TaxTMI 
TaxTMI 
1935 (5) TMI 27
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....stated to be whether the appellant is assessable to income tax and super-tax in respect of an annual sum of Rs. 2,40,000 payable to him during his life pursuant to a covenant contained in the inden ture hereinafter mentioned. The appellant was the owner of an estate in British India known as the Nine Annas Tikari Raj. He had a daughter who had married a son of Rani Bhubaneshwari Kuar (hereinafter referred to as the Rani.) By an indenture, dated March 29, 1930, and made between the appellant of the one part and the Rani of the other part, the appellant conveyed the greater portion of his said estate to the Rani for the valuable consideration therein appearing. The indenture recites among other facts that the appellant was absolute owne....
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....pellant indemnified against all suits, actions and proceedings whatsoever in respect of the said debts or any of them. This indenture does not itself contain any charge on the estate of the annual sums covenanted to be paid; but their Lordships were informed and the case proceeded upon the footing that the stipulated security had been given by a separate document: The taxing authorities in assessing the appellant in respect of the year 1931-1932 included in his assessable income the following item:- "Other sources : annuity, Rs. 2,40,000," being the sum received by him in pursuance of the Rani's covenant. The appellant contends that no part of this receipt should be included (1) because being merely an instalment of the purchase p....
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....ruing or arising, or received in British India or deemed under the provisions of this Act to accrue, or arise, or to be received in British India. (2)...... (3) This Act shall not apply to the following classes of income: ....... (viii) Agricultural income. ....... 6. Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income tax in the manner hereinafter appearing, namely:- (i) Salaries. (ii) Interest on Securities. (iii) Property. (iv) Business. (v) Professional Earnings. (vi) Other Sources. 7. (1) The tax shall be payable by an assessee under the head 'Salaries' in respect of any salary or wages, any annuity, pension, or gratuity, and any fees, c....
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....g those Judges. The Chief Justice and VARMA J., were of opinion that the sum in question was not a capital sum, but was "income" within the meaning of that word as used in Section 12 (1) of the Act, and therefore taxable. On the other hand, KHAJA MOHAMMAD NOOR, J., took the view that the transaction was a sale of the estate for a capital sum or price of an amount dependent on the duration of the appellant's life, and that each annual payment was instalment of that capital sum and therefore not taxable as income. Their Lordships find themselves in agreement with the Chief Justice and VARMA, J. Indeed but for the elaborate argument addressed to the Board they might well have contended themselves with adopting the careful judgment of th....
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....se in which he has exchanged his estate for a capital sum payable in instalments. But it was argued that even though the life annuity be income, as distinct from capital, it still is not income taxable under the Act, because the words "income, profits and gains" in Section 12(1) of the Act must be construed as including only such income as constitutes or provides a profit or gain to the recipient, i.e., that the word "income" is in some way limited by its association with the words "profits and gains." This being so, it is said that in view of (a) the true value of the estate (alleged to be about 2 crores of rupees) and (b) the age of the appellant (alleged to be about 47 at the date of the transaction), the annuity could never constitut....