Skip to content


Estate of Late Shri T.S. Srinivasa Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)7ITD597(Mad.)
AppellantEstate of Late Shri T.S. Srinivasa
Respondentincome-tax Officer
Excerpt:
1. the assessee has preferred this appeal against the order dated 4-10-1982 of dr. n.r. sivasamy, the commissioner (appeals), who partly allowed the appeal against the order dated 18-5-1982 of shri r.m.krishnan, the ito.2. the relevant facts, in brief, are that shri s. balasubramanian is the executor of the estate of late shri t.s. srinivasa iyer (assessee).shri t.s. srinivasa iyer died on 26-8-1969. the ito adopted their status as that of an aop. the accounting year for the assessment year 1976-77 ended on 31-3-1976 and the ito completed the assessment on 31-3-1977.in completing the assessment for the year under consideration, the ito included a refund of principal of annuity deposit to the tune of rs. 42,654 on treating it as income under section 2(24)(viii) of the income-tax act, 1961.....
Judgment:
1. The assessee has preferred this appeal against the order dated 4-10-1982 of Dr. N.R. Sivasamy, the Commissioner (Appeals), who partly allowed the appeal against the order dated 18-5-1982 of Shri R.M.Krishnan, the ITO.2. The relevant facts, in brief, are that Shri S. Balasubramanian is the executor of the estate of late Shri T.S. Srinivasa Iyer (assessee).

Shri T.S. Srinivasa Iyer died on 26-8-1969. The ITO adopted their status as that of an AOP. The accounting year for the assessment year 1976-77 ended on 31-3-1976 and the ITO completed the assessment on 31-3-1977.

In completing the assessment for the year under consideration, the ITO included a refund of principal of annuity deposit to the tune of Rs. 42,654 on treating it as income under Section 2(24)(viii) of the Income-tax Act, 1961 ('the Act').

The assessee being aggrieved, objected to this addition and preferred an appeal before the Commissioner (Appeals), who vide his order dated 13-10-1978 deleted the aforesaid addition following the decision of the Madras High Court in the case of CIT v. M.M. Muthiah [1977] 109 ITR 3. The department being further aggrieved, preferred an appeal before the Tribunal and the Tribunal, by its order dated 22-9-1979 in IT Appeal No. 94 (Mad.) of 1979 partly allowed the appeal and restored the matter relating to the assessability of the said refund of principal of the annuity deposit to the file of the ITO. The ITO on making enquiries as per the directions of the Tribunal passed the modification order, which was appealed before the Commissioner (Appeals). The Commissioner (Appeals) followed the decision in the case of CIT v. S.M. Ebrahim [1982] 134 ITR 599, of the Hon'ble Madras High Court, where their Lordships held that the refund of annuity deposit could be taxed only in the hands of original depositor, if alive ; and such refund could not be taxed in the hands of either the nominee or the executor of the legal representative as it makes no difference if the depositor nominated any person or not. Hence, he sustained the addition at Rs. 19,770. The reasons for sustaining the aforesaid addition were that in respect of the refund the original depositor also was S.Balasubramanian, executor of late Shri T.S. Srinivasa Iyer ; that again Shri S. Balasubramanian, the executor himself received the refund also and that according to the judgment of the Madras High Court itself in the case of S.M. Ebrahim (supra), Rs. 19,770 should be taxed in the hands of the assessee.

4. The assessee being further aggrieved with the order of the Commissioner (Appeals) has preferred this appeal. Shri T.Srinivasamurthy, the learned counsel for the assessee, contends that the impugned order is not justified on relying and repeating the grounds taken in the memorandum of appeal.

On the other hand, Shri K. Venkataraman, the learned departmental representative, contends that the impugned order is justified ; as the sustenance of addition of Rs. 19,770 by the Commissioner (Appeals) is in accordance with the ratio laid down by the Hon'ble Madras High Court in the case of S.M. Ebrahim (supra), which is binding on the income-tax authorities and the Tribunal. Hence, the Tribunal should confirm the impugned order on the issue.

5. We have heard the rival contentions and gone through the records before us. We are of the opinion that the contentions raised by the learned departmental representative are well founded and must prevail.

Since the decisions of the Madras High Court is binding on the Benches of the Tribunal at Madras and following it with respect, we hold that the Commissioner (Appeals) is justified in arriving at his conclusion as he did so on following the aforesaid decision of the Hon'ble Madras High Court. The learned counsel for the assessee has failed to rebut the concurrent finding of the authorities below and in particular that of the Commissioner (Appeals) which are there in his order, wherein he said that for the refund amount of Rs. 19,770 the original depositor also was Shri S. Balasubra-manian, the executor of the estate of late Shri T.S. Srinivasa Iyer, much more the executor himself received the refund amount also (sic). When this is so then to this amount the decision of the Hon'ble Madras High Court is not at all applicable, in view of the fact that this amount was not deposited by the deceased nor there is proof that it is deposited on his behalf by Shri S.Balasubramanian, who is the executor of the estate of the deceased and as such it is to be taxed in hands (the assessee).

6. Apart from it, Shri T.S. Srinivasa Iyer died on 26-8-1969 and the annuity deposit referred to above are deposited by Shri S.Balasubramanian, the assessee, in the capacity of executor of the estate of the deceased as per the report of the ITO, said to be quoted in the impugned order, and, hence, it was contended that it means that these deposits are made by the assessee. There is no proof on record that the sum of Rs. 19,770, referred to above, was deposited by Shri S.Balasubramanian (the assessee) on behalf of the deceased and these deposits are made from the income of the estate of the deceased or HUF funds. The assessee has not brought any material on record to show these all and in particular, the copy of application for payment of annuity or the letter of refund given by the RBI to identify the deposits and the person who received back the money which the assessee was duty bound to do to discharge the onus upon him to prove the claim in respect of the aforesaid amount of Rs. 19,770, particularly when he was supposed to do so as per the order of the Tribunal dated 22-9-1979.

When this is so then if the ITO has made a finding in his order stating therein that the assessee has deposited this amount as executor of the estate of late Shri T.S. Srinivasa Iyer, it cannot be held that the Commissioner (Appeals) has misconceived the said finding or report in concluding that this amount was not deposited by late Shri T.S.Srinivasa Iyer and as such was deposited by the assessee and, therefore, it has to be taxed in the hands of the assessee. The reasons is that the assessee can deposit it as executor of the estate as he is so and, therefore, no inference can be drawn from this fact that he is not the depositor in individual capacity rather depositor of the annuity amount referred to above on behalf of late Shri T.S. Srinivasa Iyer in view of the fact that inferences, however strong, cannot take the place of proof.

7. In view of our above discussions and reasons thereto and the totality of the facts and circumstances of the case, we hold that the amount of Rs. 19,770 is to be taxed in his hands. The Commissioner (Appeals) has acted accordingly and, therefore, we confirm his impugned order on the issue.

1. I have gone through the order proposed by my learned brother, but I find it difficult to agree with the inferences and conclusion drawn by him, particularly those referred in paragraph 6. My learned brother has pointed out in this paragraph that there was no proof on record to show that the said sum of Rs. 19,770 was deposited by the assessee on behalf of the deceased, that these deposits were made from the income of the estate of the deceased or HUF funds and that the assessee did not bring any material to show that the person who made the deposit and the person who received it was not one and the same. Elsewhere it is pointed out that though the ITO made a report pursuant to the directions given by the Tribunal when the case came first before it for consideration, that the assessee deposited this amount as an executor of the estate of late Shri T.S. Srinivasa Iyer, it could not still be held that the deposit was made by the assessee not in his capacity as executor but in his capacity as an assessee. The order proposed by my learned brother from the facts discussed and conclusion drawn in this paragraph is that should there be proof to show that the deposit was made by the assessee not in his individual capacity as assessee but in his capacity as an executor, the refund of annuity deposit could be held to be exempt in the hands of the assessee on the authority of the ruling of the Madras High Court in the case of S.M. Ebrahim (supra) (as I understand it).

2. I would like to retrace to facts in this case to make my point explicit. The assessee is the estate of late Shri T.S. Srinivasa Iyer assessed in the status of AOP. In the assessment year under appeal (1976-77), there was a refund of annuity deposit of Rs. 42,654 which was assessed to tax under the head 'Income from other sources'. On appeal, the Commissioner (Appeals), following the decision of the Madras High Court in the case of MM. Muthiah (supra) held that the amount of the refund was not liable to tax. The revenue appealed to the Tribunal contending that the Madras High Court decision was inapplicable to the facts of the case on the ground that the deposit itself was made by the legal representative and not by the deceased and, therefore, the amount of refund was taxable in his hands. The Tribunal found that the annuity deposit was paid on 26-4-1974 pursuant to an assessment made on the deceased for the assessment year 1966-67 as karta of HUF. The said Shri T.S. Srinivasa Iyer died on 26-8-1969.

Subsequent to the death of Shri T.S. Srinivasa Iyer, the assessment was made on 31-3-1971 raising a demand for the payment of annuity deposit.

It was that demand that was satisfied by the assessee on 26-4-1974 by making the deposit. The Tribunal further found that the deposit amount was made by the assessee as the legal representative out of the funds of the estate of the deceased. The Tribunal posed to itself the question whether the amount refunded to the assessee was received by the assessee in his own right liable to be included in his total income. The Tribunal also found that there was a partition in the family of the deceased on 7-7-1969 just before his death and though there was an assessment on the HUF, since by the time the assessment was made the joint family was disrupted and the deceased had died, the properties devolved on the successors, there could be in existence of an estate fastened with the liability to deposit the money and receive the refund (sic). Then it was brought to the notice of the Tribunal that for the earlier assessment year 1975-76, the legal representative of late Shri T.S. Srinivasa Iyer was assessed to tax as an AOP as if such an estate existed. Then it became necessary for the Tribunal to find out whether the person who made the deposit was the same as the person who received it. For this purpose it felt the need to examine the application made to the RBI for the payment of annuity deposit and also the letter given by the RBI to see whether the present assessee who deposited the money was also the person entitled to receive the refund of the amount. Since this aspect was not gone into and to enable the department to examine this aspect, the matter was set aside with a direction to the ITO to examine this point.

3. From the enumeration of the salient points as noticed from the earlier order of the Tribunal, what emerges is that consequent to the partition on 7-7-1969, which took place before the death of the deceased, there could not be any estate in existence for the purpose of assessment and that since for the assessment year 1975-76 the assessment was made in the status of AOP, though it showed the existence of an estate, it became necessary to find out for whom and in which capacity the annuity deposit was made and in which capacity the refund was received so that if there is identification between the two, so to say both are one, the amount of refund could be brought to tax.

4. It was pursuant to the order of the Tribunal that the ITO called for the necessary information and found that the deposit in question was in respect of the assessment year 1966-67 and that the liability to pay the deposit arose in the status of joint family and that the deposit was made on 26-4-1974 of Rs. 1,58,160 by Shri S. Balasubramanian as representative of the estate of late Shri T.S. Srinivasa Iyer and out of that amount Rs. 19,770 was refunded by Shri S. Balasubramanian as representative of the estate of late Shri T.S. Srinivasa Iyer. That means the sum of Rs. 19,770 in question was a part of Rs. 1,58,160, the annuity deposit raised on the HUF of late Shri T.S. Srinivasa Iyer for the assessment year 1966-67. There was, thus, a liability of Rs. 1,58,160 relating to the HUF which had to be discharged by the assessee. It is an undeniable fact that the assessee got funds of the HUF, as its legal representative. Out of those funds, he discharged the liability of the joint family. Thus, the fact emerges that what was paid was by the joint family on behalf of and in discharge of the liability relating thereto. When the liability of the joint family was discharged, the refund received was by one of the legal representative of the joint family. Thus, there is a difference between the person on whose behalf the annuity deposit was paid and the person in which capacity and on whose behalf the refund was received. The repayment was received by the assessee as the legal representative of the deceased whatever be his capacity-executor, legal representative, etc., it makes no difference in view of the decision of the Madras High Court in S.M.Ebrahim's case (supra). The principal laid down by the Madras High Court in that case was that under the Annuity Deposit Scheme the refund of the principal is taxable as deemed income only in the hands of the depositor who made the initial deposit and not in the hands of any other person [See page 600 of S.M. Ebrahim's case (supra)]. If I am right in my interpretation that the amount of deposit was paid for the assessment year 1966-67 relating to the joint family though the liability was discharged by the assessee, herein Shri S.Balasubramanian, the refund of the instalment was not to the same joint family, viz., not the same assessee, viz., not the same taxable entity but to a different person in the sense of a different capacity, i.e., a different taxable entity and, consequently, under the principal laid down by the Madras High Court it is not taxable. Now the very information furnished by the ITO in the order shows that : (a) the deposit related to the assessment year 1966-67 when the status of the assessee was joint family ; (b) the deposit, though made on 26-4-1974, related to the joint family and was discharged by Shri S. Balasubramanian as representative of the estate of the late Shri T.S. Srinivasa Iyer because by then the joint family was not in existence and the deposit was to be made only in that capacity and the deposit was received by S. Balasubramanian, a different entity not of a joint family.

Now the status of the present assessee is AOP for purposes of assessment to tax for the assessment year under appeal. The assessee who made the deposit was HUF and the assessee who received the deposit was AOP and is, therefore, different and not the same.

5. It is for this reason I am unable to agree with the conclusion reached by my learned brother that there was no proof on record to show that the amount of deposit was made from the income of the estate of the deceased or HUF funds. In fact, this was the finding given by the Tribunal in its earlier order. At any rate the ITO's report as tabulated in the assessment order clearly shows, to my mind, that the deposit was made by the assessee on behalf of the deceased, viz., joint family and that these deposits were made from the income of the deceased or the HUF funds because the HUF funds and the personal funds got mixed up thereafter and the inference cannot be otherwise and there could not be any direct material to show this aspect. Neither the contemplated copy of the application for payment of annuity deposit nor the letter of refund given by the RBI would show as to wherefrom the funds have come for the purpose of making this deposit. It is for this reason I am inclined to think that the Commissioner (Appeals) has not properly appreciated the report given by the ITO.6. My learned brother mentioned that the assessee deposited as executor of the estates and, therefore, no inference can be drawn from this fact that he is not the depositor in his individual capacity. I am unable to agree with this finding. If I understood this observation correctly, it would go against Section 168 of the Act. Section 168 dealing with assessment of executors provides that assessment of an executor under that section shall be made separately from any assessment that may be made on him in respect of his own income under Section 168(2). That being so, there is a clear distinction maintained between an assessment to be made on an executor and an assessment to be made on an individual in his individual capacity. Since a distinction is maintained, I find it difficult to make out the finding of my learned brother that the assessee can deposit the money as executor of the estate and from that no inference could be drawn that he is not the depositor in his individual capacity ; if by this my learned brother implies that both are same, I submit that it cannot be so in view of Section 168(2).

7. I would, therefore, hold that the view canvassed on behalf of the assessee deserves to be accepted and the addition should be deleted.

1. I have gone through the order of my learned brother dated 1-8-1983 which shows that he has differed with me.

2. On discussion, we agreed that a reference under Section 255(4) of the Act be made and question to be framed for determination by the learned Third Member to settle the difference and as such, we frame the question stated hereinafter.

3. In this case, the original assessment was completed on 31-5-1977 and the ITO made additions, inter alia, for a sum of Rs. 42,654 representing the refund of annuity deposit. In appeal, the Commissioner (Appeals) deleted the same.

4. In further appeal of the revenue, the Tribunal restored the matter to the ITO for fresh disposal in accordance with law vide its order dated 22-9-1979 in IT Appeal No. 94 (Mad.) of 1979 (assessment year 1976-77) observing as under : We also find that the authorities below had no occasion to see the application for payment of annuity or the letter of refund given by the Reserve Bank of India to identify the deposits and the person who received back the m6ney in the absence of this vital information it is difficult to say whether it was the present assessee who deposited the money and whether it was the same person who was entitled to the refund of the amount unless these two facts are found the amount in question would not be chargeable to tax. Since these facts are not available on record, we deem it fit to set aside the orders of the authorities below and restore the matter to the Income-tax Officer for a fresh disposal in accordance with law.

The ITO in giving effect to this order again disallowed the claim of the assessee at a sum of Rs. 19,770 out of the sum of Rs. 42,654. In appeal, the Commissioner (Appeals) confirmed it. In the Tribunal, the Judicial Member confirmed the impugned order for the disallowance of Rs. 19,770 on following the decision of the Madras High Court in the case of (sic) and the order of the Tribunal dated 27-9-1979 held in that thereby the assessee has not proved the claim for the sum of Rs. 19,770 as it is manifest from concurrent finding on the records that this amount was deposited by the assessee in the individual capacity and since the assessee has failed to rebut it by furnishing the documentary evidence as required by the order of the Tribunal (supra) while the learned Accountant Member took the view otherwise. Thus, from these facts the following questions are referred for determination by the Third Member : 1. When there is concurrent finding of the authorities below on the question of fact and there is no material on the record to show that such finding is based upon misreading or misconceiving the material on record or perverse, whether even then the Appellate Tribunal is within its powers to interfere with or disturb such concurrent finding 2. When there is an order of the Tribunal dated 22-9-1979 vide which it sent back the matter for fresh determination placing onus of proof on the assessee to prove by producing material on record, the copy of challan form for the deposited amount of annuity in dispute and to prove the identity of the deposit and source of the deposits and the assessee failed to do so, then can it be held by the Tribunal that the claim is proved and the assessee is entitled to relief in dispute and, hence, the Commissioner (Appeals) in acting otherwise has committed an error of law and facts Vice President -I find it difficult to agree with the question framed by my learned brother for reference to Third Member as, in my view, the (sic) arose not on those questions for the Tribunal will always, in the exercise of its appellate jurisdiction, have to interfere with the findings even though they are concurrent but if they are wrong. That was not the issue before us. According to me, the issue before us is whether the person who made the annuity deposit is the same who received the refund of the annuity deposit. Therefore, the question that should be referred to the Third Member for his opinion is : Whether, on the facts and circumstances of the case, the refund of annuity deposit is exempt in the hands of the assessee on the ground that the assessee was different from the person who made the initial deposit and whether the case is covered by the ruling of the Madras High Court in [1980] 134 ITR 599 1. The assessee, assessed in the status of an AOP, is the estate of 'T.S. Srinivasa Iyer by Shri S. Balasubramanian'. It would appear that earlier there was a HUF consisting of Shri T.S. Srinivasa Iyer, his wife and children, which was partitioned on 7-7-1969. Shri T.S.Srinivasa Iyer with his wife constituted a HUF subsequent to that date and was assessed as such. Shri T.S. Srinivasa Iyer died on 26-8-1969.

An assessment seems to have been made on the estate of late Shri T.S.Srinivasa Iyer subsequent to that date on Shri S. Balasubramanian, the son of late Shri T.S. Srinivasa Iyer. In the assessment made for 1976-77, the ITO included a sum of Rs. 42,654 received by the assessee as refund of annuity deposit. On the Commissioner (Appeals) holding this amount as not includible in the total income by virtue of the decision of the Madras High Court in the case of MM. Muthiah (supra), the department appealed to the Tribunal. The Tribunal set aside the assessment with a direction to the ITO to examine certain details and for fresh disposal according to law.

2. The ITO went into the details and traced the origin of the annuity deposit refund to the following table :Sl. Assess- Date of Amount of Refund Name of Name ofNo. ment deposit deposit amount depositor receiver Year Rs. Rs. of refund of deposit1. 1963-64 30-3-65 39,650 4,956.25 T.S. Sri- S. Balasu- and nivasa bramanian, 1964-65 (individual) represen- tative of2. 1965-66 4-9-65 7,260 907.50 T.S. Sri- the estate and nivasa of T.S. 2-12-65 (individual)Srinivasa.

S. Balasub-3. 1966-67 3-3-67 9,350 1,168.75 T.S. Sri- ramanian, nivasa represen-4. 1967-68 1-6-67 14,440 1,805.00 T.S. Sri- of T.S. 8,837.50 nivasa Srinivasa.5. 1967-68 30-11-67. 93,300 11,662.50 T.S. Sri- represen- nivasa tative of6. 1964-65 7-8-68 19,070 2,387.75 T.S. Sri- Srinivasa.

14,046.25 nivasa S. Bala-7. 1966-67 26-4-74 1,58,160 19,770.00 S. Bala- tative of subramanian, the estate According to the ITO, items 1 to 6 in the above table related to late Shri T.S. Srinivasa Iyer himself but the last item of deposit was made by the assessee himself. Late Shri T.S. Srinivasa Iyer died intestate and had not nominated anybody to receive the refund. Holding that the facts in the case of MM. Muthiah (supra) were different from that of the present assessee in that there was no nomination by the depositor and that the AOP succeeded to the business carried on by late Shri T.S.Srinivasa Iyer, the ITO held that the sum of Rs. 42,654 was taxable in the hands of the assessee.

3. On appeal, the Commissioner (Appeals) accepted subramanian the claim of the assessee as to exemption with regard to a sum of Rs. 22,884, but upheld the addition to the extent of Rs. 19,770. This represented, as the above table would show, the refund amount received relating to the assessment year 1966-67. The assessee challenged the inclusion of the above amount in the total income.

4. When the matter came up before the Tribunal, the learned Judicial and Accountant Members passed separate orders--the former upholding the order of the Commissioner (Appeals) and the latter deleting the addition. It is, thus, on a point of difference between the two learned Members that the matter has been referred to me as a Third Member. It requires to be mentioned that the learned Judicial Member referred the following two questions : 1. When there is concurrent finding ofsentative the authorities below on the question of fact and there is no material on the record to show that such finding is based upon misreading or misconceiving the material on record or perverse, whether even then the Appellate Tribunal is within its powers to interfere with or disturb such concurrent finding 2. When there is an order of the Tribunal dated 22of the -9-1979 vide which it sent back the matter for fresh determination placing onus of proof on the assessee to prove by producing material on record-the copy of challan form for the deposited amount of annuity in dispute and to prove the identity of the depositor and source of the deposits and the assessee failed to do so, then can it be held by the Tribunal that the claim is proved and the assessee is entitled to relief in dispute and, hence, the Commissioner (Appeals) in acting otherwise, has committed an error of law and facts Whereas, according to the learned Accountant Membeestate of r, the point of dispute for resolution is the following : Whether, on the facts and circumstances of the case, the refund of annuity deposit is exempt in the hands of the assessee on the ground that the assessee was different from the person who made the initial deposit and whether the case is covered by the ruling of the Madras High Court in [1982] 134 ITR 599 The questions referred to by the learned Judicial nivasa. Member refer to the power of the Tribunal to interfere with or disturb a concurrent finding of the authorities below on the question of fact and secondly, on the factual question whether the claim is proved and the assessee is entitled to the relief. The learned Accountant Member in effect has referred to the second of the above two questions when he has framed the point of difference as dealing with the exemption claimed by the assessee. The question framed by the learned Accountant Member also refers to the ruling of the Madras High Court in the case of S.M.Ebrahim (supra). In S.M. Ebrahim's case (supra), the Madras High Court held that the refund of annuity deposit can be taxed only in the hands of the original depositor if he is alive, but cannot be taxed in the hands of either his nominee or the executor or the legal representative. In effect, the point of difference commonly referred to me would be whether the refund of annuity deposit received by the present assessee-AOP is exempt in his hands.

5. Though it may not be necessary to resolve the point of difference, if any, involved in the first question referred by the learned Judicial Member, since at best it is only an argument for coming to his final conclusion adopted by the learned Judicial Member and on which no difference of opinion can be made out, I would like to clarify the following. The Tribunal is under the income-tax appellate hierarchy, the final fact, finding authority. Matters come to it for resolution not merely when there is a concurrent finding of fact between the two lower authorities, viz., the taxing officer and the first appellate authority but also when the findings of fact by them differ. In this respect whatever may apply with regard to concurrent finding of facts and its acceptability in any adversary forum may not apply to the income-tax proceedings where there is a unique third stage of appeal which is fixed as the final fact finding authority in the Tribunal. The Tribunal has wide powers under the Act both of investigation and enquiry for finding out the correct facts and also for purpose of deciding the appeal. If in respect of any concurrent finding of facts by the authorities below the Tribunal were disabled from interfering with those facts either for the sake of finding out the facts correctly or for doing justice, the wide powers given to the Tribunal would be rendered illusory and may even frustrate the purpose of the Act. In my opinion, there is no justification to limit the powers of the Tribunal where the statute has not provided for it even on any analogy with civil litigation or any other basis.

6. The parties were heard in respect of the taxability of the refund of annuity deposits. The learned counsel for the assessee referred to the facts of the case and stressed the point that as pointed out in the learned Accountant Member's detailed order, the person who paid the annuity deposit was different from the person who got the refund. On the strength of the Madras High Court decisions in the cases of MM.Muthiah (supra) and S.M. Ebrahim (supra), this amount was not taxable at all. Reference was made to the Madras High Court decision in M.Thirumani Mudaliar v. CWT [1974] 96 ITR 152 to show that the capacities in which Shri S. Balasubramanian paid any amount for the assessment year 1966-67 and got also a refund of annuity deposit are entirely different from each other. It was pointed out that though the payment was made on 26-4-197'4, the deposit related to the income of the assessment year 1966-67.

7. The learned representative for the department pointed out that there was a partition in the assessee's family on 7-7-1969. With the dissolution of the HUF there was no family in existence and the assessee on whom an assessment was made subsequently certainly was not the defunct HUF. The assessment in fact was made on an AOP. According to the learned departmental representative, thus the HUF not being in existence, the payment was made by Shri S. Balasubramanian on behalf of the estate and the refund was also received by him on behalf of the estate. The capacity was the same. If the deposit related to the HUF, when the HUF was disrupted on 7-7-1969, certainly it could not have made the deposit in 1974. The very premise on which the exemption was claimed, therefore, according to the learned departmental representative, was wrong.

8. The matter lies in a short compass. It is settled that in order to tax annuity deposit refund, the refund must be received by the same 'assessee' who made the deposit. Emphasis requires to be laid on the expression 'assessee' because the fact that the same 'person' who made the payment of the compulsory deposit received the refund of such deposit does not fasten the liability on that person. In the present case, as the table reproduced above would indicate, the assessee 'Estate of Late T.S. Srinivasa Iyer by Shri S. Balasubramanian' as an AOP received the sum of Rs. 42,654 as refund of annuity deposits. This related to the assessment years 1963-64 to 1966-67. As regards the refund received, relating to the deposits up to 1964-65, totalling up to Rs. 22,884, this has been accepted as covered by the Madras High Court decision reported in MM. Muthiah's case (supra) clearly indicating the factual position that the person who paid the deposit did not receive it. Dispute arose with regard to the last sum of Rs. 19,770 for the reason that the person who made the deposit and the person who received the refund are the same. Factually this appears to be incorrect for several reasons. In the first place, according to the rules of the annuity deposit scheme, when a deposit is made in a particular year, the refund of a portion of the deposit (during that period one-tenth was refunded in every subsequent year) starts from the very next year. A sum of Rs. 1,58,160 was paid on 26-4-1974. The refund from that would start from the year 1975 onwards, which would correspond to the assessment year 1976-77. But the sum of Rs. 19,770 would include not merely this amount but also refunds relating to the earlier deposits made up to ten years (of course, limited to the time when the deposit was made). The sum of Rs. 19,770, therefore, to its full extent does not represent refunds out of this amount deposited by Shri S. Balasubramanian. The learned representative for the department has pointed out that a portion of this amount must have come from the deposit of Rs. 1,58,160. To that extent the depositor must be deemed to have received the refund thus exposing him to the liability. Accepting the argument of the learned departmental representative on this point, at best a portion of Rs. 19,770 could thus be brought to tax. The balance would stand in the same position as the sum of Rs. 22,884 exempted by the Commissioner (Appeals), whose order is accepted by the department.

9. Apart from the above, on the facts, it is clear that the deposit was made by one person and even the portion of Rs. 19,770 attributable to that deposit was received by another person. The assessment year relevant to which the compulsory deposit was made is the assessment year 1966-67 when the late Shri T.S. Srinivasa Iyer was alive.

Normally, the assessee should have made advance annuity deposit commensurate with the income earned by him. The excess payment appears to have been made long after the year 1966-67 only because of increased income at the time of the assessment. The assessment in this case is made and could be made only under the provisions of Section 159 of the Act on the representative assessee, the assessee being no more, the individual Shri T.S. Srinivasa Iyer being dead and the HUF being non-existent. The person, therefore, who paid the amount demanded perhaps by the ITO of Rs. 1,58,160 is Shri S. Balasubramanian, a representative assessee under Section 159 read with Section 161 of the Act of an assessee who is no more. Even if, as the learned representative for the department has pointed out, an argument that a representative assessee who pays tax is as much entitled to the refund of the same tax is looked into, that would not apply to the case of refund of 'annuity deposit'. The compulsory deposit may be paid by one person but it is refunded to the legal heirs of that person, if he be dead and that is paid by the bank who makes the payment only after the proper production of proof as to the heirs and also the necessary succession certificate.

10. In the present case, the refund of the compulsory deposit is received by Shri S. Balasubramanian representing the estate of the late Shri T.S. Srinivasa Iyer. This is not a refund of any tax paid under a liability fastened on him under Sections 159 and 161. This is an inheritance received by the estate on the death of the original owner.

If late Shri T.S. Srinivasa Iyer had been alive, he would have received the amount. On his death, the amount should go to his legal heirs to be distributed in the particular manner which the law provides for. Even if, therefore, Shri S. Balasubramanian received it from the bank on production of a succession certificate, etc., such a receipt would be only a receipt in the capacity of an agent on behalf of the estate of late Shri T.S. Srinivasa Iyer, which would include all the heirs who would be entitled to a share in the property. As a matter of fact, therefore, and, in law, the refund of annuity deposit has been received by the heirs of late Shri T.S. Srinivasa Iyer who died intestate. I have no hesitation, therefore, in holding that the person who paid the annuity deposit relating to the assessment year 1966-67 was a representative assessee of the late assessee whereas the person who received the refund was an agent of the several heirs of late Shri T.S.Srinivasa Iyer. The two capacities are entirely different, though donned by the individual Shri S. Balasubramanian. The ratio of the Madras High Court decision in M.M. Muthiah's case (supra) clearly applies to this case. I agree with the learned Accountant Member that the sum of Rs. 19,770 is not includible in the income of the estate of late Shri T.S. Srinivasa Iyer.

11. The file will now go back to the original Bench which heard the case for disposal, according to law.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //