LATE NAWAB SIR MIR OSMAN ALI KHAN versus COMMISSIONER OF WEALTH TAX, HYDERABAD

Citation: [1986] 3 S.C.R. 1072 · Decided: 21-10-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Case Partly allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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LATE NAWAB SIR MIR OSMAN ALI KHAN 
v. 
COMMISSIONER OF WEALTH TAX, HYDERABAD 
OCTOBER 21, 1986 
[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.J' 
Wealth Tax Act, I957-S. 2(m)-Net wealth-''4ssets belonging 
to the assessee' -MeaninK of Properties sold out by the assessee with-
out executing registered sale deed-Full sale consideration received-
' Possession handed over to the purchaser-Whether legal title still vests 
in the assessee and properties belong to the assessee for purpose of 
inclusion in net wealth. 
Trans/er of Property Act, I882, s. 53 A-Scope of 
Constitution of India-Art. 136-Dismissal of special leave peti-
tion in limine-Cannot be construed as affirmation by Supreme Court 
of the decision from which special leave was sought. 
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Statutory Interpretation-Though statutes should be equitably in-
terpreted, no place for equity in taxation laws. Words and Phrases-
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'Belonging to'-MeanJng of 
· Wealth Tax Act, 1957-S. 2(e) (iv)-Assessee-Ruler of erstwhile 
State-Private properties taken over by Government-Granting 
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paympnt of a fixed annual sum of money in lieu of previous income-
Wheiher such annual payment amounts to 'annuity'-Whether exempt 
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from inclusion in net wealth. Words and Phrases-'Annuity'-Meaning 
of: 
ln the assessment year 1957-58, the Wealth Tax Officer had inc-
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lnded a sum of Rs.4,90,775 representing the market value of certain 
immovable properties in respect of which, although the assessee had 
received full consideration money, he had not executed any registered 
· sale deeds in favour of the ven4ees. The question was whether the 
properties belonged to the assessee even after such sale for the purpose 
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of inclusion of his net wealth within the meaning of s. 2(m) of the 
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Wealth Tax Act, 1957. The Wealth Tax Officer held that the assessee 
1072 
SIRMIROSMAN ALIKHANv. COMM.OFW. TAX 
1073 
still owned those properties and consequently the value of the same was 
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included in his net wealth. 
On appeal, the Appellate Assistant Commissioner sustained the 
order of the Wealth Tax Qfficer with certain deductions in value. On 
further appeal, the Tribunal held that the assessee had ceased to be the 
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owner of the properties because the assessee having received the consi-
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deration momy from the purchasers and the purchasers having been 
put into possession were protected in terms of s. 53A of the Transfer of 
Property Act and the term 'owner' not.only included the legal owner-
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ship but also the beneficial ownership. The High Court following the 
ratio of Commissioner of Income Tax, A.P. Hyderabad v. Nawab Mir 
Barkat Ali Khan, (1974) Tax L.R. 90, reversed the order of Tribunal 
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and upheld that of the Wealth Tax qmcer and the Assistant Appellate 
Commissioner . 
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The Assess-Nizam of Hyderabad, was a paramount ruler own-
ing certain private properties called Sarf-e-khas. On surrendering his 
paramountcy and acceding to the Union of India, his private properties 
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were taken over by the Government and it was agreed to pay him a sum 
of Rs.1 crore annually distributed as follows: (a) Rs.SO lakhs as a privy 
purse; (b) Rs.25 lakbs in lieu of his previous income from the Sarf-e-
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khas, and (c) Rs.25 Iakhs for the upkeep of palaces etc. 
The Government in its letter to the assessee stated that his Sarf-e-
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khas estall-! shonld not continue as an entirely separate administration 
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independent of the Diwani administrative structure and it should, 
·therefore, be completely taken over by the Diwani, its revenne and 
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expenditure being merged with the revenues and expenditure of the 
State. Question was whether the assessee's right to receive the sum of 
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Rs.25 lakhs O.S. from the State Government was an asset for the pnr-
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poses of inclusion in his net wealth under the WealthTax Act, 1957. 
The Wealth Tax Officer treating the said sum as an annuity and as 
an asset or property, capitalised the same to Rs.99,78,572 and included 
that amount as an asset of the asseS.ee. The Appellate Assistant Com-
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missioner agreed with'this view. The Tribunal, however, refused to call 
it as an annuity, characterised it as an annual payment for snrr~nder of 
life interest and held that the capitalised value of such life interest be 
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added to the net wealth and taxed. 111e High Court agreed with the view 
taken by the Tribunal that it was only an annual payment made in 
compensation for the property which had been taken over bY the Govern-
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