TMI Blog1994 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... On January 1, 1973, the business of Royal Insurance Company was taken over by the General Insurance Company, a Government of India undertaking. The husband of the assessee became an employee of the General Insurance Company after leaving the service of Royal Insurance Company. After the death of the assessee's husband, the Royal Insurance Company granted an allowance at the rate of pound 1,638-48 per annum to the assessee in recognition of the assessee's husband's faithful and diligent service with the Royal Insurance Company from November 15, 1943, till the business was nationalised with effect from January 1, 1973. The above allowance was granted to the assessee for her lifetime. For the assessment years 1976-77 and 1977-78, for which the corresponding accounting years ended on 31st March of the respective accounting years, the assessee received sums of Rs. 22,320 and Rs. 25,512, respectively, in pursuance of the above allowance. While making the assessments for the above two assessment years, the Income-tax Officer sought to bring to tax the above sums. The assessee contended that the above payment by the Royal Insurance Company Was made gratuitously and at the discretion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as income. In order to support his contentions, learned counsel appearing for the Department relied upon the decision in C. Lahshmi Rajyam v. CIT [ 1960] 40 ITR 340 (Mad). According to the facts arising in that decision, the assessee, an actress, acted the part of the heroine in a motion picture produced by a partnership. She was paid all that was due to her under the contract of service. The picture was released for public exhibition with great success. One of the partners, voluntarily and gratuitously executed a document in her favour agreeing to pay her a fourth of his share of the realisations from the picture in consideration of the wholehearted help, co-operation, and valuable services rendered by her in respect of the production and completion of the picture by way of special remuneration in addition to the fixed remuneration paid by the partnership for her services. By virtue of this agreement, the assessee received the sums of Rs. 63,258 and Rs. 10,362 in the years of account relevant to the assessment years. The question was whether these amounts were the assessee's taxable income. On these facts, this court held, " an emolument, or perquisite of an employee may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments may constitute ' income ', they must proceed from a legal source, in that, if the payments are not made the enforcement of the payments old be sought by the payee in a court of law. It does not, however, mean that every voluntary payment will constitute ' income '. Thus, voluntary and gratuitous payments, which are connected with the office, profession, vocation or occupation may constitute ' income ' although if the payments were not made the enforcement thereof cannot be insisted upon. These payments constitute 'income' because they are referable to a definite source, which is the office, profession, vocation or occupation. It could, therefore, be said that such a voluntary payment is taxable as having an origin in the office, profession or vocation of the payee, which constitutes a definite source for the income. What is taxed under the Indian Income-tax Act is income from every source (barring the exceptions provided in the Act itself) and even a voluntary payment, which can be regarded as having an origin, which a practical man can regard as a real source of income, will fall in the category of ' income ', which is taxable under the Act. Where, however, a voluntary pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts received were income. This decision was rendered by the Gujarat High Court following the decision of the Bombay High Court in Maharani Vijaykuverba Sahib of Morvi (H. H.) v. CIT [1963] 49 ITR 594. In view of the abovesaid decisions, learned standing counsel for the Department submitted that ; in the present case, the source of income is definite and the assessee was receiving the annuities regularly every year and, therefore, the allowance received by the assessee is chargeable as income under the Income-tax Act. None appeared on behalf of the assessee. We have heard learned standing counsel for the Department and also perused the records carefully. As already stated, Rajalakshmi Venkatakrishnan was paid by the Royal Insurance Company annually pound 1,638-48 in view of the services rendered by her husband to the said company before it was nationalised. The Royal Insurance Company wrote a letter to the assessee dated April 28, 1975. In the said letter, it is stated that she has been granted a widow pension allowance as from January 1, 1975, in recognition of her late husband's faithful and diligent services with the group from November 15, 1943 ; till the business was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be considered as consideration for payment of annuitiesto his wife after his death since the retirement benefits in view of the services rendered by Venkatakrishnan were already paid out to him on the date of his retirement. While Venkatakrishnan was alive, no promise was made by the Royal Insurance Company to pay any allowance to his widow after his death. Therefore, the annuities paid by the Royal Insurance Company to the widow of Venkatakrishnan can only be considered as gratuitous. Gratuitous payment can be termed as gift in view of the provisions contained under section 5(xiii) of the Gift-tax Act. According to the abovesaid provision of the Gift-tax Act, where an employer makes a gift by way of bonus, gratuity or pension to the employee or to the dependants of the deceased employee, then such a gift would be exempt from gift-tax. As already stated, the motive for payment of annuities is the services rendered by Venkatakrishnan to the Royal Insurance Company. If that is so, the annuities paid by the Royal Insurance Company to the widow of Venkatakrishnan is a gift supported by consideration. According to the Department, even though the payments were made ex gratia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift made for the personal qualities of the assessee and as a token of personal esteem. But, in the present case, the annuities were paid by the company for the services rendered by the husband of the assessee even though the company was not liable to pay any amount to the husband of the assessee. In such a case, the payment cannot be considered as a token of personal esteem. The Tribunal also relied upon a decision of the King's Bench Division in Beynon v. Thorpe [1928] 14 TC 1, wherein it was held that " the payment was nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in themselves, that it was merely a gift moved by that sort of gratitude or that sort of moral obligation, that whether the gifts are large or small they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another. Such gifts did not fall under the category of profits and gains which could be the subject-matter of taxation." Reliance was also placed upon another decision of the King's Bench Division in Stedeford v. Beloe [1930] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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