Grant terms preclude annuity commutation. Assessee wins, revenue bears costs.

The court held that the terms of the grant dated 23rd October, 1867, precluded the commutation of the right to annuity of Rs. 50,000 into a lump sum grant. The court emphasized that unless the annuitant had an explicit right to demand commutation, it should be considered precluded. The decision was in favor of the assessee, directing the revenue to bear the costs of the reference.

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Issues Involved:
1. Whether the terms and conditions of the grant dated 23rd October, 1867, precluded the commutation of the right to annuity of Rs. 50,000 or any portion thereof into a lump sum grantRs.

Detailed Analysis:

Background and Facts:
The Secretary of State in Council for India, by an indenture dated 23rd October, 1867, granted an annuity of Rs. 50,000 in perpetuity to Ramchunder Luxmonjee and his heirs. This annuity was later assigned to Sir Cowasjee Jehangir Readymoney in 1877. Subsequently, the Cowasjee Jehangir Baronetcy Act, 1911, was enacted to settle this annuity along with other securities and properties to support the title and dignity of Baronet conferred on Sir Cowasjee Jehangir. The annuity was assigned to a corporation created under the Act to benefit Sir Cowasjee Jehangir and his heirs.

Tribunal's Decision:
The Tribunal referred to the Gujarat High Court decision in CWT v. Dr. E. D. Anklesaria and concluded that since the assessee could not demand commutation as of right, commutation was precluded by the terms of the grant. The Tribunal held that in the absence of any term recognizing the annuitant's right to claim commutation, such a right should be considered barred, thus excluding the value of the annuity from the assessee's net wealth.

Revenue's Argument:
The revenue contended that the grant of 1867 did not contain any express provision precluding the commutation of the annuity into a lump sum. The revenue argued that commutation must be taken as the normal rule unless explicitly precluded by the grant's terms. Therefore, the assessee was not entitled to the benefit of s. 2(e)(1)(iv) of the W.T. Act.

Assessee's Argument:
The assessee argued that if there is no specific bar in the terms of the annuity, the question should be whether the annuitant has the right to ask for commutation. If the answer is negative, commutation is precluded, and the benefit of s. 2(e)(1)(iv) can be claimed. The assessee also referred to the provisions of the 1911 Act, arguing that the annuity was to be paid by trustees created by the Act, and the assessee could not ask for commutation from the Government.

Court's Analysis:
The court examined the original grant of 1867 and observed that it did not contain any clause permitting or prohibiting commutation. The court emphasized that the proper approach is to ask whether the annuitant has a right to have the annuity commuted. Unless such a right is explicitly provided, it must be held that the right of commutation is precluded.

The court also considered the provisions of the Cowasjee Jehangir Baronetcy Act, 1911, which settled the annuity to support the title and dignity of the Baronet. The Act intended the annuity to benefit succeeding Baronets, indicating that commutation was not intended.

Legal Precedents:
The court referred to the decision in CWT v. Bhalchamora D. Jokhakar, which held that preclusion of the right of commutation might arise by implication. The court also cited the Gujarat High Court decision in Dr. E. D. Anklesaria's case, which held that an annuitant cannot demand the value of the annuity as a lump sum if the terms of the grant preclude such commutation.

Conclusion:
The court concluded that the terms and conditions of the grant dated 23rd October, 1867, precluded the commutation of the right to annuity of Rs. 50,000 or any portion thereof into a lump sum grant. The question was answered in the affirmative and against the revenue, with the revenue directed to pay the costs of the reference.

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