1966 (9) TMI 6 - HC - Income Tax

Amount received as annual allowance by the assessee - since, payment of the allowance is neither casual nor of a non-recurring nature, amount received as annual allowance by the assessee was revenue income liable to tax

Issues Involved:
1. Whether the annual allowance of Rs. 10,000 received by the assessee was revenue income liable to tax under the Indian Income-tax Act.

Detailed Analysis:

1. Nature of the Annual Allowance:
The primary issue was whether the annual allowance of Rs. 10,000 received by the assessee, the daughter of the late Maharaja of Jind, constituted revenue income liable to tax. The assessee argued that the allowance was paid in lieu of dowry, making it a capital receipt and not a revenue receipt. The Tribunal, however, held that the amount was revenue income liable to tax under the Act. The Tribunal reasoned that the payment of dowry by way of annual allowance was a source of income, and the directions from the Pepsu Government were a source from which the assessee received the payment year after year, making the receipts neither casual nor non-recurring.

2. Distinction Between Income and Capital Receipt:
The judgment emphasized the distinction between income, which is a revenue receipt, and other receipts of a capital nature. It referenced several landmark cases, such as Commissioner of Income-tax v. South India Pictures Ltd, where it was noted that the distinction, though generally clear, can be complex in borderline cases. The Supreme Court endorsed that the character of the payment received may vary according to the circumstances, and no infallible criterion or test can be laid down.

3. Custom and Binding Nature:
The letters from the Government of India dated 11th November 1949 and 25th November 1953 indicated that the payment was influenced by the existence of a custom in Jind State of granting annual allowances to the married daughters and sisters of the Ruler in lieu of dowry. The Government of India recognized this custom as a commitment of the old Rulers that should be honored. The court noted that the Government's acknowledgment of the custom implied its binding nature, thus supporting the revenue's stance that the payment was not a mere casual or non-recurring windfall.

4. Precedents and Analogous Cases:
The court analyzed several precedents, including:
- Rani Amrit Kunwar v. Commissioner of Income-tax: Payments made without evidence of custom were not considered income.
- H. H. Maharani Shri Vijaykunverba Saheb of Morvi v. Commissioner of Income-tax: Payments not made under any custom or legal obligation were not assessable.
- Makesh Anantrai Pattani v. Commissioner of Income-tax: A lump sum payment considered a personal gift was not liable to tax.
- Stedeford v. Beloe: A voluntary pension granted without obligation was not assessable to income-tax.

The court distinguished these cases on the basis that in the present case, the payment was influenced by a recognized custom, making it a recurring income from a definite source.

5. Applicability of Income-Tax Act Provisions:
The court referred to section 4 of the Income-tax Act, 1922, which includes all income, profits, and gains from whatever source derived in the total income of a person. The recurring nature of the allowance and the Government of India's direction, based on the custom, established the source of the income. The court also considered clause (vii) of sub-section (3) of section 4, which excludes receipts of a casual and non-recurring nature from total income, but found it inapplicable as the payment was neither casual nor non-recurring.

Conclusion:
The court concluded that the annual allowance of Rs. 10,000 received by the assessee was revenue income liable to tax under the Indian Income-tax Act. The question referred to the court was answered in the affirmative, with the parties bearing their own costs.

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