TMI Blog1969 (12) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... s judgment. We first take the income-tax reference. There is a palatial building known as " Dholpur House " at New Delhi. It belonged to Maharaja Udai Bhan Singhji, Ruler of the erstwhile Dholpur State. On the merger of the Dholpur State the question arose whether the " Dholpur House " should be treated as private property of the ruler or the property of the State of Rajasthan. By letter dated 20th October, 1951, the Government of India informed the said Maharaja that the said house would be considered to be the property of the Rajasthan State but 1/3rd of the rental value would be paid to His Highness as a purely ex gratia arrangement, and in the event of the sale of the house, His Highness would be entitled to 1/3rd of the sale price minus the share of the Government of India in the form of 75% of the incremental value. Paragraph 2 of this letter, which is relevant, is quoted below : " As Your Highness is aware, we had to decide the question of the Delhi house on certain general principles and it will not be possible for us to make an exception in the case of your house alone ; I am afraid therefore that the decision that the house should be State property cannot be changed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government. " One-third of the rent continued to be paid to His Highness Maharaja Udai Bhan Singhji till his death on 22nd October, 1954, and, thereafter, to Her Highness Malvinder Kaur and then to His Highness Maharaja Hemant Singhji who was recognised as the Ruler of the Dholpur State. These payments ceased when the said property was sold out. The amounts of payments made are detailed below : Assessment year Rs. 1953-54 21,257 1954-55 21,257 1955-56 11,998 1955-56 9,259 1956-57 21,257 1957-58 21,257 1958-59 21,257 1959-60 21,257 1960-61 21,574 1961-62 21,574 1962-63 21,574 For the assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1958-59, 1960-61, 1961-62 and 1962-63 income from this property has been taxed under section 9 of the Indian Income-tax Act, 1922, and for the assessment years 1957-58 and 1959-60 the income from this property has been taxed under section 12 of the Income-tax Act by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come fell to be assessed under section 9 of the Income-tax Act, 1922. It was assessable only under section 12 of the said Act. " Two points arise in this reference. The first is whether the various amounts received by the assessee should be held to be income of the assessee as defined in section 2 of the Income-tax Act. The second is whether such income is exempt from taxation on the ground that it is not taxable income as it falls under section 4(3)(vii) of the Income-tax Act. It has been argued before us that the concept of income is that it must be referable to a source capable of yielding some periodical return and that, in the instant case, there was no such source inasmuch as what was being paid to the assessee was merely by virtue of a gratuitous arrangement which could not be enforced in a court of law. There is no doubt that Dholpur House having been held to be the property of the Rajasthan State, the assessee was not receiving anything by way of return from that house and that whatever amount he was receiving was by virtue of an ex gratia arrangement. Ex gratia, according to law, is a term meaning as " a favour as distinguished from that which may be demanded ex debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and were not made on account of any obligation incurred by the Government of India, but were ex gratia, i.e., gratuitous. We have to examine whether, under these circumstances, it would be not proper for us to treat the payments made by the Government of India to the assessee as payments which are of a casual and non-recurring nature. Lord Dunedin in Stedeford v. Beloe, described an annual pension out of the school fund to the headmaster on his retirement by the governing body of a school as merely a casual payment which depended upon someoneelse's goodwill as the headmaster was not qualified for a pension and the governing body had the right at any time to rescind the minute under which the pension was granted and to cease making payments to him. It is of course true that the provisions of the Income-tax Act are not in Pari materia with those of the English statutes so that the decision on the English Acts are in general of no assistance in construing the Indian Income-tax Act. But, in the matter of voluntary payments, the Indian law is in no way different from the English law. It has been argued that there has been a succession of payments in this case and as such they cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the concept of income, he observed that in construing the word " income " in the Indian Income-tax Act, one has to ask oneself whether having regard to all the circumstances surrounding the particular payments and receipts in question, what is received is of the character of income according to the ordinary meaning of that word in the English language, or whether it is merely a casual receipt or a mere windfall. The learned judge then proceeded to observe : " But, or the facts provided, I am persuaded that the income-tax authorities have not discharged the burden of showing (apart from the mere circumstance of repetition) that there is any origin to account for these payments which could amount in its nature to a definite source so as to render each payment 'income' and not merely 'casual or a mere annual (though expected) windfall'. I do not reach this conclusion, as I have explained, on the ground simply that they are voluntary in the sense that they might be discontinued without the Rani having any enforceable remedy ; but on the ground that it has not been proved in this particular case that there is anything more certain than the mere whim of the Ruler to support them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1953, and to say that, after further careful examination of the case, the Government of India are satisfied that, (a) there was a custom in the jind State of granting annual allowances to the married daughters and sisters of the Ruler in lieu of dowry, and that (b) the allowances of Rs. 10,000 per annum granted to Maharaj Kumari Ruby Rajiber Kaur and Maharaj Kumari Diamond Balbir Rajinder Kaur were allowances of this nature. They are, therefore, of the view that these allowances should be restored with effect from the date on which they were stopped in 1950. I am to request that the formal orders of the State Government authorising the restoration of these allowances and the payment of the arrears may be passed as soon as possible, as the two Maharaj Kumari Kaurs have already been put to great hardship due to the stoppage of these allowances. " It was held by the High Court that Princess Ruby Rajiber Kaur had a recurring income in the form of allowance and the Source of that income was the direction to the State Government by the Government of India to pay that allowance because the Government was of the view that there was a custom to pay such allowances and that created a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act of all the assets, belonging to the assessee on the valuation date, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than those mentioned in clause (m). Thus the question to be considered is whether, on the facts and in the circumstances of this case, the so-called promise by the Government of India to make the periodical payments to the assessee constitutes an asset for inclusion in his net wealth. We have already pointed out that the assessee had no right, title or interest to the payments. He had no right to receive any periodical payments. Whatever he was to receive depended on the good wishes of the Government of India. Thus, he cannot be considered to possess any property or any right to property by virtue of the arrangement arrived at by the Government of India because everything was ex gratia. Thus, the so called promise of the Government of India did not constitute an asset of the assessee. In this view of the matter, the answer to the question in this case is clearly in the negative. This reference is answered accordingly. In both, the references, we make no order as to costs. - - TaxTMI - TMITax - Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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