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TMI Blog1992 (4) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... s Alienations Abolition Act, 1955 (hereinafter referred to as "the Act"). It may be stated at this stage that the Act was passed to abolish miscellaneous alienations of various kinds prevailing in the merged territories in the State of Bombay. The District Treasury Officer, Kolhapur, by his letter dated April 14, 1956, communicated the discontinuance of the said allowance. Under sub-section (1), clause (d), of section 15 of the Act, it was provided that a cash allowance could be paid as a compassionate payment notwithstanding the abolition of all alienations under section 4 of the Act. The assessee continued to receive the cash allowance from August 1, 1956, on modified terms. The sanction of this cash allowance was conveyed to the appellant by the Collector of Kolhapur through his letter dated October 6, 1959. It appears that an amount of Rs. 10 lakhs out of a trust property in the Bank of Kolhapur in accordance with the provisions of an Indenture of Trust dated October 19, 1947, was misappropriated. The cash allowance that was to be paid to the assessee under order dated October 6, 1959, was to be reduced in the circumstances mentioned therein. For the assessment year 1963-64, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference No. 192 of 1974, relates to the assessment year 1970-71 corresponding to the financial year 1969-70. Civil Appeal No. 2202 of 1979, directed against the order passed in Income-tax Reference No. 191 of 1973, relates to the assessment years 1965-66, 1966-67, 1967-68, 1968-69 and 1969-70 corresponding to the financial years 1964-65 to 1968-69. Civil Appeal No. 2203 of 1979, directed against the order passed in Income-tax Reference No. 121 of 1969, relates to the assessment years 1963-64 and 1964-65 corresponding to the financial years 1962-63 and 1963-64. Learned counsel for the appellant draws our attention to the various provisions of the Act particularly to section 2 wherein the definition of alienation is provided. According to him, payment was originally made under a Huzur order which was abolished consequent to the merger of Kolhapur State. Section 4 of the Act makes it very clear that all alienations shall be deemed to have been abolished. The said section contains a non obstante clause. However, where any cash allowance which is included in the definition of alienation is granted under section 15(1)(d), the said payment is on compassionate grounds. This payment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with. Learned counsel appearing for the respondent (the Revenue), after referring to section 2(24) of the Income-tax Act, 1961, would submit that if it is not a windfall and if there is regularity in payment, that would be enough to constitute income. That is the test adopted as seen in the case of E. D. Sassoon and Co. Ltd. v. CIT [1954] 26 ITR 27,49 (SC). Similar is the case in Raghuvanshi Mills Ltd. v. CIT [1952] 22 ITR 484, 489 (SC). Therefore, if these are applied, there is no difficulty in holding that the payments received by the assessee which do not amount to compensation are nothing but income. Where it is a case of compensation, that would be as laid down in CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460 (SC). The direct authority which governs the present case is Raja Rameshwara Rao v. CIT [1963] 49 ITR 144 (SC) because that was a case of maintenance allowance. Here as well, the assessee applied to the government in order to maintain herself. It is such an allowance which is talked of under clause (d) of section 15(1) of the Act. Therefore, where she is paid maintenance allowance periodically, it cannot be claimed as compensation. It does not matter on what grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was income and so was taxable ; Held further, that the receipt was inseparably connected with the ownership and conduct of the business and arose from it and therefore it was not exempt under section 4(3)(vii). The view taken in England in B. C. Fir and Cedar Lumber Co. v. The King [1932] AC 441 and Commissioner of Inland Revenue v. William's Executors [1944] 26 TC 23 preferred. The remarks of the judicial Committee in CIT v. Shaw Wallace and Co. [1932] 59 I.A. 206 with regard to the meaning of the word 'income' must be read with reference to the particular facts of that case." What is to be carefully observed is at page 489, where it was held as under : "It is true the judicial Committee attempted a narrower definition in CIT v. Shaw Wallace and Co. [1932] 2 Comp Cas 276 ; [1932] 59 1A 206, by limiting income to 'a periodical monetary return "coming in" with some sort of regularity, or expected regularity, from definite sources' but, in our opinion, those remarks must be read with reference to the particular facts of that case." Therefore, the observation of the Privy Council in CIT v. Shaw Wallace and Co. [1932] 2 Comp Cas 276 cannot be pressed into service as of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the remainder of her life ; (b) is received by an alienee for the purpose of education, he shall be paid an amount equal to such allowance during a like period, and subject to the like conditions, as are contained in the grant; (c) is received by an alienee who is (i) a male minor, he shall be paid an amount equal to the allowance till he attains the age of twenty-one years ; (ii) an unmarried female, she shall be paid an amount equal to the allowance till she marries, or the amount calculated in accordance with the provisions of this section, whichever is greater ; (d) is received by an alienee of whom, upon application made to it, in the manner prescribed, before the first day of August, 1958, the State Government is satisfied after such inquiry (if any) as it thinks fit, that he has no other source of income, or that if he has any other source of income it is insufficient for his livelihood, or that on account of old age, mental or physical infirmity or other reason he is incapable of earning a livelihood, or maintaining himself in a reasonable manner, there shall be paid to such alienee as a compassionate payment an amount equal to such allowance during his lifetime, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on Raja Rameshwara Rao [1963] 49 ITR 144 (SC). That case no doubt dealt with interim maintenance allowance. At page 148, the following observations are found : "We have earlier said that it is not in dispute that the commutation sum was paid as compensation for the loss of the Jagir and was, therefore, capital which was not liable to be taxed. We thus find that the Regulations make a clear distinction between the commutation sum or compensation and the interim maintenance allowances. These allowances were obviously not intended to be compensation. The question then arises, if these allowances were not paid as compensation for the loss of the Jagir and were not of the nature of capital as such, what was their nature ? We think that if we have regard to the provisions of the Regulations under which they were paid, as we must, there is no doubt that they were of the nature of income. No doubt they were not income of any of the kinds that are commonly found, but are, as Lord Radcliffe said in a case to which we shall later refer, sui generis. We proceed now to discuss why we think they were income. These allowances, we notice, were treated by the Regulations as something oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be found for them, the Regulations had to be held the source. A case very near to the one in hand and a case that throws a great deal of light on the problem that faces us is Commissioners of Inland Revenue v. Butterley Co. Ltd. [1956] 36 TC 411. We think a detailed reference to it can be very profitably made. That case was concerned with the English Coal Industry Nationalisation Act, 1946, which nationalised the collieries and divested all owners of them and the businesses concerning them. Under this Act and the Coal Industry (No. 2) Act, 1949, the assessee company became entitled to compensation for the assets transferred to the Government and to certain payments called 'revenue payments' and 'interim income' for the period between what was called the primary vesting date and the date on which compensation for the assets taken away was fully satisfied. The question was with regard to these payments. The assessee company had contended in the beginning that the payments were not of income nature at all. In the Court of Appeal however that contention was abandoned and it was conceded that the payments were of income nature. The only dispute was whether they were income charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances payable until such time as the terms for the commutation of jagirs are determined.' It is the character of the payments made under section 14 that came up for consideration before this court in Rameshwara Rao's case [1963] 49 ITR 144 (SC). Quite clearly the maintenance allowances paid were revenue receipts. Hence that decision has no bearing on the question of law under consideration in the present case. The observations made by this court in that decision must be read in the light of the facts of that case." (emphasis supplied) Thus, it is clear that the observations made by this court in Rameshwara Rao's case [1963] 49 ITR 144 (SC) must be read in the light of the facts of that case. From the ruling in S. R. Y. Sivaram Prasad Bahadur [1971] 82 ITR 527 (SC), it is clear that what is decisive of the character is the quality of the payment. The following passage at page 535 is of vital significance: "It is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital, or revenue." Equally, in P. H. Divecha's case [1963] 48 ITR 222 (SC), at pages 231232, the test applied was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compassion, the payment is made. The mere fact that, after the order is made, it becomes an enforceable right is neither here nor there. The reliance on Rameshwara Rao's case [1963] 49 ITR 144 (SC), does not seem to be correct in view of what we have pointed out above. It has already been seen that the marginal heading of section 15 is "compensation". The fact that, under clauses (i), (ii) and (iii) of section 15(1), the compensation is paid as of right and in cases falling under clause (d) of the proviso, it is a discretionary payment, would not stamp the payment with the character of revenue. As to how a marginal heading has to be construed can be gathered from Chandroji Rao's case [1970] 77 ITR 743 (SC). It is stated therein that the marginal heading to a section cannot control the interpretation of the words of the section particularly where the meaning of the section is clear and unambiguous. For a moment, we are not interpreting the words of the section but we are only holding that even a payment under clause (d) is nothing but compensation because, as the facts disclose, the amount of Rs. 10 lakhs out of a trust property in the Bank of Kolhapur was misappropriated. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taxable in the hands of the assessee : Held, that the assessee had a beneficial interest in that sum in the hands of the company. Undoubtedly, the amount received by the company towards salami and compensation for acquisition of its lands was a capital receipt in the hands of the company and when the sum was distributed amongst its shareholders each of the shareholders took a share of the capital asset to which they were beneficially entitled. The receipt of Rs. 8,829 was a capital receipt in the hands of the assessee. The fact that the sum was distributed as 'dividend' did not change the true nature of the receipt ; a receipt was what it was and not what it was called. Trustees of the Will of H. K. Brodie v. Commissioners of Inland Revenue [1933] 17 TC 432 (KB) applied. Held also, that that part of the dividend received by the assessee attributable to land acquisition compensation received by the company after March 31, 1948, was not receipt of 'dividend' within the meaning of section 2(6A) of the Indian Income-tax Act, 1922. CIT v. Nalin Behari Lall Singha [1969] 74 ITR 849 (SC) followed. It is now well-settled that in order to find out whether a receipt is a capital rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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