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PETITIONER: LATE NAWAB SIR MIR OSMAN ALI KHAN

       Vs.

RESPONDENT: COMMISSIONER OF WEALTH TAX, HYDERABAD

DATE OF JUDGMENT21/10/1986

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) PATHAK, R.S.

CITATION:  1987 AIR  522            1986 SCR  (3)1072  1986 SCC  Supl.  700     JT 1986   684  1986 SCALE  (2)626

ACT:      Wealth  Tax   Act,  1957-S.   2(m)-Net   wealth-’Assets belonging to the assessee’-Meaning of Properties sold out by the assessee  without executing  registered  sale  deed-Full sale consideration  received-Possession handed  over to  the purchaser-Whether legal  title still  vests in  the assessee and  properties  belong  to  the  assessee  for  purpose  of inclusion in net wealth.      Transfer of Property Act, 1882, s. 53A-Scope of.      Constitution of  India-Art.  136-Dismissal  of  special leave petition  in limine-Cannot be construed as affirmation by Supreme  Court of  the decision  from which special leave was sought.      Statutory  Interpretation-Though   statutes  should  be equitably interpreted, no place for equity in taxation laws. Words and Phrases-’Belonging to’-Meaning of.      Wealth Tax  Act, 1957-S.  2(e)  (iv)-Assessee-Ruler  of erstwhile State-Private properties taken over by Government- Granting payment  of a  fixed annual sum of money in lieu of previous  income-Whether  such  annual  payment  amounts  to ’annuity’-Whether exempt from inclusion in net wealth. Words and Phrases-’Annuity’-Meaning of:

HEADNOTE:      In the  assessment year 1957-58, the Wealth Tax Officer had included  a sum  of Rs.4,90,775  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 s. 2(m)  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

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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 s. 53A  of the Transfer of Property Act 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,  A.P. Hyderabad  v.  Nawab  Mir Barkat Ali  Khan, [1974]  Tax L.R. 90, 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) Rs.50 lakhs as a privy purse; (b)  Rs.25 lakhs  in lieu of his previous income from the Sarf-e-khas,  and (c)  Rs.25 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  Rs.25  lakhs  O.S.  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 Rs.99,78,572 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 Rs.25 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 s.  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 s. 2(m) 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 s. 2(m) 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 ss. 9 and 10 of the Indian

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Income Tax  Act, 1922  and ss. 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, s. 2(m) 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 v. Bishwanath Chatterjee and Others, 103 I.T.R. 536 and Raja Mohammad Amir Ahmed Khan v. Municipal Board of Sitapur and another. A.I.R. 1965 S.C. 1923, 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 s. 2(m) 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  s.  2(m)  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 i.e.  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

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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 s. 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 s. 2(m) 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 v. H.H. Maharaja F.P. Gaekwad, 144 I.T.R. 304 approved.      Commissioner of  Income-tax, A.P. Hyderabad v. Nwab Mir Barkat Ali Khan, [1974] Tax L.R. 90 referred to.      Commissioner of  Wealth-tax, A.P. v. Trustees of H.E.H. Nizam’s family  (Remainder Wealth)  Trust, 108  I.T.R.  555, R.B. Jodha  Mal  Kuthiala  v.  Commissioner  of  Income-tax, Punjab, Jammu & Kashmir and Himachal Pradesh, 82 I.T.R. 570, Commissioner  of   Income-tax,  West   Bengal  II  v.  Ganga Properties Ltd.,  77 I.T.R. 637, Commissioner of Wealth-tax- Gujarat-I  v.   Kum  Manna   G.  Sarabhai,  86  I.T.R.  153, Commissioner of Income-tax, Gujarat v. Ashaland Corporation, 133 I.T.R.  55, Commissioner  of Income-tax, Bombay City III v. Smt.  T.P. Sidhwa,  133  I.T.R.840,  Smt.  Kala  Rani  v. Commissioner of  Income-Tax, Patiala I, 130 I.T.R. 321, Mrs. M.P. Gnanambal  v. Commissioner  of Income-tax,  Madras, 136 I.T.R. 103, S.B. (House & Land) Pvt. Ltd. v. Commissioner of Income-tax,  West   Bengal,  119   I.T.R.  785   and   Addl. Commissioner of  Income-tax Bihar  v. Sahay  Properties  and Investment Co. (P) Ltd., 144 I.T.R. 357 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. v. State of U.P. & Ors., AIR 1961 SC 1457 relied upon. 1077      Sahu Govind  Prasad v.  Commissioner of Income-tax, 144 I.T.R. 851 at 863 approved.      (12) Section  2(e) (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

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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 Rs.25 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 Rs.25 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 Rs.25 lakhs in lieu of the  previous   income  of   Sarf-e-khas  must  be  read  in conjunction with  two other sums namely Rs.50 lakhs as privy purse and  Rs.25 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 Rs.25 lakhs and, therefore, it was exempt under s. 2(e) (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 Rs.25 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  Rs.25 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 s. 2(e) of the Act and the assessee was entitled to exemption. [1094C-F]      Oxford Dictionary: Jarman on Wills (P. 1113), relied on and      Ahmed G.H.  Ariff and Others v. Commissioner of Wealth- tax, Calcutta,  76 I.T.R.  471, Commissioner  of  Wealth-tax Gujarat v. Arundhati Balkrishna, 77 I.T.R. 505, Commissioner of Wealth-tax,  Rajasthan v.  Her Highness  Maharani Gayatri Devi of  Jaipur, 82  I.T.R. 699, Commissioner of Wealth-tax, Lucknow  v.   P.K.  Banerjee,   125  I.T.R.   641  and  H.H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur & Ors. v. Union of India, [1971] 3 SCR 9 referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal  No.  1763 (NT) of 1974      From the  Judgment and  Order  dated  2.2.1973  of  the Andhra Pradesh High Court in Case Reference No. 67 of 1971.

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    Y. Ratnakar,  Mrs, A.K.  Verma and  D.N. Misra  for the Appellant.      S.C. Manchanda,  Ms. A.  Subhashini and  B.B. 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 2(m) of the Wealth-tax Act, 1957?           (ii)  Whether,   on   the   facts   and   in   the           circumstances of the case, the assessee’s right to           receive the sum of Rs.25 lakhs O.S. from the State           Government  was  an  asset  for  the  purposes  of           inclusion in  his net  wealth under the Wealth-tax           Act, 1957?"      The year  involved in  this case is the assessment year 1957-58 under  the Wealth-tax  Act, 1957 (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  Rs.4,90,775 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,  A.P.,  Hyderabad  v. 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 i.e. Rs.25 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,.Maj. 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

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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 Rs.25 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 H.E.H. will be paid annually a           total sum of Rs. 1 crore distributed as follows:           (a) Rs.50 lacs as a privy purse,           (b) Rs.25 lacs in lieu of his previous income from           the Sarf-e-khas, and           (c) Rs.25 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 Rs.25 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 Rs.99,78,572 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  Rs.25 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 2(m) 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 2(m) of the Act. The relevant portion of section 2(m) is as follows:           "(m) "net  wealth" means  the amount  by which the

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         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, i.e., 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

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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, v.  Bishwanath Chatterjee and others, 103 I.T.R. 536.  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 2(m)  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,  A.P.  v.  Trustees  of H.E.H. Nizam’s  family (Remainder  Wealth) Trust, 108 I.T.R. 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,  A.P. Hyderabad v. Nwab Mir Barkat  Ali Khan, [1974] Tax L.R. 90, 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.

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    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  R.B.  Jodha  Mal  Kuthiala  v. Commissioner of  Income-tax, Punjab,  Jammu  &  Kashmir  and Himachal Pradesh,  82 I.T.R. 570. 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 v. Ganga Properties Ltd., 77 I.T.R. 637.  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 v.  Kum Manna G. Sarabhai 86 I.T.R. 153, 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 v. Ashaland Corporation, 133 I.T.R.  55. 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

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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  Transfer of  Property Act, 1882, 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 v.  Smt. T.P.  Sidhwa, 133 I.T.R. 840. 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 v. H.H.  Maharaja F.P.  Gaekwad, 144  I.T.R. 304.  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 Rs.30  lakhs in January, 1964 and were put in possession  of the property. Thereafter, four instalments of Rs.  17-1/2 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  Transfer  of Property Act  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  v.  Municipal  Board  of Sitapur and  another, A.I.R.  1965  S.C.  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

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Gujarat High  Court in  the case  of Commissioner of Wealth- tax, Gujarat-IV v. H.H. Maharaja F.P. 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  v.  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   v.  H.H.   Maharaja  F.P.  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 I.T.R. 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. v. State of U.P. & Ors., AIR 1961 SC 1457. It may be  mentioned as was rightly observed by a full bench of the  Allahabad   High  Court   in  Sahu   Govind  Prasad  v. Commissioner of  Income-tax, 144  I.T.R. 851 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  v. Commissioner  of  Income-tax,  Patiala-I,  130 I.T.R. 321  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. M.P. Gnanambal v. Commissioner of Income-tax, Madras, 136  I.T.R.  103.  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 S.B. (House & Land) Pvt. Ltd. v. Commissioner of Income-tax,  West Bengal,  119 I.T.R. 785 the question of ownership had  to be  considered only  in the  light of  the

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particular facts  of a  case. The  Patna High Court in Addl. Commissioner of  Income-tax Bihar  v. Sahay  Properties  and Investment Co.  (P) Ltd.,  144 I.T.R. 357 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 [1983] 143 I.T.R. 60.      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 i.e.  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

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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 v. 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 2(m) 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

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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 2(e)  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  Rs.25  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  G.H. Ariff  and  Others  v.  Commissioner  of Wealth-tax, Calcutta,  76 I.T.R.  471, this  Court held that the word ’annuity’ in clause (iv) of section 2(e) 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  v.  Arundhati Balkrishna, 77  I.T.R. 505,  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 2(e) (iv) of the Act.      In  Commissioner   of  Wealth-tax,   Rajasthan  v.  Her Highness Maharani  Gayatri Devi  of Jaipur,  82 I.T.R.  699,

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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 2(e) (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 2(e) (iv).      In  Commissioner   of  Wealth-tax,   Lucknow  v.   P.K. Banerjee, 125  I.T.R. 641, 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 2(e) (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 Rs.25 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 Rs.25 lakhs  for the upkeep of palaces etc. and the third of Rs.25 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

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    In this  case this being an aggrement between erstwhile ruler  and  the  Government  of  India,  there  is  no  such motivation and  this payment  of Rs.25  lakhs in lieu of the previous income  of Sarf-e-khas  must be read in conjunction with two  other sums  namely Rs.50  lakhs as privy purse and Rs.25 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 Rs.25  lakhs. If that is the position, then, in our opinion, it was exempt under section 2(e) (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 Rs.25 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 H.H.  Maharajadhiraja Madhav Rao Jiwaji  Rao Scindia  Bahadur &  Ors. v.  Union of India, [1971] 3  SCR 9.  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 Rs.25  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 2(e) 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. A.P.J.                               Appeal allowed in part. 1095