Maj. Kapil Mohan vs Commissioner of Income Tax

D.K. Jain, J.—In these references under s. 256(1) of the IT Act, 1961 (for short, "the Act"), pertaining to the asst. yrs. 1971-72 to 1975-76 and 1977-78, at the instance of the assessee, the following questions of law have been referred for the opinion of this Court :

For asst. yrs. 1971-72 to 1974-75 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the refund of annuity of Rs. 19,656 to the assessed (as the executor of the estate of the late Shri N. N. Mohan) was income assessable in his hands as such executor, for each of the asst. yrs. 1971-72, 1972-73, 1973-74 and 1974-75 ?"

For asst. yrs. 1975-76 and 1977-78 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the refund of annuity of Rs. 19,656 for the asst. yr. 1975-76 and Rs. 11,586 for the asst. yr. 1977-78 to the assessed as an executor of the estate of his late father, Padam Shree N. N. Mohan, was his income and was assessable in his hands as executor of the estate of the deceased ?"

Since, in substance, the issue involved in all the references is the same, these are being disposed of by this common judgment.

The assessed is the executor of the estate of the late Shri N. N. Mohan. The late Shri N. N. Mohan had deposited a sum of Rs. 1,57,250 under the Annuity Deposit Scheme under Chapter XXII-A of the Act, which, along with interest was refundable in ten equal installments under s. 280D of the Act. Shri N. N. Mohan having died on 15th July 1969, the repayment of installments of annuity along with interest, amounting to Rs. 19,656 and Rs. 11,586, were received by the assessed as the executor of his estate in each of the years, relevant to the asst. yrs. 1971-72 to 1975-76 and 1977-78, respectively.

Accordingly to the assessee, these sums were not taxable as income in the hands of the executor but his stand was not accepted and these amounts were included as income in the hands of the assessed for the respective assessment years. On appeal, the AAC accepted the viewpoint of the assessed and deleted the addition. On further appeal by the Revenue, the Tribunal, following its earlier order in respect of the asst. yr. 1970-71, held that the said amounts were taxable in the hands of the executor. At the instance of the assessee, Therefore, the afore noted questions have been referred.

At the outset, Mr. Rajendra, learned counsel for the Revenue, has invited our attention to an earlier decision of this Court in the case of the assessee, reported as Padam Shree N.N. Mohan Vs. Commissioner of Income Tax, New Delhi, , wherein it has been held that the refund of annuity deposit received by the executor of the estate of the deceased depositor is income assessable in the hands of the executor.

On the other hand, Mr. P. N. Monga, learned counsel for the assessee, has contended that the said decision requires reconsideration because it is based on another decision of this Court in Commissioner of Income Tax, Delhi-II Vs. O.N. Talwar, , which has no application to a case like the present one. He sought to distinguish the decision in O. N. Talwar''s case (supra) on the facts on the ground that in that case the assessed was a Karta of the HUF and prior to the partition of this HUF he had made certain annuity deposits on behalf of the HUF as Karta. After the partition of the family, he received his share of the repayment of annuity deposits as an erstwhile member of the family and on these facts this Court held that the assessed was a "depositor" to whom the annuity was due to be repaid and, Therefore, the receipt of installments of the annuity by a person, as a Karta of an erstwhile family, was a receipt by the "depositor" within the meaning of s. 280D of the Act. He has also urged that under the charging s. 2(24)(viii) of the Act what is included in the definition of income is the annuity due or the commuted value of any annuity paid to a "depositor" under s. 280D and not the repayment to any person other than the depositor and, Therefore, the repayment of installments of annuity to an executor cannot be treated as income. He, thus, asserts that we should not adopt the earlier view taken by this Court in the case of the assessed himself and instead the matter may be referred to a larger Bench for reconsideration.

Though, prima facie, there appears to be some merit in the argument of Mr. Monga and in fact he is supported by a decision of the Bombay High Court in Commissioner of Income Tax Vs. Dr. Rodhan H. Shroff, , having regard to the fact that the tax effect on the amounts involved is very small and the issue is also of non-recurring nature in view of the omission of s. 280D along with other sections of Chapter XXII-A by the Finance Act, 1988 w.e.f. 1st April, 1988, we feel that it would not be worthwhile to refer the case to a larger Bench particularly when for the earlier year the issue stands concluded against the assessed by the aforementioned decision of this Court which has not been challenged further.

In this view of the matter, following the decision of this Court in the assessor�s own case in respect of the asst. yr. 1970-71, we answer the questions in the affirmative, i.e., in favor of the Revenue and against the assessee.

There will, however, be no order as to costs.