Annuity deposit repayment to legal representative is return of capital, not taxable income, absent express statutory deeming

Repayment of an annuity deposit to a deceased depositor's legal representative is not income in the representative's hands unless the statute expressly deems it so. Section 2(24)(viii) covers only annuity due, or commuted value of annuity paid, under section 280D, which is directed to repayment to the original depositor. Payment under the scheme to a legal representative is a return of capital forming part of the estate, not repayment under section 280D. Section 159 also does not apply because it concerns income accrued to the deceased during lifetime. The amount was therefore not taxable as income in the legal representative's hands.

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Issues: Whether the repayment of an annuity deposit received by the legal representative of a deceased depositor is income chargeable to tax in the hands of the legal representative under the Income-tax Act, 1961.

Analysis: Section 2(24)(viii) enlarges the definition of income only in respect of any annuity due, or commuted value of any annuity paid, under section 280D. Section 280D is directed to repayment to the original depositor, subject to the Chapter and any scheme framed thereunder. The scheme may regulate the manner of repayment, but payment to a legal representative under the scheme is not repayment under section 280D to the depositor. On the depositor's death, the balance of the annuity deposit forms part of his estate and its payment to the legal representative is a return of capital unless the statute expressly deems it to be income in that person's hands. Section 159 also does not apply because it concerns income that had accrued to the deceased during his lifetime.

Conclusion: The repayment received by the legal representative is not taxable as income in the legal representative's hands.

Ratio Decidendi: An amount is taxable as annuity income only when the statute expressly deems repayment under section 280D to the original depositor to be income, and that deeming fiction cannot be extended to a legal representative receiving repayment of capital under the scheme.

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