Civil Appeal No 1763 NT of 1974 From the Judgment and Order dated 221973 of the Andhra Pradesh High Court in Case Reference No 67 of 1971
Y Ratnakar Mrs AK Verma and DN Misra for the Appellant
SC Manchanda Ms A Subhashini and BB Ahuja for the Respondent
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This appeal by Special leave arises from the decision of the High Court of Andhra Pradesh and it seeks answers to two questions 1079 i Whether on the facts and in the circumstances of the case the properties in respect of which registered sale deeds had not been executed but consideration had been received belonged to the assessee for the purpose of inclusion in his net wealth within the meaning of section 2m of the  ii Whether on the facts and in the circumstances of the case the assessee s right to receive the sum of Rs25 lakhs OS from the State Government was an asset for the purposes of inclusion in his net wealth under the  The year involved in this case is the assessment year 1957 58 under the hereinafter called the Act 
It may be mentioned that the valuation date is the first valuation date after coming into operation of the Act which came into force on 1st April 1957
The assessee was the Nizam of Hyderabad an individual
There were several questions involved in the assessment with all of which the present appeal is not concerned
So far as the first question indicated hereinbefore which was really question No ii in the statement of case before the High Court it may be mentioned that the Wealth tax Officer had included a total sum of Rs490775 representing the market value of certain immovable properties in respect of which although the assessee had received full consideration money he had not executed any registered sale deeds in favour of the vendees
The Wealth tax Officer held that the assessee still owned those properties and consequently the value of the same was included in his net wealth
On appeal the Appellate Assistant Commissioner sustained the order with certain deductions in value
On further appeal the Tribunal held that the assessee had ceased to be the owner of the properties
The Tribunal was of the opinion that the assessee having received the consideration money from the purchasers and the purchasers having been put into possession were protected in terms of section 53A of the Transfer of Property Act and the term owner  not only included the legal ownership but also the beneficial ownership
The first question arises in the context of that situation
The High Court following the ratio of Commissioner of Income Tax AP Hyderabad vs Nawab Mir Barkat Ali Khan infra answered the question in favour of the revenue
1080 The second question set out before which was question No v before the High Court has to be understood in the context of the facts of this case
The right of the assessee to get the amount in question ie Rs25 lakhs a year arose in the wake of accession of the Hyderabad State to the Union of India
Several communications followed between the Military Governor of Hyderabad
Gen Chaudhuri and the Nizam of Hyderabad as well as other officers
It has to be borne in mind that the assessee was a paramount ruler owning certain private properties called Sarf e khas
He surrendered his paramountcy and acceded to the Union of India
His private properties were taken over by the Government and it was agreed by the Government that in lieu of his income from the said properties he would be paid Rs25 lakhs in Osmania currency annually
The communication between Major General Chaudhuri the Military Governor and the Nizam about this particular sum in contained in the letter dated 1st February 1949
It stated inter alia as follows After this merger HEH will be paid annually a total sum of Rs 1 crore distributed as follows a Rs50 lacs as a privy purse b Rs25 lacs in lieu of his previous income from the Sarf e khas and c Rs25 lacs and for the upkeep of Palaces etc
 The letter which appears in the Paper Book of this appeal from Military Governor of Hyderabad Major General Chaudhuri to the Nizam of Hyderabad states inter alia that Nizam s Sarf e khas estates should not continue as an entirely separate administration independent of the Diwani administrative structure
The Sarf e khas it was stated in that letter should therefore be completely taken over by the Diwani its revenue and expenditure being merged with the revenues and expenditure of the State
Thereafter we have extracted the relevant portion of the letter which stipulated for the payment of Rs25 lakhs
The other parts of the agreement contained in that letter are not relevant for the present purpose
The Wealth tax Officer treating the said sum as an annuity and secondly as an asset or property capitalised the same to Rs9978572 1081 and included that amount as an asset of the assessee
The appellate Assistant Commissioner agreed with the view taken by the Wealth tax Officer
The Tribunal however refused to call it as an annuity and characterised it as an annual payment for surrender of life interest
The Tribunal therefore held that the capitalised value of such life interest be added to the net wealth and taxed
The High Court in the judgment under appeal agreed with the view taken by the Tribunal that it was only an annual payment made in compensation for the property which had been taken over by the Government
It was therefore a part of the wealth according to the High Court
The High Court was of the view that it was possible to commute the annual payment of Rs25 lakhs
The High Court found that there was neither any express preclusion nor any circumstances from which legitimately an inference could be drawn precluding commutation of the said amount into a lumpsum grant
The High Court therefore was of the view that the Wealth tax Tribunal had rightly rejected the contention of the assessee
The question was accordingly answered by the High Court in the affirmative and against the assessee and in favour of the revenue
The first question involved in this case is whether the properties in respect of which registered sale deeds had not been executed but full consideration had been received by the assessee belonged to the assessee for the purposes of inclusion in his net wealth in terms of section 2m of the Act
Under section 3 of the Act the charge of wealth tax is on the net wealth of the assessee on the relevant valuation date
Net wealth is defined under section 2m of the Act
The relevant portion of section 2m is as follows m net wealth means the amount by which the aggregate value computed in accordance with the provisions of this 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 this Act is in excess of the aggregate value of all the debts owed by the assessee on the valuation date  The material expression with which we are concerned in this appeal is belonging to the assessee on the valuation date 
Did the assets in the circumstances mentioned hereinbefore namely the properties in respect of which registered sale deeds had not been 1082 executed but consideration for sale of which had been received and possession in respect of which had been handed over to the purchasers belonged to the assessee for the purpose of inclusion in his net wealth Section 53A of the Transfer of Property Act gives the party in possession in those circumstances the right to retain possession
Where a contract has been executed in terms mentioned hereinbefore and full consideration has been paid by the purchasers to the vendor and where the purchasers have been put in the possession by the vendor the vendees have right to retain that possession and resist suit for specific performance
The purchasers can also enforce suit for specific performance for execution of formal registered deed if the vendor was unwilling to do so
But in the eye of law the purchasers cannot and are not treated as legal owners of the property in question
It is not necessary in our opinion for the purpose of this case to be tied down with the controversy whether in India there is any concept of legal ownership apart from equitable ownership or not or whether under sections 9 and 10 of the Indian Income tax Act 1922 and sections 22 to 24 of the Indian Income tax Act 1961 where owner  is spoken in respect of the house properties the legal owner is meant and not the equitable or beneficial owner
Salmond On Jurisprudence Twelfth Edition discusses the different ingredients of ownership  from pages 246 to 264 Ownership  according to Salmond denotes the relation between a person and an object forming the subject matter of his ownership
It consists of a complex of rights all of which are rights in rem being good against all the world and not merely against specific persons
Firstly Salmond says the owner will have a right to possess the thing which he owns
He may not necessarily have possession
Secondly the owner normally has the right to use and enjoy the thing owned the right to manage it ie the right to decide how it shall be used and the right to the income from it
Thirdly the owner has the right to consume destroy or alienate the thing
Fourthly ownership has the characteristic of being indeterminate in duration
The position of an owner differes from that of a non owner in possession in that the latter s interest is subject to be determined at some future time
Fifthly ownership has a residuary character
Salmond also notes the distinction between legal and equitable ownership
Legal ownership is that which has its origin in the rules of the common law while equitable ownership is that which proceeds from rules of equity different from the common law
The courts of common law in England refused to recognize equitable ownership and denied the equitable owner as an owner at all
All the rights embedded in the concept of ownership of Salmond 1083 cannot strictly be applied either to the purchasers or the assessee in the instant case
In the instant appeal however we are concerned with the expression belonging to  and not with the expression owner 
This question had come up before this Court before a bench of five learned judges in Commissioner of Wealth tax West Bengal vs Bishwanath Chatterjee and others At page 539 of the report this Court referred to the definition of the expression belong  in the Oxford English Dictionary To be the property or rightful possession of
So it is the property of a person or that which is in his possession as of right which is liable to wealth tax
In other words the liability to wealth tax arises because of the belonging of the asset and not otherwise
Mere possession or joint possession unaccompanied by the right to be in possession or ownership of property would therefore not bring the property within the definition of net wealth for it would not then be an asset belonging to the assessee
The first limb of the definition indicated in the Oxford Dictionary may not be applicable to these properties in the instant appeal because these lands were not legally the properties of the vendees and the assessee was the lawful owner of these properties
The vendees were however in rightful possession of the properties as against the vendor in view of the provisions of section 53A of the Transfer of Property Act 1908
The scheme of the Act has to be borne in mind
It has also to be borne in mind that unlike the provisions of Income Tax Act section 2m of the Act uses the expression belonging to  and as such indicates something over which a person has dominion and lawful dominion should be the person assessable to wealth tax for this purpose
In Commissioner of Wealth tax AP vs Trustees of HEH Nizam s family Remainder Wealth Trust 108 ITR 555 the question as to what is the meaning of the expression belonging to  was raised page 594 of the report but this Court did not decide whether the trust property belonged to the trustee and whether the trustee was liable under section 3 of the Act apart from or without reference to section 21 of the Act
The case was disposed of in terms of sections 21 of the Act
In Commissioner of Income tax AP Hyderabad vs Nwab Mir Barkat Ali Khan  it was held by the Andhra Pradesh High Court that when a vendor had agreed to sell his property as in the instant case and had received consideration thereof but had 1084 not executed a registered sale deed his liability to pay tax on income from that property did not cease
His position as owner  of the property within the meaning of section 9 of the Indian Income tax Act 1922 and section 22 of the Income tax Act 1961 did not thereby change
According to the said decision the agreement to sell and the receipt of consideration by the assessee the Nizam of Hyderabad did not create any beneficial ownership according to Indian law in the purchaser neither did it create any equitable ownership in him
The ownership did not change until registered sale deed was executed by the vendor
The term owner  in section 9 of the 1922 Act or section 22 of the 1961 Act did not mean beneficial or equitable owner which concept was not recognised in India
In the instant case as we have noticed the position is different
We are not concerned with the expression owner 
We are concerned whether the assets in the facts and circumstances of the case belonged to the assessee any more
This Court had occasion to discuss section 9 of the Income tax Act 1922 and the meaning of the expression owner  in the case of RB Jodha Mal Kuthiala vs Commissioner of Income tax Punjab Jammu  Kashmir and Himachal Pradesh There it was held that for the purpose of section 9 of the Indian Income tax Act 1922 the owner must be the person who can exercise the rights of the owner not on behalf of the owner but in his own right
As assessee whose property remained vested in the Custodian of Evacuee Property was not the owner of the property
This again as observed dealt with the expression of section 9 of the Indian Income tax Act 1922
At page 575 of the report certain observations were relied upon in order to stress the point that these observations were in consonance with the observations of the Gujarat High Court which we shall presently note
We are however not concerned in this controversy at the present moment
It has to be borne in mind that in interpreting the liability for wealth tax normally the equitable considerations are irrelevant
But it is well to remember that in the scheme of the administration of justice tax law like any other laws will have to be interpreted reasonably and whenever possible in consonance with equity and justice
Therefore specially in view of the fact that the expression used by the legislature has deliberately and significantly not used the expression assets owned by the assessee  but assets belonging to the assessee  in our opinion is an aspect which has to be borne in mind
The bench decision of the Calcutta High Court in Commissioner 1085 of Income tax West Bengal II vs Ganga Properties Ltd rested on the terms of section 9 of the Income tax Act 1922 and the Court reiterated again that in Indian law beneficial ownership was unknown there was but one owner namely the legal owner both in respect of vendor and purchaser and trustee and cestui que trust
The income from house property refers to the legal owner and further that in case of a sale of immovable property a registered document was necessary
But these propositions as noted hereinbefore rested on the use of the expression in section 9 of the Income tax Act 1922
It used the expression owner  unlike belonging to 
The Gujarat High Court in Commissioner of Wealth tax Gujarat I vs Kum Manna G Sarabhai  held that a spes successionis is a bare and naked possibility such as the chance of a relation obtaining a legacy and that could not form the basis of assessment under section 26 of the Act
At page 174 of the report the Gujarat High Court referred to the expression belonging to  and referred to the fact that the expression has been the subject matter in a number of judicial decisions
The Court observed that the words property  and belonging to  were not technical words
The Gujarat High Court had occasion to deal with part performance in the case of an agreement of sale in Commissioner of Income tax Gujarat vs Ashaland Corporation The Gujarat High Court noted that in case of a person who was a dealer in land the business transaction would be completed only when the purchase or sale transaction was complete
In order to decide whether the business transaction was complete the question of vital importance was whether title in the property had passed
It was only on the passing of the title that the transaction became complete and unless the transaction was complete any advance receipt of money towards the transaction would not form part of income or profit
It was observed by the Gujarat High Court that the doctrine of part performance embodied in section 53A of the  had only a limited application and it afforded only a good defence to the person put in possession under an agreement in writing to protect his possession to the extent provided in section 53A but an agreement in writing to sell coupled with the parting of possession would not confer any legal title on the purchaser and take the land out of the stock in trade of the seller if the seller was a dealer in land
The context in which the Gujarat High Court had to deal this question was entirely different
The Gujarat High Court had to proceed on the basis that the assessee 1086 under the Income tax Act was the owner and he was dealing in land and therefore whether the land was stock in trade was the question
In the instant appeal we are concerned with the expression belonging to 
Therefore the observations of the Gujarat High Court would not be quite apposite to the problem of the instant appeal
This question was again viewed by the Bombay High Court in a slightly different context in Commissioner of Income tax Bombay City III vs Smt
TP Sidhwa The Bombay High Court was not concerned with the expression belonging to 
Our attention was drawn to another decision of the Gujarat High Court in Commissioner of Wealth tax Gujarat IV vs HH Maharaja FP Gaekwad There the facts were more or less identical with the instant appeal on this aspect of the matter
The assessee owned two properties and had agreed to sell one property to a company
The vendees had paid Rs30 lakhs in January 1964 and were put in possession of the property
Thereafter four instalments of Rs 17 12 lakhs each were paid and the property was conveyed by four deeds executed in 1970 71 and 1972
It was contended that at the relevant time the property did not belong to the assessee
It was held by the Gujarat High Court that receipt of part of the sale price and parting of possession would not divest the vendor of immovable property of his title to the property
The doctrine of part performance embodied in section 53A of the had limited application and afforded a good defence to the person put in possession
The legal position and the relevant clauses of the agreement of sale showed that the assessee was the owner of the property at the relevant valuation dates
Therefore according to the Gujarat High Court the property agreed to be sold which had been parted with was includible as an asset of the assessee
Even in some cases the phrase belonging to  is capable of connoting interest less than absolute perfect legal title
See in this connection the observations of this Court in Raja Mohammad Amir Ahmed Khan vs Municipal Board of Sitapur and another AIR 1965 SC 1923
This Court observed in that case that though the expression belonging to  no doubt was capable of denoting an absolute title was nevertheless not confined to connoting that sense
Full possession of an interest less than that of full ownership could also be signified by that expression
Before concluding this aspect of the matter there is certain as 1087 pect which has to be borne in mind
Reliance was placed as we have mentioned hereinbefore on the decision of the Gujarat High Court in the case of Commissioner of Wealth tax Gujarat IV vs HH Maharaja FP Gaekwad supra It was contended that if the Gujarat High Court s view was correct then the assessee s contention on this aspect in the instant appeal cannot be accepted
On behalf of the assessee it was submitted that the decision of the Gujarat High Court in Commissioner of Wealth tax Gujarat I vs Kum
Manna G Sarabhai supra not having been taken into consideration by the Gujarat High Court in the later decision the Gujarat High Court the judgment on which revenue relied was not correct
It is not necessary in the view we have taken on the other aspect of the matter namely the use of the expression belonging to  to discuss this point any further
It was further submitted before us that from the said decision of the Gujarat High Court in Commissioner of Wealth Tax Gujarat IV vs HH Maharaja FP Gaekwad supra a special leave petition was filed by the assessee which was dismissed by this Court on 17th January 1983
See in this connection 144 ITR Statute page 23
It is however well settled that dismissal of special leave petition in limine does not clothe the decision under appeal in special leave petition with the authority of the decision of this Court
See in this connection the observations in Daryao  Ors
vs State of UP  Ors
  It may be mentioned as was rightly observed by a full bench of the Allahabad High Court in Sahu Govind Prasad vs Commissioner of Income tax at 863 special leave is a discretionary jurisdiction and the dismissal of a special leave petition cannot be construed as affirmation by this Court of the decision from which special leave was sought for
On this aspect it may also be mentioned that our attention was drawn to some decisions which we shall presently note
The Punjab and Haryana High Court in the case of Smt
Kala Rani vs Commissioner of Income tax Patiala I had occasion to discuss this aspect of the matter
But the Punjab and Haryana High Court was construing the meaning of the expression owner  under section 22 of the Income tax Act 1961
There the division bench of the Punjab  Haryana High Court held that the assessee occupied the property after the execution of the agreement of sale deed in his favour and after completion of the building he was in a position to earn income from the property sold to him though the registered sale deed was executed subsequently in April 1969
It was 1088 held that the assessee was owner  in terms of section 22 of the Income tax Act 1961
The Madras High Court had occasion to discuss this aspect in Mrs MP Gnanambal vs Commissioner of Income tax Madras There the facts were entirely different and the Madras High Court held that the rights with reference to the properties in question in that case could only be described as a delusion and a snare so long as the sons continued to occupy the property which they were entitled to under the will and to describe the assessee s right as owner of the property would be a complete misnomer
There the court was construing the will and section 22 of Income tax Act 1961 as to who were the owners in terms of the will
In all these cases as was reiterated by the Calcutta High Court in SB House  Land Pvt Ltd vs Commissioner of Income tax West Bengal the question of ownership had to be considered only in the light of the particular facts of a case
The Patna High Court in Addl
Commissioner of Income tax Bihar vs Sahay Properties and Investment Co P Ltd was concerned with the construction of the expression owner  in section 22 of the Income tax Act 1961
There the assessee had paid the consideration in full and had been in exclusive and absolute possession of the property and had been empowered to dispose of or even alienate the property
The assessee had the right to get the conveyance duly registered and ex ecuted in its favour but had not exercised that option
The assessee was not entitled to say that because of its own default in having a deed registered in its name the assessee was not the owner of the property
In the circumstances it was held that the assessee must be deemed to be the owner of the property within the meaning of section 22 of Income tax Act 1961 and was assessable as such on the income from the property
This is only an illustrative point where in certain circumstances without any registered conveyance in favour of a purchaser a person can be considered to be owner 
It may incidentally be mentioned that this Court has granted special leave to appeal against this judgment
See in this connection Salmond s conception of ownership  has been noted
The meaning of the expression belonging to  has also been noted
We have discussed the cases where the distinction between belonging to  and ownership  has been considered
The following facts emerge here 1 the assessee has parted with the possession which is one of the essen 1089 tials of ownership 2 the assessee was disentitled to recover possession from the vendee and assessee alone until the document of title is executed was entitled to sue for possession against others ie others than the vendee in possession in this case
The title in rem vested in the assessee 3 The vendee was in rightful possession against the vendor 4 the legal title however belonged to the vendor
5 The assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk
The position is that though all statutes including the statute in question should be equitably interpreted there is no place of equity as such in taxation laws
The concept of reality in implementing fiscal provision is relevant and the Legislature in this case has not significantly used the expression owner  but used the expression belonging to 
The property in question legally however cannot be said to belong to the vendee
The vendee is in rightful possession only against the vendor
Speaking for myself I have deliberated long on the question whether in interpreting the expression belonging to  in the Act we should not import the maxim that equity looks upon a thing as done which ought to have been done and though the conveyance had not been executed in favour of the vendee and the legal title vested with the vendor the property should be treated as belonging to the vendee and not to the assessee
I had occasion to discuss thoroughly this aspect of the matter with my learned Brother and in view of the position that legal title still vests with the assessee the authorities we have noted are preponderantly in favour of the view that the property should be treated as belonging to the assessee in such circumstances I shall not permit my doubts to prevail upon me to take the view that the property belongs to the vendee and not to the assessee
I am conscious that it will work some amount of injustice in such a situation because the assessees would be made liable to bear the tax burden in such situations without having the enjoyment of the property in question
But times perhaps are yet not ripe to transmute equity on this aspect in the interpretation of law much as I would have personally liked to do that
As Benjamin Cardozo has said The judge even when he be free is not wholly free
A Judge cannot innovate at pleasure
It may be said that the legislature having designedly used the expression belonging to  and not the expression owned by  had perhaps expected judicial statesmanship in interpretation of this expression as leading to an interpretation that in a situation like this it should not be treated as belonging to the assessee but as said before 1090 times are not yet ripe and in spite of some hesitation I have persuaded myself to come to the conclusion that for all legal purposes the property must be treated as belonging to the assessee and perhaps legislature would remedy the hardship of assessee in such cases if it wants
The assessee had a mere husk of title and as against the vendee the assessee had no reality of title but as against the world he was still the legal owner and real owner
As has been observed by this Court in Commissioner of Wealth tax West Bengal vs Bishwanath Chatterjee and Others supra the property is owned by one to whom it legally belongs
The property does not legally belong to the vendee as against the vendor the assessee
In Webstor s Dictionary belonging to  is explained as meaning inter alia to be owned by be in possession of
The precise sense in which the words were used therefore must be gathered only by reading the instrument or the document as a whole
Section 53A of the Transfer of Property Act 1908 is only a shield and not a sword
In Aiyar s Law Laxicon of British India 1940 Edition page 128 it has been said that the property belonging to a person has two meanings 1 ownership 2 the absolute right of the user
The same view is reiterated in Stroud s Judicial Dictionary 4th Edn
page 260
The expression property belonging to  might convey absolute right of the user as well as of the ownership
A road might be said with perfect propriety to belong to a man who has the right to use it as of right although the soil does not belong to him
Under section 53A of the Transfer of Property Act 1908 where possession has been handed over to the purchasers and the purchasers are in rightfuly possession of the same as against the assessee and the occupation of the property in question and secondly that the entire consideration has been paid and thirdly the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers were in possession had right to call upon the assessee to execute the conveyance it cannot be said that the property legally belonged to the assessee in terms of section 2m of the Act in the facts and circumstances of the case even though the statute must be read justly and equitably and with the object of the section in view
We are conscious that if a person has the user and is in the enjoyment of 1091 the property it is he who should be made liable for the property in question under the Act yet the legal title is important and the legislature might consider the suitability of an amendment if it is so inclined
This question therefore must be answered in favour of the revenue and in the affirmative
The appeal in this aspect must therefore fail
For the second question it is necessary to refer to section 2e which provides for the definition of assets by stating that assets includes property of every description movable or immovable but does not include    iv 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 Therefore in order to be excluded from the assets of the assessee the right being the sum which was annually to be paid under the agreement or letter mentioned hereinbefore must be by the terms and conditions precluded commutation of any portion thereof into a lumpsum grant
The question therefore is could this lumpsum grant of Rs25 lakhs be commuted by the Nizam and the capital value of the commutation be received Furthermore the next question that arises was whether that commutation was precluded by the terms and conditions relating to that right
It may be that preclusion might be either by express terms and conditions of the right or as an inference from the terms and conditions of the payment
We need not go into the rights of the erstwhile princes before the abolition of the privy purses whether the privy purses could be commuted or not
The term annuity  is not defined in the Act
According to the Oxford Dictionary annuity  means sums payable in respect of a particular year yearly grant
An annuity is a certain sum of money payable
yearly either as a personal obligation of the grantor or out of property
The hall mark of an annuity according to Jarman On Wills page 1113 is 1 it is a money 2 paid annually 3 in fixed sum and 4 usually it is a charge personally on the grantor
1092 Whether a particular sum is an annuity or not has been considered in various cases
It is not necessary in the facts and circumstances of the case and in view of the terms of the payment indicated to examine all these cases
In Ahmed GH Ariff and Others vs Commissioner of Wealth tax Calcutta  this Court held that the word annuity  in clause iv of section 2e of the Act must be given the signification which it has assumed as a legal term owing to judicial interpretation and not its popular and dictionary meaning
In Commissioner of Wealth tax Gujarat vs Arundhati Balkrishna  there were two deeds of trust
The assessee s father had settled certain shares in trust for the benefit of the assessee and her two brothers
The trustees were to pay the residue of the income from the trusts in equal shares to the beneficiaries after deducting all costs and expenses
The assessee had a right after she had attained majority and after the birth of her first child to require the trustees to pay her shares out of the corpus of the trust fund absolutely up to one half thereof
Under another trust created by her mother in law of certain sums of money and certain shares the trustees were required to pay the income of the trust funds after deducting expenses to the assessee during her lifetime
It was held that the payments to the assessee under the trust deeds were not annuities  within the meaning of section 2e iv of the Act
In Commissioner of Wealth tax Rajasthan vs Her Highness Maharani Gayatri Devi of Jaipur  this question arose again
The Maharaja of Jaipur had executed a deed of irrevocable trust whereunder the properties mentioned in the schedule thereto stood transferred to the trustee
The trust fund was to include the assets mentioned in the schedule and also such additions thereto and other capital moneys which might be received by the trustee
The assessee was one of the beneficiaries under the trust to whom the trustee was to pay during her lifetime 50 per cent of the income of the trust fund
The question was whether the assessee had a life interest in the corpus of the trust fund and her interest was therefore an asset  liable to wealth tax or whether the assessee had only a right to an annuity and as such her right was exempt from wealth tax in view of section 2e iv of the Act
It was held by this Court that since neither the trust fund nor the amount payable to the assessee was fixed and the only thing certain was that she was entitled to 50 per cent of the income of the trust fund 1093 what the assessee was entitled to was not an annuity but an aliquot share in the income of the trust fund
The assessee had a life interest in the trust fund and the right of the assessee under the trust deed was not exempt from wealth tax by virtue of the provisions of section 2e iv
In Commissioner of Wealth tax Lucknow vs PK Banerjee  it was held that the right of the assessee in the trust fund in that case was not an annuity  and was not exempt from the wealth tax under section 2e iv of the Act
It was further observed that in order to constitute an annuity  the payment to be made periodically should be a fixed or predetermined one and it should not be liable to variation depending upon or on any ground relating to the general income of the fund or estate which was charged for such payment
In this case in view of the background of the terms of payment and the circumstances why the payment was made there cannot be any doubt that Rs25 lakhs annually was an annuity 
It was a fixed sum to be paid out of the property of the Government of India in lieu of the previous income of the assessee from Sarf e khas
Therefore it was an annuity
The only question that arises was there any express provision which prevented commutation of this annuity into a lumpsum Counsel for the revenue contended that there must be an express provision which must preclude commutation
In this case indeed there is no express provision from the document itself
The question is can from the circumstances of the case such an express provision precluding commutation be inferred in the facts and circumstances of this case The background of the facts and circumstances of the payment has to be kept in mind
The Nizam had certain income
He was being given three sums one was the privy purse which was not commutable the other was payment of Rs25 lakhs for the upkeep of palaces etc
and the third of Rs25 lakhs in lieu of his previous income from the Sarf e khas
Income is normally meant for expenditure
The Nizam had to incur various expenditures
Commutation is often made when one is not certain as to whether the source from which that income comes for example when a man retires from service he normally commutes in order to ensure for himself and after his death for his family a certain income which he can ensure by getting the commuted amount invested in his private bank or otherwise which he may not be sure because upon his death the pension will cease
1094 In this case this being an aggrement between erstwhile ruler and the Government of India there is no such motivation and this payment of Rs25 lakhs in lieu of the previous income of Sarf e khas must be read in conjunction with two other sums namely Rs50 lakhs as privy purse and Rs25 lakhs for upkeep of palaces
This bears the same character
As privy purses were not commutable we are of the opinion that from the circumstances and keeping in background of the payment there was an express provision flowing from the circumstances precluding the commutation of this amount of Rs25 lakhs
If that is the position then in our opinion it was exempt under section 2e iv of the Act
There was no right granted and can be gathered from the terms of the grant of payment for the assessee to claim commutation of the amount of Rs25 lakhs
That would defeat the purpose and the set up of the arrangement under which the payment of the amount was made
The nature of privy purses have been discussed in HH Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur  Ors
vs Union of India  We are however not concerned with the controversy of the privy purse
But it is quite evident from the nature of the sum stipulated in the letter the assessee had no right to claim commutation
Taking that fact in conjunction with the circumstances under which the payment of Rs25 lakhs was agreed to we are of the opinion that it must be held that from the terms of the agreement there was an express stipulation precluding commutation
If that is so then it comes within clause iv of section 2e of the Act and the assessee was entitled to exemption
The question therefore must also be answered in the negative and in favour of the assessee
The appeal is disposed of in the aforesaid terms
The judgment and order of the High Court are modified accordingly
In view of the divided success there will be no order as to costs
APJ Appeal allowed in part


Summary:
In the assessment year 1957 58 the Wealth Tax Officer had included a sum of Rs490775 representing the market value of certain immovable properties in respect of which although the assessee had received full consideration money he had not executed any registered sale deeds in favour of the vendees
The question was whether the properties belonged to the assessee even after such sale for the purpose of inclusion of his net wealth within the meaning of section 2m of the Wealth Tax Act 1957
The Wealth Tax Officer held that the assessee 1073 still owned those properties and consequently the value of the same was included in his net wealth
On appeal the Appellate Assistant Commissioner sustained the order of the Wealth Tax Officer with certain deductions in value
On further appeal the Tribunal held that the assessee had ceased to be the owner of the properties because the assessee having received the consideration money from the purchasers and the purchasers having been put into possession were protected in terms of section 53A of the and the term owner  not only included the legal ownership but also the beneficial ownership
The High Court following the ratio of Commissioner of Income Tax AP Hyderabad vs Nawab Mir Barkat Ali Khan  reversed the order of Tribunal and upheld that of the Wealth Tax Officer and the Assistant Appellate Commissioner
The Assessee Nizam of Hyderabad was a paramount ruler owning certain private properties called Sarf e khas
On surrendering his paramountcy and acceding to the Union of India his private properties were taken over by the Government and it was agreed to pay him a sum of Rs 1 crore annually distributed as follows a Rs50 lakhs as a privy purse b Rs25 lakhs in lieu of his previous income from the Sarf e khas and c Rs25 lakhs for the upkeep of palaces etc
The Government in its letter to the assessee stated that his Sarf e khas estates should not continue as an entirely separate administration independent of the Diwani administrative structure and it should therefore be completely taken over by the Diwani its revenue and expenditure being merged with the revenues and expenditure of the State
Question was whether the assessee s right to receive the sum of Rs25 lakhs OS from the State Government was an asset for the purposes of inclusion in his net wealth under the Wealth Tax Act 1957
The Wealth Tax Officer treating the said sum as an annuity and as an asset or property capitalised the same to Rs9978572 and included that amount as an asset of the assessee
The Appellate Assistant Commissioner agreed with this view
The Tribunal however refused to call it as an annuity characterised it as an annual payment for surrender of life interest and held that the capitalised value of such life interest be added to the net wealth and taxed
The High Court agreed with the view taken by the Tribunal that it was only an annual payment made in compensation for the property which had been taken over by the Govern 1074 ment therefore it was a part of the wealth and it was possible to commute the annual payment of Rs25 lakhs
The High Court found that there was neither any express preclusion nor any circumstances from which legitimately an inference could be drawn precluding commutation of the said amount into a lumpsum grant
Consequently the High Court upheld the order of the Wealth Tax Tribunal
Partly allowing the Appeal  HELD 1 Under section 3 of the Wealth Tax Act 1957 the charge of wealth tax is on the net wealth  of the assessee on the relevant valuation date as defined under section 2m of the Act
1081E F 2 The material expression for the purposes of this appeal is belonging to the assessee on the valuation date
The properties in respect of which registered sale deeds had not been executed but consideration for sale of which had been received and possession in respect of which had been handed over to the purchasers belonged to the assessee for the purpose of inclusion of his net wealth
1081G H 1082A 3 It is not necessary for the purpose of section 2m to be tied down with the controversy whether in India there is any concept of legal ownership apart from equitable ownership or not or whether under sections 9 and 10 of the Indian Income Tax Act 1922 and sections 22 to 24 of the Indian Income Tax Act 1961 where owner  is spoken of in respect of house properties the legal owner is meant and not the equitable or beneficial owner
All the rights embedded in the concept of ownership of Salmond cannot strictly apply either to the purchasers or the assessee in the instant case
1082C D 1082H 1083A 4 The liability to wealth tax arises because of the belonging of the asset and not otherwise
Mere possession or joint possession unaccompanied by the right to be in possession or ownership of property would therefore not bring the property within the definition of net wealth for it would not then be an asset belonging to the assessee
Unlike the provisions of Income tax Act section 2m of the Act uses the expression belonging to  to indicate that the person having lawful dominion of the assets would be assessable to wealth tax
1083C E 5 Though the expression belonging to  no doubt was capable of denoting an absolute title was neyertheless not confined to connoting that sense
Full possession of an interest less than that of full ownership could also be signified by that expression
1086G H 1075 Commissioner of Wealth tax West Bengal vs Bishwanath Chatterjee and Others and Raja Mohammad Amir Ahmed Khan vs Municipal Board of Sitapur and another
AIR  relied upon
Webster s Distionary and Aiyar s Law Lexicon of British India 1940 edn p 128 and Salmond on Jurisprudence 12th edn pp 246 to 264 referred to
6 The property is owned by one to whom it legally belongs
The property does not legally belong to the vendee as against the vendor the assessee
The precise sense in which the words belonging to  were used in section 2m of the Act must be gathered only by reading the instrument or the document as a whole
1090C D 7 Though all statute including the Wealth Tax Act should be equitably interpreted there is no place of equity as such in taxation laws
The concept of reality in implementing fiscal provision is relevant and the Legislature in section 2m has not significantly used the expression owner  but used the expression belonging to 
The Legislature having designedly used the expression belonging to  and not the expression owned by  had perhaps expected Judicial statesmanship in interpretation of this expression
1089G H 8 On a distinction being made between belonging to  and ownership  the following facts emerge 1 the assessee has parted with the possession which is one of the essentials of ownership 2 the assessee was disentitled to recover possession from the vendee and assessee alone until document of title is executed was entitled to sue for possession against others ie others than the vendee in possession in this case
The title in rem vested in the assessee 3 the vendee was in rightful possession against the vendor 4 the legal title however belonged to the vendor and 5 the assessee had not the totality of the rights that constitute title but a mere husk of it and a very important element of the husk
1088H 1089A B 9 The property in question legally cannot be said to belong to the vendee
The vendee is in rightful possession only against the world
Since the legal title still vests with the assessee the property should be treated as belonging to the assessee
It will work some amount of injustice in such a situation because the assessees would be made liable to bear the tax burden in such situations without having the enjoyment of the property in question
But times perhaps are not ripe to transmute equity on this aspect in the interpretation of law
1089C F 1076 10 Under section 53A of the Transfer of Property Act 1908 where possession had been handed over to the purchasers and the purchasers are in rightful possession of the same as against the assessee secondly that the entire consideration has been paid and thirdly the purchasers were entitled to resist eviction from the property by the assessee in whose favour the legal title vested because conveyance has not yet been executed by him and when the purchasers were in possession had right to call upon the assessee to execute the conveyance it cannot be said that the property legally belonged to the assessee in terms of section 2m of the Act in the facts and circumstances of the case even though the statute must be read justly and equitably and with the object of the section in view
If a person has the user and is in the enjoyment of the property it is he who should be made liable for the property in question under the Act yet the legal title is important and the Legislature might consider the suitability of an amendment if it is so inclined
1090F H 1091A Commissioner of Wealth tax Gujarat IV vs HH Maharaja FP Gaekwad approved
Commissioner of Income tax AP Hyderabad vs Nwab Mir Barkat Ali Khan referred to
Commissioner of Wealth tax AP vs Trustees of HEH Nizam s family Remainder Wealth Trust  RB Jodha Mal Kuthiala vs Commissioner of Income tax Punjab Jammu  Kashmir and Himachal Pradesh  Commissioner of Income tax West Bengal II vs Ganga Properties Ltd  Commissioner of Wealth tax Gujarat I vs Kum Manna G Sarabhai  Commissioner of Income tax Gujarat vs Ashaland Corporation  Commissioner of Income tax Bombay City III vs Smt
TP Sidhwa 133 ITR840 Smt
Kala Rani vs Commissioner of Income Tax Patiala I  Mrs MP Gnanambal vs Commissioner of Income tax Madras  SB House  Land Pvt Ltd vs Commissioner of Income tax West Bengal and Addl
Commissioner of Income tax Bihar vs Sahay Properties and Investment Co P Ltd distinguished
11 Special leave is a discretionary jurisdiction and the dismissal of a special leave petition cannot be construed as affirmation by the Supreme Court of the decision from which special leave was sought for
1087E Daryao  Ors
vs State of UP  Ors
  relied upon
1077 Sahu Govind Prasad vs Commissioner of Income tax at 863 approved
12 Section 2e iv of the Wealth Tax Act 1957 provides that assets includes property of every description movable or immovable but does not include 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
1091B D 13 The term annuity  is not defined in the Act
It must be given the signification which it has assumed as a legal term owing to judicial interpretation and not its popular and dictionary meaning
An annuity  is a certain sum of money payable yearly either as a personal obligation of the grantor or out of property
The hall mark of an annuity is 1 it is a money 2 paid annually 3 in fixed sum and 4 usually it is a charge personally on the grantor
1091G H 14 In this case in view of the background of the terms of payment and the circumstances why the payment was made there cannot be any doubt that Rs25 lakhs annually was an annuity 
It was a fixed sum to be paid out of the property of the Government of India in lieu of the previous income of the assessee from Sarf e khas
Therefore it was an annuity 
1093C D 15 In the instant case there is no express provision in the document itself which prevented commutation of this annuity into a lump sum
For inferring whether such as express provision precluding commutation exists the background of the facts and circumstances of the payment has to be kept in mind
The assessee was given Rs25 lakhs in lieu of his previous income from the Sarf e khas
Income is normally meant for expenditure
The assessee had to incur various exenditures
Commutation is often made when one is not certain as to whether the source from which that income comes
In this case this being an agreement between earstwhile ruler and the Government of India there is no such motivation and this payment of Rs25 lakhs in lieu of the previous income of Sarf e khas must be read in conjunction with two other sums namely Rs50 lakhs as privy purse and Rs25 lakhs for upkeep of palaces
This bears the same character
1093E H 1094A B 16 As privy purses were not commutable from the circumstances and keeping in background of the payment there was an express provision flowing from the circumstances precluding the 1078 commutation of this amount of Rs25 lakhs and therefore it was exempt under section 2e iv of the Act
1094B C 17 There was no right granted and can be gathered from the terms of the grant of payment for the assessee to claim commutation of the amount of Rs25 lakhs
That would defeat the purpose of the set up of the arrangement under which the payment of the amount was made
From the nature of the sum stipulated in the letter written by the Government to the assessee the assessee had no right to claim commutation
Taking that fact in conjunction with the circumstances under which the payment of Rs25 lakhs was agreed to it is held that from the terms of the agreement there was an express stipulation precluding commutation and therefore it comes within cl
iv of section 2e of the Act and the assessee was entitled to exemption
1094C F Oxford Dictionary Jarman on Wills P 1113 relied on and Ahmed GH Ariff and Others vs Commissioner of Wealth tax Calcutta  Commissioner of Wealth tax Gujarat vs Arundhati Balkrishna  Commissioner of Wealth tax Rajasthan vs Her Highness Maharani Gayatri Devi of Jaipur  Commissioner of Wealth tax Lucknow vs PK Banerjee and HH Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur  Ors
vs Union of India  referred to