1(e) (iv) and 5(1)(vii)-Receipt of
share from trust funds-When 'annuity'-Jewellery intended for personal
use-Whether exempt.
The assessee was an individual.
She was entitled for her life, to an
aUquot share of the income arising from the funds settled on trust by three
trust deeds and received payments of such share.
She also possessed
jewellery, intended for her personal use, of the value of Rs. 80,000.
On the questions : ( 1) whether the payments to the assessee were
annuities falling within the scope of s. 2(e)(iv) of the Wealth Tax Act,
1957, whose value could not be included in the computation of her net
wealth; and (2) whether the value of the jewels was exempt under
s. 5(1)(viii).
HELD: (1) Under the trust deeds, the assessee was not entitled to
any fixed sum of money. Therefore, the payments to the assessee under
the trust deeds could not be considered as annuities and hence, she was
not entitled ·to the benefit of s. 2(e)(iv). [824 B-F]
. Ahmed G H. Arifj v. Commissioner of Wealth Tax, Calcutta, [1970]
2 S.C.R. 19 followed Commissioner of Wealth Tax v. Mr3,
Dorothy
Martin, (1968) 60 I.T.R. 586, approved,
(2) Under. s. 5 there are four provision• dealing with jewellery, namely,
(a)
jewellery intended for
the personal use of the assessee-
•· 5(1) (viii}, (b)
jewellery which forms an heir loom-s. 5(1) (xiii),
(c) jewellery in the possession of any ruler-s. 5(1) (xiv); and
(d)
jewellery in general-s. 5(1)(xv), Under s. 5(1)(xv), as it stood
in
1958-59, every assessee was entitled to deduct a sum of Rs. 25,000 from
out di the value of the jewellery whether the same was intended for personal use or not; but under s. 5 (I) (viii) the value of all the jewellery intended for the personal use. of the assessee stands excluded in the computation of the net wealth Of an assessee.
Therefore, the jewellery in
the
present case is exempt under s. S(l)(viii). [825 D, E-G]

## Text

819
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COMMISSIONER OF WEALTH TAX, GUJARAT AT
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JI
AHMED ABAD
v.
MRS. ARUNDBATI BALKRISHNA
February 25, 1970.
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Wealth Tax Act (27 of 1957), ss. 1(e) (iv) and 5(1)(vii)-Receipt of
share from trust funds-When 'annuity'-Jewellery intended for personal
use-Whether exempt.
The assessee was an individual.
She was entitled for her life, to an
aUquot share of the income arising from the funds settled on trust by three
trust deeds and received payments of such share.
She also possessed
jewellery, intended for her personal use, of the value of Rs. 80,000.
On the questions : ( 1) whether the payments to the assessee were
annuities falling within the scope of s. 2(e)(iv) of the Wealth Tax Act,
1957, whose value could not be included in the computation of her net
wealth; and (2) whether the value of the jewels was exempt under
s. 5(1)(viii).
HELD: (1) Under the trust deeds, the assessee was not entitled to
any fixed sum of money. Therefore, the payments to the assessee under
the trust deeds could not be considered as annuities and hence, she was
not entitled ·to the benefit of s. 2(e)(iv). [824 B-F]
. Ahmed G H. Arifj v. Commissioner of Wealth Tax, Calcutta, [1970]
2 S.C.R. 19 followed Commissioner of Wealth Tax v. Mr3,
Dorothy
Martin, (1968) 60 I.T.R. 586, approved,
(2) Under. s. 5 there are four provision• dealing with jewellery, namely,
(a)
jewellery intended for
the personal use of the assessee-
•· 5(1) (viii}, (b)
jewellery which forms an heir loom-s. 5(1) (xiii),
(c) jewellery in the possession of any ruler-s. 5(1) (xiv); and
(d)
jewellery in general-s. 5(1)(xv), Under s. 5(1)(xv), as it stood
in
1958-59, every assessee was entitled to deduct a sum of Rs. 25,000 from
out di the value of the jewellery whether the same was intended for personal use or not; but under s. 5 (I) (viii) the value of all the jewellery intended for the personal use. of the assessee stands excluded in the computation of the net wealth Of an assessee.
Therefore, the jewellery in
the
present case is exempt under s. S(l)(viii). [825 D, E-G]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.
1991
1992, 2010 and 2011 of 1968.
Appeals from the judgment and order dated October 9, 1967
of the Gujarat High Court in Wealth Tax Reference No. 3 of
1964.
B. Sen, S. K. Aiyar and B. D. Sharma, for the appellant (in
C. A. Nos. 1991 and 1992 of 1968) and the respondent (in
C. As. Nos. 2010 and 2011 of 1968).
820
SUPREME COURT REPORTS
[1970] 3 S.C.R.
N. A. Palkhivala and I. N. Shroff, for the respondent (in
A
C. As. Nos. 1991 and 1992 of 1968) and the appellant (in
C.As. Nos. 2010 and 2011 of 1968).
The Judgment of the Court was delivered by
Hegde, J.
These appeals by certificate under s. 29 of the
Wealth Tax Act, 1957 (to be hereinafter referred to as the Act)
arise from a reference under s. 27(1) of the Act to the High Court
of Gujarat. Therein four questions were referred to the High Court
for its opinion. These four questions really gave rise to two questions of law viz. ( 1) whether under the three trust deeds referred to
therein the assessee got annuities falling within .the scope of s. 2( e)
(iv) ? and (2) whether the value of the jewels owned by the assessee
was exempt under s. 5(l)(viii) in computing the net wealth of the
assessee ?
The asse~iee is an individual and the assessment years with
which we are concerned in these appeals are 1957-58 and 195859, 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 Indian Companies of
the estimated va.lue of R..s. 5,50,325/- upon trust for the benefit
of his two sons and his daughter, the assessee. By another deed
of settlement dated October 12, 1945 he settled certain other
shares upon
trust for the benefit of the assessee
and her two
brothers.
All the terms of the two trust deeds relevant for our
present purpose are identical.
By a deed of settlement dated
September 3 0, 1945, the mother-in-law
of the assessee settled
upon t'rust a sum of Rs. 3,88,931/- and shares of some Indian
Companies of the aggregate market value of Rs. 11,81,670/-.
The- assessee is one of the beneficiaries named in that deed. The
assessee also possessed jewellery of the value of Rs. 80,000/-
As regards the payments to be ma.de to the assessee under the
afore-mentioned three trust deeds, the contention of the assessee
is that under each of those deeds, she has o'nly a right to an 'annuity' and the terms and conditions relating thereto preclude the
commutation of any portion thereof into a lumpsum grant and
hence in viow of s. 2 ( e)(iv), the value of those annuities cannot be
included in the computation of her net wealth.
As regards the
jewellery her case is that they are articles of her personal use and
therefore their value cannot be taken into consideration in ascertaining her net wealth.
She contends that the value of those
jewellery is exempt under s. 5(1)(viii). The Wealth Tax Officer
rejected both those contentions and assessed her after including
in her net wealth the value of the benefits receivable by her under
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COMM!l. WEALTH TAX v. ARUNDHATI (Hegde, ].)
821
the trust deeds in question as well as the value of the jewellery
minus Rs. 25,000/-, deduction !\iven under s. S(l){xv) as it stood
at the relevant tinle.
Against that order the assessee went up in appeal t11 the Assistant Appellate Commissioner. That officer agreed with the conclusions reached by the Wealth Tax Officer and he accordingly
dismissed the appeal of the assessee. Thereafter th• assessee appealed to the Tribunal. The. Tribunal held that the payments to
be made to the assessee under the trust deed executed by her
mother-in-law is an 'annuity' entitled to exemption under s. 2( e)
(iv).
As regards the payments to be made to the assessee under
her father's settlement deeds, it opined that as the as•essee was
entitled to withdraw from the trust fund at her own discretion after
she attained majority and after she gave birth to one child,. one
half of the corpus, to that extent commutation was possible. Therefore to the extent of one half of the value of the annual payments
to be made to her under those deeds, the assessee was not entitled
to exemption under s. 2(e)(iv) but she was entitled to exemption
as regards the other half.
The Tribunal rejected the· assessee's
claim for exemption under s. S(l)(viii) i.e. in respect of the value
of the jewellery.
One a reference under s. 27(1), the High Court of Gujarat
held that the payments to be made to the assessee under the three
settlement deeds do not come within s. 2(e)(iv) but the value of
the jewellery is exempt under s. S(l)(viii). Both the assessee as
well as the Revenue have appealed against that decision.
We shall first take up the contention of the assessee that the
payments to be made to her under the trust deeds are annuities
which by the terms and conditions relating thereto preclude the
commutation of any portion thereof into a lumpsum grant and
hence are within the scope of s. 2(e)(iv). If those payments fall
within the scope of that provision, they cannot be considered as
the assets of the assessee and therefore their value cannot be reckoned in determining her net wealth under s. 2(m). Under s. 3,
the charging section, only the net wealth of an assessee can be
brought to tax. Hence we have to examine the terms of the settlement deeds to find out whether the benefits conferred on the assessee by any or all of those deeds can be considered as annuity.
As stated earlier the two settlement deeds executed by the
father of the assessee are expressed more or less in identical language. It was conceded at the bar that whatever construction we
may place on one, would be equally applicable to the other. Therefore we shall take up.the deed executed on September 7. 1945
by the father of the assessee. Under cl. 3 of that deed it is provided that the trustees, after deducting from tht it1c9me of the
822
SUPREME COURT REPORTS
[1970] 3 S.C.R.
shares in question, all costs and expenses incurred in or about the
administration of the trust, should at the end of every calendar
year pay the whole residue to the assessee and her two b~others
in equal shares. But after the death of the assessee her helfs are
not entitled to any share in that income.
Therein provision is
made by the settlor for disposition of the corpus of the trust. But
it is provided that notwithstanding anything contained to the
contrary in the deed of Trust after assessee attained majority and
after the birth of her first child when and so often as might be
required by the assessee, the trustees are required to pay a portion
of the corpus of the trust fund not exceeding in the whole one-half
thereof to the assessee and this payment of the corpus was to be
absolutely freed and discharged from the trust and provisions of
the trust deed. The other provisions of the trust deed are not relevant for our present purpose.
Under the trust deed executed by the assessee's mother-in-law
on December 30, 1945, the husband of the assessee and her two
brothers-in-law were constituted as the Trustees.
Under cl. (a)
of that deed, the trust~s were required to pay the income of the
trust fund after deducting the expenses to the assessee during her
life-time. The rest of the clauses in that trust deed relate to disposition of the corpus to different beneficiaries after the life time
of the assessee.
It is clear from the terms of the three trust deeds referred to
earlier that the assessee had a life interest in each of those funds.
Further under the trust deeds executed by her father, she was
also entitled to a portion of the corpus under certain circumstances.
The question for decision is whether the benefits obtained
by the assessee under those deeds can be held to come within s.
2(e)(iv).
The expression "annuity" is not defined in the Act. In Halsbury's Laws of England, 3rd Edn. Vol. 32 at p. 534 (paragraph
899), the meaning of the. word "annuity" is explained thus :
"An annuity is a certain sum of money payable
yearly either as a personal' obligation of the grantor or
out of property not consisting exclusively of land."
In Jarman on Wills at p. 1113 "annuity" is defined thus :
"An annuity is a right to receive de anno in 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 devo'.
lution, as real estate; they may be given to a man and
his heirs, and may go to the heir as real estate."
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COMMR. WEALTH TAX v. ARUNDHATI (Hegde, J.)
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In Williams on Executors and Administrators "annuity" is described as a yearly payment of a certain fixed sum of money granted for life or for years charging the person of the grantor only.
In Bignold v. Giles,('), Kindersley V. C. described "annuity" in
these words :
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"An annuity is a right to receive de anno in 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 alth.ough payable out of the personal
assets, they are ca12able 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--
so an annuity may be given to a man and the heirs of
his body; that does not, it is true, constitute an estate tail,
but that is by reason of the Statute De Donis, which contains only the word 'tenements', and an annuity, though
a hereditament, is 11ot a tenement; and an annuity so
given is a base fee."
Proceeding further the learned judge observed :-
"But this appears to me at least clear; that if the
gift of what is called an annuity is so made, that, on the
face of the will itself, the testator shows his intention
to give a certain portion of the dividends of a fund,
that is a very different thing; and most of the cases proceed on that footing.
The ground is, that the Court
construes the intention of the testator to be, not merely
to give an annuity, but to give an aliquot portion of the
income arising from a certain capital fund."
illustrations of annuity given in s. 173 of the Indian Succession Act also show that it is a right to receive a specified sum and
not an aliquot share in the income arising from any fund or property. Ordinarily an annuity is a money payment of a fixed sum
annually made and is a charge personally on the grantor.
On an analysis of the relevant clauses in three trust deeds, it
is clear the assessee wrui given thereunder a share of the income
arising from the funds settled on trust. Under those deeds she is
.not entitled to any fixed· sum ofmq.ney. Therefore it is not possible to hold that the payments that she is entitled to receive under
those deeds are annuities. She has undoubtedly a life interest in
those funds. In Ahmed G. H. Arif! v. Commissioner of Wealth
Tax, Calcutta('), a Division Bench of the Calcutta High Court
held that the right of a person to receive under a wakf an aliquot
(I) (1859) Ch. 4 Drew 345; (Revised Reports 113 p. 390).
(2) 59. I.T.R. 230.
824
SUPREME COURT REPORTS
[1970] 3 S.C.R.
:share of the net income of the wakf property is an 'asset' within
.the meaning of the Wealth Tax Act, 1957 and the capital value
of such a right is assessable to wealth tax.
Therein the Court
repelled the contention that the right in question was an 'annuity'.
Tbis decision was approved by this CQurt in Ahmed G. H. A riff &
Ors. v. Commr. of Wealth Tax, Calcutta(') and the same is bind·
ing on us.
A similar view was taken by another Bench of the
Calcutta High Court in Commissioner of Wealth Tax v.
Mrs.
Dorothy Martin.(').
In that case under the will of the assessee's
father the assessee was entitled to receive for her life the annual
interest accruing upon her share in the residuary trust fund. The
Wealth Tax Officer included the entire value of the said share in
the assessable wealth of the assessee and subjected the same to
tax under s. 16(3) of the Wealth Tax Act, 1957. That order was
confirmed by the Assistant Appellate Commissioner but the Tri·
bunal in appeal excluded the same in the computation of the net
wealth of the assessee. On a reference made to the High Court,
it was held that on a construction of the various clauses in the
will, the assessee was entitled to an aliquot share in the general
income of the residuary trust fund and not a fixed sum payable
periodically as "annuity" and, t~e.refore, the value of her share
was an asset to be included in computing his net wealth. These
decisions in our view correctly lay down the legal position. In
this view it is not necessary to consider whether the income receivable by the assessee under those deeds either wholly or in
part is capable of being commuted into a lumpsum grant.
For the reasons mentioned above we agree with the High
Court that payments to be made to the assessee under the three
trust deeds cannot be considered as annuities and hence she is
not entitled to the benefit of s. 2(e)(iv).
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This takes us to the question whether the High Court was
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right in its view that the value of the assessee's jewellery should
not be taken into consideration in determininz her net wealth.
The Tribunal has taken the view and the High Court has agreed
with that view that the jewellery in question are articles intended
for the personal use of the assessee. As mentioned earlier those
jewels were valued at Rs. 80,000/ -; out of that amount Wealth
tax Officer deducted Rs. 25,000/ • Ullder s. 5(l)(xv). The asses·
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see claims that in view of s. 5(1)(viii), the value of those jewels
cannot be included in the computation of her net wealth. Section
5(1 )(viii) reads:
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"5. (1) Wealth-tax shall not be payable by the assessee in respect of the following assets, and such assets
shall not be included in the net wealth of the asses~eeH
(1) [197.J] 2 S.C.R. 19.
(2) [1968] 69, J.T.R. 586.
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COMMR. WEALTH TAX v. ARUNDHATI (Hegde, J.)
825
(viii) furniture, household utensils, wearing apparel,
provisions and other articles intended for the personal
or household use of the assessee."
There is no dispute that the jewels in question were :intended
for the personal use of the assessee; but it is said on behalf of the
revenue that s. 5 (1 )(viii) does not apply to jewels as those articles
are specifically provided for under s. 5(1)(xv). On the other hand
it is urged on behalf of the assessee that s. 5(1)(xv) deals with
jewellery which are not intended for personal use of the assessee
such as heirloom or other jewellery which are retained as valuable
assets or intended for the use of persons other than the assessee
whereas s. 5(l)(viii) takes in only such jewellery as are intended
for personal use of the assessee. We think the contention advanced on behalf of the assessee is the correct one. It is well known
that the jewellery is widely used as articles of personal use by the
ladies in this country specially by those belonging to the richer
classes. That being so jewellery intended for the personal use of
the assessee comes within the scope of s. 5(1 )(viii). But the jewellery mentioned in s. 5 ( 1 )(xv) need not be articles intended for
personal use of the assessee. That provision deals with jewellerv
in general. The two provisions deal with different classes of jeweflery. That is made further clear by s. 5(1)(xiii) which says that
Wealth Tax shall not be payable by assessee in respect of any
drawings, paintings, photographs, prints and other heirloom not
falling within cl. (xii) and not intended for sale but not including
jewellery. If the contention that the jewellery is exclusively dealt
with by s. 5 ( l)(xv) is correct then there was no occasion for the
legislature to refer to jewellery in s. 5(1)(xiii). From an analysis
of the various provisions in s. 5, it appears to us that therein there
are four provisions dealing with jewellery viz. ( 1 ) jewellery intended for personal use of the assessee-s. 5(1 )(viii); (2) jewellery
that is heirloom-s. 5(1)(xiii); (3) jewellery in the possession of
any ruler-s. 5(1)(xiv) and (4) jewellery in general-s. 5(1)(xv).
Under s. 5(1)(xv) as it stood at the relevant time every assessee
was entitled deduct a sum of Rs. 25 ,000/- from out of the value
of the jewellery in her possession whether the same was intended
for her personal use or not but under s. 5(1 )(yjjj) the value ot all
the jewellery intended for the personal use of the assessee stands
excluded in the computation of the net wealth of an assessee.
F?r th~ reasons. mentioned a~ove we think the High Court
was nght m answenng the question relating to the value of the
jewellery in favour of the assessee.
In the result these appeals fail and they are dismissed-no
costs.
V.P.S.
Appeals dismissed.
LIOSup Cl/70-8