P.M. Ghiya (Decd.) (By Legal representative) vs Commissioner of Income Tax, Gujarat

Mehta, J.—The assessment year under reference is 1971-72, previous year relevant to the assessment year being S.Y. 2026 which ended

on October 30, 1970. The assessee, P.M.Ghiya, since deceased, made an annuity deposit, and in the year of accounting relevant to the

assessment year under reference, an amount of Rs. 6,636 was returned out of the said deposit to the estate of the deceased, P.M.Ghiya, which

was represented by his legal representative, Shri K.P.Ghiya, who happened to be the executor under the will of the deceased assessee. The

question which arose for consideration before the ITO was whether the said amount of Rs. 6,636 was includible in the income of the estate of the

deceased ? On behalf of the assessee, it was contended that the said amount was an income in the bands of the executor and, therefore, should not

be included in the income of the estate. This contention did not find favour with the ITO who held that the said amount was includible in the total

income of the estate and, therefore, he allowed the said appeal and directed the deletion of the said amount. The Revenue carried the matter in

appeal before the Tribunal which, following a decision of this court in Commissioner of Income Tax, Gujarat-III Vs. Narottamdas K. Nawab, ,

held that the aforesaid amount of Rs. 6,636 was includible in the income of the estate of the deceased. In that view of the matter, the Tribunal

reversed the order of the AAC and restored that of the ITO. The assessee, therefore, sought a reference to this court; and, accordingly, the

Tribunal framed the following question for our advice :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 6,636 received back

from annuity deposit paid was includible in the income of the estate of the deceased Shri P.M.Ghiya ?

We must answer this question in the affirmative, i.e., in favour of Revenue and against the assessee, since the position is now concluded so far as

this court is concerned by the decision of a Division Bench of this court in Commissioner of Income Tax, Gujarat-III Vs. Narottamdas K. Nawab,

. It should be noted that the assessee concerned in that case had accepted the decision of this court and did not carry the matter any further to the

Supreme Court. The Division Bench in that case was concerned with the question as to whether the instalment of annuity deposit received by the

karta of the assessee as nominee/legal representative of the deceased depositor was liable to be assessed as income of the assessee. The Division

bench, speaking through Divan C.J. (as he then was), held that having regard to the Annuity Deposit Scheme, the payment of instalments was not

the return of capital but was a return of the original item of income spread over a period of ten years and would retain its character of income

notwithstanding the fact that the original depositor died in the meanwhile and money was being received by the legal representative or the nominee.

The Division Bench further held that under the provisions of the I.T.Act, 1961, particularly ss. 2(24), 280D and 280W, the instalments received by

the depositor have to be assessed as income in his hands and in the event of death of the original depositor, the amount of annuity becomes due to

the legal representative, in case there is no nomination or to the nominee in whose favour nomination has been made by the original depositor and,

therefore, having regard to the provisions of the I.T. Act, read with the Annuity Deposit Scheme, the annual payments which were made in the

exercise of statutory powers were income in the hands of the nominee or the legal representative of the original depositor. Since the position is

concluded, we have to answer the question as indicated above.

Mr. Patel for the assessee makes an oral application for grant of certificate for appeal to the Supreme Court, since in his submission, this court

could not have ruled as it did, particularly in view of the decision of the Supreme Court in Commissioner of Income Tax, Madhya Pradesh Vs.

Hukumchand Mohanlal, , and also because this involves a substantial question of law. We are of the opinion that having regard to the fact that the

Division Bench of this court has ruled against the assessee in Commissioner of Income Tax, Gujarat-III Vs. Narottamdas K. Nawab, after

distinguishing the decision of the Supreme Court in Commissioner of Income Tax, Madhya Pradesh Vs. Hukumchand Mohanlal, , this matter

involves a substantial question of law; and, therefore, we grant the certificate that this is a fit case for appeal to the Supreme Court. Oral application

is, therefore, allowed with no orders as to costs.