Annuity deposit instalments remain income in a nominee's hands and are taxable despite devolution on death.

Instalments received under the annuity deposit scheme were assessable as income because Chapter XXII-A treated the periodic repayment of the deposit with interest as an annuity, and section 2(24)(viii) brought annuities due under section 280D within the definition of income. The scheme also authorised payment to a nominee or, failing nomination, to a legal representative on the depositor's death, so receipt by devolution did not change the character of the amount. The instalments were therefore not capital refunds in the recipient's hands but statutory income, and they were taxable accordingly.

---

---

Issues: Whether the instalments of annuity deposit received by the assessee as nominee and legal representative of the deceased depositor were assessable as income.

Analysis: The annuity deposit scheme under Chapter XXII-A of the Income-tax Act, 1961 treated the periodic repayment of the deposited amount with interest as an annuity. Section 2(24)(viii) included within income any annuity due under section 280D. The scheme framed under section 280W expressly provided for payment of the annuity to the nominee or, failing nomination, to the legal representative on the death of the depositor. The receipt was therefore not a capital refund in the hands of the recipient but the statutory return of income originally impounded from the depositor, and the character of income did not change because payment was made to the nominee or legal representative after the depositor's death.

Conclusion: The instalments received by the assessee as nominee and legal representative were liable to be assessed as income and the question was answered in the affirmative in favour of the Revenue.

Ratio Decidendi: Where a statute treats periodic repayments under an annuity deposit scheme as income and the scheme authorises payment to a nominee or legal representative on the depositor's death, the receipt retains the character of income in the recipient's hands and is not transformed into a capital receipt by reason only of devolution on death.

---