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TMI Blog1978 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... e being paid as per the provisions of s. 15 of the Act. The assessee continued to receive the cash allowance from August 1, 1956, though on modified terms. The sanction of the Government continuing the cash allowance was conveyed to the assessee by the Collector of Kolhapur through his letter No. RB/WTN. 16, dated October 6, 1959. It appears. that an amount of Rs. 10 lakhs out of a trust property which was invested in the Bank of Kolhapur in accordance with the provisions of the indenture of trust dated October 19, 1947, was misappropriated. The cash allowance that was to be paid to the assessee under the order dated October 6, 1959, was to be reduced under the circumstances therein mentioned. For the assessment year 1963-64, the assessee received Rs. 36,000 and for the assessment year 1964-65 she received Rs. 33,992. Before the ITO, for these two assessment years a question arose whether the amounts received by the assessee during these two years were subject to income-tax. It was sought to be contended, on behalf of the assessee, that these receipts were of a capital nature and were not subject to income-tax. That contention of the assessee was rejected. The ITO subjected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt. He urged that both under the provisions of the Act as well as the order that was communicated by the Collector by the letter dated October 6, 1959, the amounts to be paid to her from time to time are described as compensation and that they were accordingly capital receipts by way of compensation for extinction of the rights as a result of abolition of alienation. In short, his submission was that what was received by the assessee pursuant to this order was a capital receipt and cannot be regarded as income, since the receipt is not of a revenue nature. His submission was that both the taxing authorities as well as the Tribunal were in error in subjecting the amounts to tax holding it as income in her hands. It will be appropriate to refer to the relevant provisions of the Act (Bombay Act XXII of 1955) in order that the contentions urged by Mr. Munim,on behalf of the assessee, may be properly appreciated. The word " alienation " is defined in s. 2(1)(i) of the Act. The relevant part of the definition for our present purpose is as under : " 2. (1) In this Act, unless there is anything repugnant in the subject or context,-- (i) 'alienation' means a grant or recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to such allowance during a like period, and subject to the like conditions, as are contained in the grant ; (c) is received by an alienee who is-- (i) a male minor, he shall be paid an amount equal to the allowance till he attains the age of twenty-one years ; (ii) an unmarried female shall be paid an amount equal to the allowance till she marries, or, the amount calculated in accordance with the provisions of this section, whichever is greater ; (d) is received by an alienee in respect of whom, upon application made to it, in the manner prescribed, before the first day of August, 1958, the State Government is satisfied after such inquiry (if any) as it thinks fit, that he has no other source of income, or that if he has any other source of income it is insufficient for his livelihood, or that on account of old age, mental or physical infirmity or other reason he is incapable of earning a livelihood, or maintaining himself in a reasonable manner, there shall be paid to such alienee as a compassionate payment an amount equal to such allowance during his lifetime, or for such lesser period as the State Government in the circumstances thinks just. (2) For the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fetime as compensation for the abolition of the cash allowance held by her subject to certain conditions therein laid down." The conditions related to relaxation of the amount of compensation depending upon the realisation of the amount out of the misappropriated amount of Rs. 10 lakhs from her trust properties. It was specifically stated that the pro rata reduction should be effected in such a way that the total amount of income of the assessee should not be less than Rs. 49,800 per year during her lifetime, subject to the further condition that the Government securities of the face value of Rs. 6,22,900 held by the trustees if encashed the assessee would be presumed to be getting Rs. 13,800 as interest on this sum whether this sum is invested in Government securities or otherwise and this interest of Rs. 13,800 would be taken into consideration for deciding her annual income. Certain adjustments were provided in this order, but we are not concerned with the same. It is pursuant to this order of the Government that during the assessment year 1963-64, the assessee received Rs. 36,000 and during the assessment year 1964-65, she received Rs. 33,992 from the Government. The ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cl. (b) of the proviso provides for the amount to be paid to an alienee for education ; cl. (c) provides for the payment either to a male minor or an unmarried female. We are not concerned with any one of these three cases, because the amounts paid to the assessee do not fall under any of these categories mentioned in the proviso. The assessee made an application in the prescribed form for payment of compassionate payment, as contemplated by cl. (d) to sub-s. (1) of s. 15. We have reproduced the provisions of the said section earlier and it is quite apparent from cl. (d) of the proviso that any payment to an alienee like an assessee in view of her application as a compassionate payment cannot be regarded as compensation. Ordinarily, the word " compensation " suggests an idea of just equivalent or something to be received by a person whose asset or interest in property is taken away as a matter of legal right. If the amounts so received by the assessee fall under either of cls. (i), (ii) or (iii) of sub-s. (1) of s. 15, there could be no difficulty in holding that the amounts so received by her would be compensation and would be capital receipts. But she has not received the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by adopting appropriate legal proceedings. A payment received by a person under cl. (d) of the proviso has to be distinguished from the amount of compensation receivable under cl. (i), (ii) or (iii) of sub-s. (1) of s. 15. These two payments are of entirely different character. It will not be inappropriate if reference is made to certain observations made by this court in the case of H. H. Maharani Shri Vijaykuverba Saheb of Morvi CIT [1963] 49 ITR 594 at p.604. It was observed : " There is no doubt that under the Indian Income-tax Act even payments, which are voluntarily made, may constitute ' income ' of the person receiving them. It is not necessary that in order that the payments may constitute ' income ' they must proceed from a legal source; in that if the payments are not made the enforcement of the payments could 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oints out : " While it is true that the terminology used by the legislature in respect of a payment is not conclusive of the true character of that payment, it would be proper to proceed on the basis that the legislature knew what it was saying. The word ' compensation ' is a well-known expression in law. When the legislature says that all payments made under the Act are in respect of the compensation payable to the former holders unless there are clear and convincing circumstances to show that one or more items of payment do not form part of the compensation payable, we must hold that those payments are what they are said to be by the statute. We must give the word ' compensation ' its normal and natural meaning." This view was taken by the Supreme Court upon scrutiny of the various provisions of the Act with which the court was concerned. There were no provisions in the Act that came for consideration before the court similar to those contained in cl. (d) of the proviso to s. 15(1) of the Act with which we are concerned. In the case before the Supreme Court, there was no question of any payment being made for lifetime. Thus, the view that has been taken by the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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