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 section K Aiyar and B D Sharma for the appellant in C A Nos 1991 and 1992 of 1968 and the respondent in C As
2010 and 2011 of 1968
8 20 N A Palkhivala and I N Shroff for the respondent in C As
Nos 1991 and 1992 of 1968 and the appellant in CAs
2010 and 2011 of 1968
The Judgment of the Court was delivered by Hegde J
These appeals by certificate under section 29 of the Wealth Tax Act 1957 to be hereinafter referred to as the Act arise from a reference under section 271 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 section 2e iv  and 2 whether the value of the jewels owned by the assessee was exempt under section 51viii in computing the net wealth of the assessee  The assessee 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 value of Rs 550325 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 30 1945 the mother in law of the assessee settled upon trust a sum of Rs 388931 and shares of some Indian Companies of the aggregate market value of Rs 1181670 
The assessee is one of the beneficiaries named in that deed
The assessee also possessed jewellery of the value of Rs 80000 
As regards the payments to be made to the assessee under the afore mentioned three trust deeds the contention of the assessee is that under each of those deeds she has only 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 view of section 2eiv 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 section 51viii
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 821 the trust deeds in question as well as the value of the jewellery minus Rs 25000  deduction given under section 51xv as it stood at the relevant time
Against that order the assessee went up in appeal to 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 the 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 section 2e iv
As regards the payments to be made to the assessee under her father s settlement deeds it opined that as the assessee 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 section 2eiv but she was entitled to exemption as regards the other half
The Tribunal rejected the assessee s claim for exemption under section 51viii ie in respect of the value of the jewellery
One a reference under section 271 the High Court of Gujarat held that the payments to be made to the assessee under the three settlement deeds do not come within section 2eiv but the value of the jewellery is exempt under section 51viii
Both the assessee as well as the Revenue have appealed against that decision
We shall first take up the contention of the assess6e 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 section 2eiv
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 section 2m
Under section 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 the income of the 822 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 assesses and her two brothers in equal shares
But after the death of the assessee her heirs are not entitled to any share in that income
Therein provision is made by the settler 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 trustees 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 section 2 eiv
The expression annuity is not defined in the Act
In Halsbury s Laws of England 3rd Edn Vol32 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 11 13 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 devolution as real estate they may be given to a man and his heirs and may go to the heir as real estate
 823 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 vs Giles1 Kindersley V C described annuity in these words An annuity is a right to receive de anno in annuma 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 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 not 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 section 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 was 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 of money 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 Ariff vs Commissioner of Wealth Tax Calcutta 2  a Division Bench of the Calcutta High Court held that the right of a person to receive under a wakf an aliquot 1 Drew 345 Revised Reports 113 p 390
2 824 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 
This decision was approved by this Court in Ahmed G H Ariff  Ors
vs Commr
of Wealth Tax Calcutta1 and the same is binding on us
A similar view was taken by another Bench of the Calcutta High Court in Commissioner of Wealth Tax vs Mrs Dorothy Martin1
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 section 163 of the Wealth Tax Act 1957
That order was confirmed by the Assistant Appellate Commissioner but the Tribunal 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 therefore 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 section 2eiv
This takes us to the question whether the High Court was right in its view that the value of the assessee s jewellery should not be taken into consideration in determining 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 80000  out of that amount Wealth tax Officer deducted Rs 25000 under section 51xv
The assessee claims that in view of section 51viii the value of those jewels cannot be included in the computation of her net wealth
Section 51viii reads 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 assessee 1  2 825 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 section 51viii does not apply to jewels as those articles are specifically provided for under section 51xv
On the other hand it is urged on behalf of the asessee that section 51xv 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 section 51viii 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 assesses comes within the scope of section 51viii
But the jewellery mentioned in section 5 1 xv need not be articles intended for personal use of the assessee
That provision deals with jewellery in general
The two provisions deal with different classes of jewellery
That is made further clear by section 51xiii 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 section 51xv is correct then there was no occasion for the legislature to refer to jewellery in section 51xiii
From an analysis of the various provisions in section 5 it appears to us that therein there are four provisions dealing With jewellery viz 1 jewellery intended for personal use of the assess
51 viii 2 jewellery that is heirlooms
51xiii 3 jewellery in the possession of any ruler section 51xiv and 4 jewellery in generate section 51xv
Under section 51xv as it stood at the relevant time every assessee was entitled deduct a sum of Rs 25000 from out of the value of the jewellery in her possession whether the same was intended for her personal use or not but under section 51 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
For the reasons mentioned above we think the High Court was right in answering 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
VPS Appeals dismissed


Summary:
The assessee was an individual
She was entitled for her life to an aliquot 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 80000
On the questions  1 whether the payments to the assessee were annuities falling within the scope of section 2eiv 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 section 51 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 section 2eiv
824 E F Ahmed G H Ariff vs Commissioner of Wealth Tax Calcutta  followed Commissioner of Wealth Tax vs Mrs Dorothy Martin 1968 60 ITP 586 approved
2 Under section 5 there are four provisions dealing with jewellery namely a jewellery intended for  the personal use of the assessees
51viii b jewellery which forms an heir loom section
51xiiic jewellery in the possession of any ruler section 51xiv and d jewellery in general
51xv
Under section 51xv as it stood in 1958 59 every assessee was entitled to deduct a sum of Rs 25000 from out of the value of the jewellery whether the same was intended for personal use or not but under section 5 1 viii the value of all the jewellery intended for the personal use of the assessee stands excluded in the compu tation of the net wealth of an assessee
Therefore the jewellery in the present case is exempt under section 51viii
825 D E G