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Issues Involved:
1. Whether the annuity received by the assessee as compensation for the resumption of jagir lands is a capital receipt or revenue receipt liable to tax. Summary: Issue 1: Nature of Annuity Received as Compensation - The controversy centers on whether the amounts received by the assessee, a religious trust, as compensation for the jagir lands resumed by the State are capital receipts or revenue receipts. - The Income-tax Officer held that the annuity received was a revenue receipt liable to tax, not agricultural income, as it was not derived from land by agricultural operations. - The Appellate Assistant Commissioner agreed that the compensation was not agricultural income but considered it a capital receipt, stating that the annual amounts received were compensation for the resumption of jagirs. - The Tribunal, however, concluded that the compensation was a revenue receipt, as it represented a regular source of income with assured regularity, thus liable to tax. Relevant Legal Provisions and Interpretation: - The judgment examined sections 21 and 22 of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, and clauses 5, 6, and 7 of its Second Schedule. - Clause 7 specifies that for charitable and educational institutions, compensation is paid as an annuity in perpetuity equal to the net income from the jagir lands in the basic year. - The court referred to precedents, including Senairam Doongarmall v. CIT and P. H. Divecha v. CIT, emphasizing that the quality of the payment, not its periodicity or the method of payment, determines whether it is capital or revenue. Court's Conclusion: - The court determined that the annuity in perpetuity paid as compensation for the resumption of jagir lands is a capital receipt. The principal is gone forever, and the annuity is a method of effecting payment for the loss of a capital asset. - The Tribunal's view that the compensation was a revenue receipt was found unsound. The court held that the compensation paid to the assessee by way of annuity in perpetuity was a capital receipt. Final Judgment: - The question referred to the court was answered in the negative, in favor of the assessee and against the Revenue. - The Tribunal is to be informed of the judgment as required by section 260(1) of the Income-tax Act, 1961.
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