9911796707
TMI Blog1985 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... The said covenant has been submitted as annexure A. We may reproduce article XI of the Covenant, annexure A, which is as under : " (1) The Ruler of each Covenanting State shall be entitled to receive annually from the revenues of the United State for his privy purse the amounts specified against Covenanting State in Schedule 1 : Provided that the sums specified in the Schedule in respect of the Rulers of Jaipur, Bikaner and jodhpur State shall be payable only to the present Rulers of the said States and not to their successors each of whom shall be entitled to receive annually a sum of rupees ten lakhs as his privy purse. (2) The said amount is intended to cover all the expenses of the Ruler and his family including expenses on residence, marriages and other ceremonies, and shall neither be increased nor reduced for any reason whatsoever. (3) The Rajpramukh shall cause the said amount to be paid to the Ruler in four equal instalments at the beginning of each quarter in advance. (4) The said amount shall be free of all taxes, whether imposed by the Government of the United State or by the Government of India." Maharana Bhupal Singhji died in 1955. The President of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not received by or on behalf of the Ruler as privy purse or as a result of any financial agreement with the Government and, therefore, exemption under section 10(19) of the Income-tax Act, 1961, is not available in the hands of the assessee. The covenant is between the Ruler and the Government whereas Hath Kharch Allowance is between the Ruler and the assessee." The legal heir of the deceased-assessee (Jr. Rajmata Smt. Gulab Kunwar) filed appeals before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated February 11, 1975, held that the Income-tax Officer was justified in bringing to tax the amounts received by the appellant (legal heir of the deceased-assessee) daring the two years under appeal from Maharana Shri Bhagwat Singh, ex-Ruler of Udaipur, out of the privy purse amount received by him from the Government of India. He, however, dismissed the appeal for the assessment year 1970-71 and partly allowed the appeal for the assessment year 1971-72 with a relief of Rs. 10,000 per year from the total income of the deceased-assessee. A further appeal was taken by Maharana Bhagwat Singh of Mewar, legal heir of junior Rajmata Smt. Gulab Kun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uaranteed by the Government of India, clauses 2 and 4 of which provided that the privy purse was intended to cover the maintenance expenses of all family members and that the entire privy purse was exempt from tax ? 5. Whether the Tribunal erred in holding that such payments made out of privy parse were not entitled to exemption under section 10(19) of the Income-tax Act, 1961, in spite of clauses (2) and (4) of the Covenant, but constituted income of by virtue of the definition of 'income' contained in section 2(24) of the Income-tax Act, 1961 ? " The Tribunal, has however, thought it fit to refer the following question for our opinion, as the question formulated by it is wide enough to include questions Nos. 3 to 5 : " Whether, on the facts and in the circumstances of the case, the amounts of Rs. 36,000 and Rs. 25,500 received as 'Hath Kharch' by the deceased, Her Highness late Jr. Rajmata Smt. Gulab Kunwarji of Udaipur, in the respective financial years relevant to the assessment years 1970-71 and 1971-72 from Maharana Bhagwat Singh of Mewar was exempt from income-tax under the provisions of section 10(19) and/or section 10(2) of the Income-tax Act, 1961, or otherwise? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the amount paid by Maharana Bhagwat Singh to his junior Rajmata Gulab Kunwar of Udaipur out of the privy purse was her income or not. It does not matter whether the payment was made on account of custom or usage prevalent in the royal family of Mewar. In these circumstances, it is necessary for us to consider the meaning of the word " income ". Section 2(24) of the Act defines " income ". It is an inclusive definition. It is well settled that when there is an inclusive definition, it means not only the things mentioned therein but also includes in its ambit the meaning of the term as generally understood. " Income " has been defined in Shorter Oxford English Dictionary, third edition, vol. I, as under: " That which comes in as the periodical produce of one's work, business, lands or investments (commonly expressed in terms of money) annual or periodical receipts accruing to a person or corporation revenue." The judicial Committee of the Privy Council in CIT v. Shaw Wallace Co. [1932] 2 Comp Cas 276; AIR 1932 PC 138, observed as under (at p. 140): "Income in this Act connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such an overriding charge had existed either upon the property or upon its income, which is not the case. " The test laid down in Sitaldas Tirathdas' case [1961] 41 ITR 367 (SC), clearly shows that it is not every obligation to apply income in a particular way that results in the diversion of income before it reaches the assessee. While considering section 23(5)(a) of the old Act, in Murlidhar Himatsingka v. CIT [1966] 62 ITR 323 (SC), it was held that until and unless there is an overriding obligation, the amount received cannot be treated as income. We have already reproduced article XI of the covenant and keeping in view the tests laid down by the Supreme Court, we have to see whether by that article, any charge was created for payment of allowance of maintenance or there was an obligation on the part of the Maharana of Udaipur to pay from the amount of privy purse, the allowance for maintenance, or though there was no overriding charge on the amount of the privy purse, but the Maharana of Udaipur, out of the privy purse amount, applied a part of the amount for providing allowance for maintenance to the Maharanis. As per the finding of the Tribunal, there was no charge on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments received by the assessee from out of the privy purse paid to the Maharaja of Porbandar was not liable to be taxed in the hands of the assessee as her income? The Gujarat High Court held that the amount of privy purse paid to the Maharaja was immune from income-tax under the covenant of 1948, under article 291 of the Constitution, under section 4(3)(x)(a) of the old Act and under section 10(19) of the Act and thus any amount received by the Maharaja as privy purse was not liable to be included in the total income of the Maharaja for any previous year. The learned judges observed as under (at p. 914): " It is obvious, in the light of the test laid down in Sitaldas Tirathdas' case [1961] 41 ITR 367 (SC), that there was no diversion of any part of the amount of privy purse before it reached the Maharaja and, therefore, if the Maharaja had been liable to pay tax in respect of the privy purse, the entire amount of Rs. 3,80,000 would have been includible in his total income. Payments to different members of the family would be instances of application of the income after it reached the hands of the Maharaja. Therefore, so far as the persons who receive the money from the Maharaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was the half-brother of the late Maharaja of Patiala. After the merger of the State of Patiala with the Union of India, the appellant was sanctioned an amount of Rs. 2,000 per month as allowance out of the sum of Rs. 5 lakhs set apart for the relations of the late Maharaja. In pursuance of the circular issued by the Finance Department, the Treasury Officer, Patiala, on May 17, 1955, started making advance deductions of income-tax from the appellant's allowance. There was a protest by the appellant, but that was rejected by the Commissioner of Income-tax on August 25, 1965. A writ petition was filed challenging the imposition of income-tax on the ground that he was being paid this allowance as a member of the Hindu undivided family out of the income of the family, as also on the ground that the erstwhile State of Patiala was an impartible estate and that this fund was being paid out of the income of the holder of the estate belonging to the family. The learned single judge dismissed the petition. An appeal was filed to the Division Bench of the Punjab and Haryana High Court. The Division Bench held that the erstwhile State of Patiala lapsed when its Ruler executed an instrument o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
