C. S. P. Singh, J. - The Income-tax Appellate Tribunal, Allahabad Bench Allahabad, has under section 27(1) of the Wealth Tax Act, referred the following question for our opinion :-
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the right to receive the Malikana allowance of Rs. 30,612-8 Annas in the case of the joint family in respect of 1957-58 and 1958-59 assessment years and 1/4th thereof in the hands of each of the four members of the Joint Hindu family in respect of 1964-65 assessment years onwards, was exempt under section 2(e)(iv) of the Wealth-tax Act, 1957 ?"
2. For the assessment years 1957-58 and 1958-59, the reference relate to Kr. T. N. Singh Hindu undivided family while those pertaining to years 1964-65, 1965-66, 1966-67, 1967-68, 1968-69 and 1969-70, relate to Kr. T. N. Singh as an individual. The case of Smt. Shanti Devi, individual, wife of Kr. T. N. Singh, for the assessment years 1966-67, 1967-68 and 1968-69, is also covered by the aforesaid references. The question referred also pertains to the assessment of V. N. Singh, and Ajai Narain Singh, sons of Kr. T. N. Singh, pertaining to the assessment years 1966-67 to 1971-72, as regards the first of the aforesaid assessees and the years 1966-67, 1967-68 and 1968-69, the second of the aforesaid assessees. The valuation dates for the Hindu undivided family for the two assessment years 1957-58 and 1958-59 are 31st August, 1956 and 31st August, 1957 and in the case of other assessees the 31st March of the preceding year. Although the assessees are different, the Tribunal referred a single question which arose out of its consolidated order dated 18th March, 1972, passed in W.T.A. Nos. 76 to 81 and 4 to 14 and 94 and 95 of 1971-72, inasmuch as the question of law involved was similar. The original assessment for the year 1957-58 was made on the Hindu undivided family of Kr. T. N. Singh on a net wealth of Rs. 4,15,780/-. Subsequently, it came to the notice of the Wealth Tax Officer that the capitalised value of Malikana allowance of Rs. 30,612/8 annas had escaped assessment. The Wealth Tax Officer reopened the assessment under section 17 of the Act. The assessee filed returns under section 17 showing net wealth of Rs. 4,15,780, and it was contended that the Malikana allowance was an annuity and not being commutable was exempt under section 2(e)(iv) of the Act. This contention of the assessee was rejected, and the capitalized value of Malikana allowance was included in the net wealth of the assessee and valued at Rs. 6,12,256/-. On the 16th May 1958, a partial partition took place in the joint family of Kr. T. N. Singh with effect from 22nd February, 1958. This was effected by an arbitration awarded and the Malikana allowance of Rs. 36,330/- was also partitioned among Kr. T. N. Singh, his wife Smt. Shanti Devi, and his two minor sons. The Wealth Tax Officer estimated the capitalised value of the Malikana allowance and included an amount of Rs. two lacs in the net wealth of each of the four assessees for the year 1959-60 onwards. The appeals, which were filed before the Appellate Assistant Commissioner against the assessment orders, were dismissed. But the appellate Assistant Commissioner reduced the quantum of the capitalized value, and directed that only one and half lacs should be included in the hands of each of the four assessees after the partial partition on 22nd February, 1958. As respect the appeal of Hindu undivided family for the year 1957-58 and 1258-59, the capitalized value of the Malikana allowance taken by the Wealth Tax Officer was upheld, and the appeal dismissed. Thereafter, appeals were filed by the Hindu undivided family and the various individual before the Tribunal. It was contended before the Tribunal that the Malikana allowance which the assessees were getting was a pension, and hence exempt under section 2(e)(iv) of the Act. In the alternative, it was contended that the Malikana allowance was an annuity in perpetuity and capable of being commuted and, as such, was exempt under section 2(e)(iv) of the Act. The Tribunal rejected the assessees contention that the sum of Rs. 30,612/8 annas was a pension, but upheld the contention that it was in the nature of annuity and was not capable of being commuted and, as such, was exempted under section 2(e)(iv) of the Act. In view of this conclusion, the Tribunal ordered that the capitalised value of the Malikana allowance be deleted from the net wealth of the assessees.
3. In order to determine as to whether the amount in question is an annuity, as is contemplated by section 2(e) of the Act, it is necessary to see the genesis of the grant. Fortunately, the facts relating to the grant are set out in two of the assessees own cases reported in AIR 1963 SC 799 Government of the State of Uttar Pradesh and others vs. Kunwar Shri Trivikram Narain Singh and (1965) 57 ITR 29 Commissioner of Income-tax, U.P. vs. Kunwar Trivikram Narain Singh. In AIR 1963 SC 799, the Supreme Court, while dealing with the genesis of grant, put up the matter thus :-
"Under a treaty between the East India Company and Nawab Asafuddaula, the Province of Banaras was ceded about the year 1175 to the East India Company. The company then granted a sanad to Raja Chet Singh the former ruler of Banaras, and under that sanad, the rights and powers previously held by Raja Chet Singh were conferred afresh. Raja Chet Singh granted in Jagir, pargana "Syedpore Bhettree" in perpetuity to his Diwan Ousan Singh as remuneration for services rendered to his family. Raja Chet Singh having renounced his gaddi, the East India Company confirmed the grant made by the Raja in favour of Ousan Singh. Raja Chet Singh was succeeded by Raja Mahip Narain Singh who executed a sanad in favour of Ousan Singh affirming the grant.
"Land revenue settlements were made in the Province of Banaras about the year 1789-90, but the Jagirs including "Syedpore Bhettree" were excluded from that settlement. Ousan Singh died in or about the year 1800, and his son Sheo Narain Singh succeeded to the Jagir. In the enquiry held by the Collector of Ghazipur into the proprietary right claimed by the Jagirdar under Regulation II of 1819, it was declared that the grant to Ousan Singh was for life only and did not confer a heritable or transferable tenure in the parganas. The decision of the Collector was confirmed by the Commissioner of Bihar and Banaras subject to the recommendation that Sheo Narain Sigh should be maintained in possession of the parganas for life. The Government then directed in 1828 that a detailed settlement be made with the village zamindars, and offered Sheo Narain Singh allowance for life of one-half of the revenue to be assessed on the pargana. Sheo Narain Singh declined to accept the offer and commenced an action in the Civil Court contesting the validity of the order resuming the Jagir. The Government considered the question afresh, and resolved to revise the order of resumption and in July, 1830, ordered that Sheo Narain Singh be considered Tahsildar of pargana "Syedpore Bhattrees" and that the office be treated an hereditary devolving upon the descendants of the Jagirdar and held so long as the incumbent did not in fringe the privilege found to belong to other classes at the time of formation of settlement. Sheo Narain Singh died before the resolution of the Government was communicated to him and he was succeeded by his son Harnarain Singh who withdrew the suit and signed a compromise incorporating the terms of resolution. On August 19, 1831 the Secretary to the Government addressed to the Agent of the Governor General at Banaras a letter requesting the Secretary to the Governor General in pension department to prepare the necessary documents relating to the grant of a sanad specifying that parganas "Syedpore Bhettree" were granted on an "istrar" tenure to Harnarain Singh for his own benefit and of his heirs and successors in perpetuity on condition of their paying to Government 3/4th of the Jama which the revenue officers may in a resettlement of the parganas assess thereon and that all claims to proprietary right to any village situate in the said pargana shall be fully enquired into and in the event of any such claims being established to the satisfaction of the Government the village or villages forming the subject of the claim shall be considered distinct from the independent of the grant and that a settlement shall be made with the proprietor as in other cases that the office of Tahsildar shall belong to Harnarain Singh and be hereditary in his family so long as the condition prescribed for the duties of that office be not infringed, and that in virtue of such office, the separate proprietors shall continue to pay the Jama which may be assessed on their villages through Harnarain or such other member of the family as the Government may appoint provided that 1/4th of the Jama of such separated villages shall be deducted from the payment to be made to the Government in lieu of all remuneration for discharging the duties of Tahsildar, and provided further that until the settlement shall be completed, Harnarain Singh shall continue to pay Jama to Government. This proposal calling upon Harnarain Singh to bear all the expenses of the administration and any loss in collection which may occur, departed from the terms of the compromise. Harnarain Singh refused to accept the offer of a sanad so the terms set out in that letter and also the office of Tahsildar. In the meanwhile proceedings for settlement were commenced on November 16, 1832, settlement officer reported on the conclusion of a summary settlement of the parganas that in 166 mahals, the village zamindars established proprietary rights and the revenue assessed upon them was Rs. 1,28,980/-. He further reported that 12 mahals of which the gross revenue was Rs. 22,840/- were settled with the Jagirdar at reduced revenue of Rs. 17,130/-.
"Harnarain Singh having refused to undertake the office of Tahsildar on the terms offered by the Government, the Board of Revenue suggested that Harnarain Singh should receive 1/4th of the net collections after deducting from the gross collections the costs of Tahsil establishment thereby giving him an income of Rs. 36,3220-8-0. The Board of Revenue recommended that a sanad be issued under the authority of the Lt. Governor conferring the pension of Rs. 36,322-8-0 on Babu Harnarain Singh and his heirs in perpetuity." In a letter dated September 13, 1837, it was recorded that the Lt. Governor of N.W.F. Province was of the view that it would be more conformable with the terms of agreement if the allowance on Harnarain Singhs villages (12 mahals) were given in the form of a remission of revenue to the amount of one fourth, the Jama being fixed at Rs. 17,130/- instead of Rs. 22,940/- and for the villages settled with the zamindars (166 mahals), Harnarain Singh be paid annually a person of 1/4th of the collections after deducting the Tahsildari charge, and on that footing Rs. 30,612-8-0 be granted to Harnarain Singh. By letter dated October 19, 1837 from the Secretary to the Lt. Governor N.W.F. Province, the Secretary to the Board of Revenue was informed that the Lt. Governor had resolved to adopt the Boards recommendation made on their letter dated Sept. 26, 1837 after deducting the expenses of Tahsildari establishment i.e. Rs. 30,612.8-0 out of a net Jama of the villages amounting to Rs. 1,28,960. About the 12 mahals settled with Harnarain Singh, the allowance was directed to be made in the form of a remision of 1/4th of revenue assessed. Finally, in the letter dated Sept. 14, 1836, from the Secretary to the Sardar Board of revenue to the officiating Commissioner 5th Division Banaras it was stated that what the Government intended was to give a clear fourth of the net revenue of the parganas to the Muqurrurreedar as pension. The letter further stated :-
(2) "The arrangement of paying a portion of that pension by a commission of revenue on certain mauzas settled, as was supposed, directly with the muqurrurreedar was proposed by the Board and allowed by Government as a mere matter of convenience to the parties. Neither the Government nor Board intended to alienate any part of the muqurrurreedars pension to his son or to any other person.
(3) If the mauzas supposed to have been settled with the muqurrurreedar for his own use and behalf, turn out to be held by another person on a distinct interest, it will be necessary for the Board to modify the arrangement previously allowed and to collect the whole assessed revenue of those mauzas as of all other, and when the same shall have been collected to pay the Muqurrurreedar his clear fourth of the net collections.
(4) As however, these mauzas were settled by the Government with the Muqurrurreedar his responsibility for the Jama of any portion of revenue which may fall in arrear by person or the arrangement made by him or of the domestic difference of his family, must be made good from his pension before the assignment of the fourth share of the net collections can have effect.
(5) The Board must consider the Muqurrurreedar as the owner of these villages during his life. With his family arrangements they have no concern. But if it will be his wish that the whole revenue be collected from these villages and one-fourth be returned to him from the treasury instead of receiving that fourth in the shape of a remission he is at liberty to make the election.
(6) He is also, the Board remark, of course at liberty to cause those mauzas to be transferred or sold in the case of arrear, but his responsibility for the assessed Jama as fixed by the act of settlement will remain the same."
It is manifest that the recommendations made by the Board of Revenue and the Secretary to the Government in the lengthy correspondence varied from time to time, but in the final letter, it appears to have been made clear that an amount equivalent to 1/4th of the net revenue of the 166 mahals be given as pension annually to the Jagirdar.
A formal Sanad, though contemplated, was it appears never issued, but it is common ground that the allowance was paid through the Treasury office of the Collector of Ghazipur year after year since the year 1833 to Harnarain Singh and his descendants. This allowance to the Jagirdar of "Syedpore Bhittree" share in the revenue of the entire pargana."
4. After setting out these facts, the Supreme Court went to hold that out of the total amount of Rs. 36,322/- which the assessees ancestors were receiving the sum of Rs. 30,612/- was an allowance to Harnarain Singh in respect of 166 mahals and, as such, could not be taken over by the State Government. It also held that the mere fact that it represented 1/4th share of the net revenue of 166 mahals of the estate did not create any right in the assessee to the estate, which had vested in the State of U.P. The fixation of the amount of the allowance a portion of the land revenue was only for the purpose of using the land revenue for the 166 mahals, as a measure for fixation of the annual amount to be paid to the ancestors of the assessee and to the assessee himself.
5. In a subsequent decision of the Supreme Court reported in (1965) 57 ITR 29 Commissioner of Income-tax, U.P. vs. Kunwar Trivikram Narain Singh, question had arisen as to whether the amount that was being received by the assessee was an agricultural income. It was held that the source of income being the arrangement arrived at between the assessees ancestors and the Government in 1837, the income was not derived from land used for agricultural purpose and, as such, not exempt. It was also held that the amount being received by the assessee was not a capital receipt or compensation paid by the Government for resumption of the estate of the assessees ancestors. Ultimately, the Supreme Court allowed the claim for exemption made by the assessee by describing the payment as perpetual annuity for the exchange of a capital asset i.e., the erstwhile estate of the predecessors of the assessee. These decisions of the Supreme Court established that the amount paid to the ancestors of the assessee was a fixed amount payable in perpetuity, and not subject to variation.
6. The Tribunal has found as a fact that the amount of Rs. 30,612/- had not undergone any change for the last 134 years i.e. from onwards. The question now is whether this payment meets the test of section 2(e)(iv) of the Act, it will be convenient to extract section 2(e)(iv) at this stage :-
"a right to any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant."
It will be seen that before the exemption can be granted under section 2(e)(iv) of the Act, the sum in respect of which the claim must be an annuity, and the terms and conditions relating to the payment must be such as to prevent its communication either in whole or in part. The Wealth Tax Officer and the Appellate Assistant Commissioner had proceeded on the footing that the amount in question was an annuity. Before the Tribunal, the Revenue took the stand that the amount in question was not annuity. The Tribunal was not inclined to allow the Revenue to raise such a contention on the ground that no such case had been taken before the Wealth Tax Officer or Appellate Assistant Commissioner. Ultimately however, the Tribunal examined the question whether the amount received by the assessee was in the nature of an annuity. In the case of Commissioner of Wealth Tax, Gujarat vs. Arundhati Balkrishna, (1970)77 ITR 505, the distinction between an annuity and aliquot share of the net income of properties was considered by their Lordships of the Supreme Court, and they accepted the distinction between these two sum as set out by Kindersley V. C. in Eignold vs. Giles, (1859) 4 Drew 345, 113, Revised Reports 590, wherein the law was stated thus :-
"An annuity is a right to receive de anno in annum a certain sum that may be given for life, or for series of years, it may be given during any particular period, or in perpetuity, and there is also this singularity about annities, that although payable out of the personal assets, they are capable of being given for the purposes 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 tenaments and an annuity, though a hereditament, is not a tenament, and an annuity so given is a base fee.
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 dividends of a fund, that is a very different thing; and most of the case proceeds 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."
It would also be instructive to extract other portions of the judgment of other Lordships of the Supreme Court in this case which are to be found on pages 508 and 509 :-
The expression "annuity" is not defined in the Act. In Halsburys Laws of England, Third Edition, Volume 32, at page 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 page 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 devolution, as real estate; they may be given to a man and his heirs and may go to the heir as real estate."
"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. Ordinary an annuity is a money payment of a fixed sum annually made and is a charge personally on the grantor."
7. We now proceed to consider as to whether the amount in question meets these tests, as laid down by the Supreme Court. The Tribunal has found that Sheo Narain Singh son of Ausan Singh was offered the office of Tahsildar for life but did not accept the office, and civil litigations ensued. After his death, his son Harnarain Singh agreed to settle the dispute with the Government some time in 1830. By letter dated 19th August, 1831, Mr. W. H. Machaurhton, Secretary to Government of India wrote to the Agent of Governor General at Banaras that on receipt of an Urzee from the mother and brothers of Babu Harnarain Singh to the effect that the family differences had been adjusted, and that they recognised Harnarain Singh as the sole Manager of the property, the Government of India decided to grant a Sanad in the name Harnarain Singh, and that the steps were being taken so that the Secretary to the Governor-General in the Pension Department prepared the necessary documents and forwarded it to the Agent for delivery to Harnarain Singh. Paragraph 3 of the letter dated 19th August, 1831 is to the following effect :-
"The Sanad will specify that the parganas of Syedpore Bhittree have been granted an Istamararee Tenure. Babu Harnarain Singh for his own benefit and that of the other heirs of Babu Sheo Narain the heirs and successors in perpetuity on condition of their paying to Government 3/4th of the Jama which the Revenue Officers may in a resettlement of the parganas assessed thereon, subject, however, to the further condition that all claims to proprietary right to any village or villagers forming the subject of the claim shall be considered as distinct from and independent of the present grant and a settlement shall be made with the proprietary as in other cases provided that the office of Tahsildar shall belong to Babu Harnarain and be hereditary in the family as long as the conditions which have been or may be prescribed for the duties of that office are not infringed and that in virtue of such office the separate proprietors shall continue to pay the Jama which may be assessed on their villages through Harnarain or such other member of the family as Government may be pleased to appoint provided however, that 1/4th of the Jama of such separated villages shall be deducted from the payment to be made to Government in lieu of all remuneration for discharging the duties of Tahsildar and provided that until the settlement shall be completed, Harnarain shall continue to mined."
Thereafter, correspondence between the Secretary to the Lt. Governor, N.W.P. and the Sardar Board of Revenue, N.W.P. at Allahabad, ensued, which according to the Tribunal, established that the original intention of the Government was to appoint Harnarain Singh as Tahsildar in perpetuity on condition of his paying to the Government 3/4th of the Jama of Syedpore Bhittree. By letter dated 7th July, 1837, Harnarain Singh refused to act as Tahsildar in the circumstances, and the Sardar Board of Revenue, Allahabad, proposed that Harnarain Singh should receive an income of Rs. 36,322/8 Annas on the basis of yearly Jama of Parganas Syedpore Bhittree. Paragraphs 3 and 6 of the letter run as under :-
3. The settlement of the parganas commenced with 1241 Fasli from which time the Board proposed that the Mukarreedar should receive one fourth of the net collections the costs of Tahsil Establishment which will give him an income of Rs. 36,322/8 as exhibited in margin on which principle the intermediate accounts should be adjusted.
Deduct Tahsil Est.
6. The Board also requested that the Sanad may be issued under the authority of the Lt. Governor conferring the pension of Rs. 36,322/8/- on Babu Harnarain Singh and his heirs in perpetuity."
On the 13th Sept. 1837 J. Thompson, Secretary to the Lt. Governor wrote a letter to H. M. Elliot. Secretary to the Sadar Board of Revenue. In this letter, J. Thompson mentioned that even if pension is fixed at Rs. 36,612/8 annas, Harnarain Singh would be gainer. Opinion of the Sadar Board was sought on this point. On the 26th September, 1837, H. M. Elliot, Secretary to the Sardar Board again recommended an allowance to Harnarain Singh and asked for orders of the Lt. Governor. The matters were finalised by letter dated 19th October, 1837, sent by J. Thompson to H. M. Elliot whereby the Government fixed the pension at Rs. 30,612/8/- annas in respect of 166 mahals in pargana Syedpore Bhittree on ad hoc basis, even though according to the calculation shown in the said letter Harnarain Singh would not have been entitled to that much amount as pension. So far as the remaining 12 mahals were concerned a sum of Rs. 5,170/- was granted on ad hoc basis. The letter of the 19th October, 1837 aforesaid which forms part of the record and has been noticed by the Tribunal runs as under :-
"I am directed by the Honables Governor to acknowledge the receipt of your letter dated the 26th ultimo on the subject of the allowance to Harnarain Singh as Muquarridar of the parganas Syedpore Bhittery in Zila Ghazipur.
2nd. The entry in paragraph 8th of my former letter of Sept. 13, was evidently erroneous as the Board have remarked. It should have stood as now inserted on the margin and give to the Muqarridar an allowance on the Zamindari villages Rs. 25,730/- or Rs. 4,882/8 less than that recommended by the Board.
Jama of Zamindari village
One fourth of which is
Deduct Tahsildari Estt.
Recommended by the Board
After however, maturely considering all the circumstances connected with the case his Honour has resolved to adopt the Boards recommendation and to allow the Muqarridar one fourth of the net collection after deducting the expenses of the Tahsildari establishment i.e. Rs. 30,612/8 on Rs. 1,28,960/- Jama of these villages. 4th. In the 12 Mahals settled with the Tahsildar the allowance to the Muqarridar will be made in the form of remission of one-fourth of the revenue assessed in the cash as shown in the margin.
Name of Mahal
Jama of Settlement
5th. There is no objection to the further arrangement proposed by the Board under which the amount still demandable on account of these Mahals will be carried to account against his money allowance of Rs. 13,482/8/- per annum, supposing no balance arises on the parganas. It must however be remembered that the Muqarridar is only entitled to 1/4th of the actual collections whatever they may be and that the whole of the loss which may arise from balance is not to be borne by the Government. The total Jama on these Mauzaz will be 17,130, rupees instead of Rs. 22,840/- and the difference of Rs. 5,710/- will appear as a remission in the Jama of the Pargana to the amount.
Muqarridars share of the collections from
Jama Zamindari villages
6th. The Sardar Board of Revenue will adjust with revenue accountant the most convenient forms in which this transaction may be exhibited in the account."
The Tribunal has found that the reference to the land revenue of the 166 mahals was made only as a measure for calculation of the amount payable. This conclusion of the Tribunal is in accord with the decision of the Supreme Court in Government of the State of Uttar Pradesh and others vs. Kunwar Sri Trivikram Narain Singh, AIR 1963 S.C. 799. In view of the aforesaid decision of the Supreme Court, wherein it has been held that the amount payable as Malikana allowance was in no way related to the revenue of the 166 mahals, it must be held that the Malikana allowance received by the assessee was not an aliquot share of the income from the aforesaid mahals. The Malikana allowance on the terms of the grant was payable to the family of the assessee in perpetuity. Thus, the amount being payable per annum, and not being in any way related to the annual income from the 166 mahals of pargana Syedpore Bhittree, the amount in question partakes of the nature of an annuity, and meets the requirement of an annuity as laid down in Arundhatis case (supra).
8. The question now is whether the amount aforesaid or any part thereof is commutable or not. For, if it is so, then the assessee would not be entitled to exemption under section 2(e)(iv) of the Act. The Wealth tax Officer and the Appellate Assistant Commissioner rejected the assessees claim for exemption solely on the ground that the amount in question was commutable. The Tribunal relying on a letter dated 7th July 1837 by H. M. Elliot, Secretary to the Sardar Board of Revenue to J. Thompson, Secretary to the Governor, wherein it was recommended that the allowance in question should be granted as a pension to Babu Harnarain Singh and his heirs in perpetuity, has held that although the letter dated 19th October, 1837, from J. Thompson to H. M. Elliot by which the matters were finalised, does not mention as to whether the grant was being made only to Babu Harnarain Singh or his heirs perpetuity; the grant was, in fact, to Babu Harnarain Singh and to his successors-in-interest also. This conclusion of the Tribunal finds support from the observations of the Supreme Court to Government of the State of U.P. and others vs. Kunwar Trivikram Narain Singh, AIR 1963 S.C. 799, wherein the grant has been described as one to the Jagirdar and his descendants. The fact that the payment of the allowance was made to Babu Harnarain Singh and thereafter to his heirs strongly supports this conclusion.
9. Counsel for the Revenue has contended, as was contended before the Tribunal, that inasmuch as the letter dated 19th October, 1837 which granted the allowance did not contain any specific prohibition to the communication of the allowance, the amount or a portion thereof could be commuted and as such, the assessee was not entitled to any exemption under section 2(e)(iv) of the Act. The relevant words of section 2(e)(iv) pertinent to the question in issue are "in any case where the terms and conditions relating thereto preclude the communication ...." Counsel contends that the terms and conditions relating to the grant must be gathered from the letter of the 19th October 1837 and inasmuch as the letter does not prohibit the communication of the allowance, the case of the assessee for exemption is ill-founded. The argument put is plausible, but breaks down on a closer scrutiny. In the first place, the relevant enquiry is not as to the terms and conditions of the annuity, but terms and conditions relating thereto. The phrase terms and conditions relating thereto i.e. the annuity, is, in our view much wider than the terms and conditions on which an annuity is granted. It may be although we express no final opinion, that if the phrase were terms and conditions of the annuity, one might be tied down to the letter of the 19th October, 1837, but inasmuch as the words used in section 2(e)(iv) are "relating thereto" the enquiry is much wider in scope. Thus, in order to gather whether the annuity talked of in the sub-section is commutable or not, the entire circumstances relating to the grant of the annuity as also nature of the grant have got to be taken into account before concluding as to whether the annuity is commutable or not. In the first place, it is pertinent to note that the amount of Malikana allowance was not only to Babu Harnarain Singh or his immediate servivor, but to Babu Harnarain Singh and all his successors-in-interest in perpetuity. It was in the nature of hereditary grant to the family of Babu Harnarain Singh. Further, on the terms of the letter of 19th October, 1837, Babu Harnarain Singh was not entitled to claim communication of the Malikana allowance by way of payment of a lump sum amount. All that the letter of 19th October 1837 granted to Babu Harnarain Singh was the fixed amount of Malikana allowance payable to him and his successors-in-interest. We have noticed the nature of the grant which was in essence granted not only to Babu Harnarain Singh in his individual capacity but to heirs in perpetuity. This being so, it was not open to Babu Harnarain Singh to thwart the perpetual nature of the grant by having it commuted into a lump sum amount and appropriating it for himself alone. This being so neither Babu Harnarain Singh nor his heirs could, till such time that the grant of 1837, stood, have any right to get the amount commuted. The fact that the letter of 19th October, 1837, granted the payment in perpetuity to Babu Harnarain Singh and his heirs, precluded the Government from commuting the amount into a lump sum, for it did so, the condition that the amount would be payable in perpetuity would stand frustrated. Thus, neither the Government could force Babu Harnarain Singh or his heirs to accept payment in lump sum in lieu of Malikana allowance, nor could Babu Harnarain Singh or his heirs call upon the Government to pay a lump sum amount in lieu thereof. The grant in question was a perpetual hereditary grant and it did not lie within the power of any recipients of the grant at any point of time to efface the interest of the future successors by having it commuted into a lump sum amount. It is not necessary to refer to the cases of Commissioner of Wealth Tax, Gujarat vs. Dr. E. D. Anklesaria, (1964) 53 ITR 393 and Commissioner of Wealth Tax, Delhi and Rajasthan vs. Her Highness Maharani Gayatri Devi of Jaipur (1967) 68 ITR p. 1, as in our view, the facts of those cases were not in pari materia with the present case. The decision of the Supreme Court in the case of Ahmad G. H. Ariff and others vs. Commissioner of Wealth Tax, Calcutta, (1970) 76 ITR 471 and Commissioner of Wealth Tax, Gujarat vs. Arundhati Balkrishna, (1970) 77 ITR 505 are hardly relevant for deciding the present controversy.
10. For all these reasons, we answer the question referred in the affirmative against the Department and in favour of the assessee. The assessee is entitled to his costs which we assess at Rs. 200/-. Counsels fee is assessed at the same figure.