VIJAYKUVERBA SAHEB OF MORVI H H MAHARANI SHRI Vs. COMMISSIONER OF INCOME TAX
LAWS(BOM)-1962-10-5
HIGH COURT OF BOMBAY
Decided on October 18,1962

H.H.MAHARANI SHRI VIJAYKUVERBA SAHEB OF MORVI Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents


Referred Judgements :-

RANI AMRIT KUNWAR VS. COMMISSIONER OF INCOME TAX [REFERRED TO]



Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. SHANTI MEATTLE SMT [LAWS(ALL)-1971-12-13] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GEORGE THOMAS K [LAWS(KER)-1973-7-1] [REFERRED TO]
MEHBOOB PRODUCTIONS PVT LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(BOM)-1974-12-24] [REFERRED TO]
LUDHIANA CENTRAL CO-OPERATIVE CONSUMERS STORES LTD VS. COMMISSIONER OF INCOME-TAX [LAWS(P&H)-1979-8-8] [REFERRED TO]
SUKHDEO CHARITY ESTATE VS. COMMISSIONER OF INCOME TAX [LAWS(RAJ)-1984-4-27] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RAMDEO SAMADHI [LAWS(RAJ)-1985-8-18] [REFERRED TO]
K GEORGE THOMAS VS. COMMISSIONER OF INCOME TAX KERALA ERNAKULAM [LAWS(SC)-1985-9-35] [REFERRED TO]
PADMARAJE R KADAMBANDE VS. COMMISSIONER OF INCOME TAX PUNE [LAWS(SC)-1992-4-31] [APPROVED]
SIDDHARTHA PUBLICATIONS P LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-1980-3-40] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. STEWARTS AND LLOYDS OF INDIA LTD [LAWS(CAL)-1986-4-29] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NAGARAJ P N [LAWS(MAD)-1973-7-44] [REFERRED TO]
COMMISSIONER OF INCOME VS. SHRI GIRDHARRAM HARIRAM BHAGAT [LAWS(GJH)-1983-12-47] [REFERRED TO]


JUDGEMENT

V.S.DESAI, J. - (1.)THE following three questions have been referred to us by the Tribunal in the present reference :
"(1) Whether the sum of Rs. 500 can be deducted in arriving at the total income of the `previous year' ended 31st March, 1950, when it was neither paid in that year nor any liability to pay it was incurred in that year though it related to professional services to be rendered at some future date after 31st March, 1950 ? (2) Whether the monthly sum of Rs. 10,000 received by H. H. Maharaja Sir Lukhdhirji Bahadur from H. H. Maharaja Mahendrasinhji during the year ended 31st March, 1953, is `income' for the purposes of the Indian IT Act, 1922 ? and (3) If so, whether the said receipt is of a casual and nonrecurring nature and as such exempt from tax under s. 4(3) (vii) ?"

(2.)THE question arises out of the order passed by the Tribunal relating to the assessment of the assessee for the asst. yrs. 1950-51 to 1953-54. Although in question No. 1 the dates mentioned are with reference to the first assessment year, viz., 1950-51, the same question arises in the remaining three years also. Question No. 1, therefore, is common to all the assessment years. Questions Nos. 2 and 3 only relate to the assessment year 1953-54. THE learned counsel appearing for the assessee has stated before us that the assessee does not want to press question No. 1 and the said question, therefore, need not be answered. We will accordingly not answer question No. 1.
The facts necessary to be stated in connection with question Nos. 2 and 3 are as follows : The original assessee, H. H. Maharaja Lukhdhirji Bahadur of Morvi, who has since died on the 4th May, 1957, and is now represented by the surviving administrators of his estate, was the ruler of the erstwhile Indian State of Morvi. On the 21st Jan., 1948, he abdicated the gadi in favour of his son, H. H. Maharaja Mahendrasinhji. From 1st of April, 1949, a sum of Rs. 10,000 was being paid each month by the son Maharaja to the assessee. This monthly payment, admittedly, continued to be paid from April, 1949, to October, 1953, and from April, 1954, to April, 1957. According to the assessee for the interval between November, 1953, to April, 1954, such payment was not made, but that statement of the assessee was not accepted by the Tribunal. It will thus be seen that a monthly payment of Rs. 10,000 continued to be made by the son Maharaja to the father Maharaja from April, 1949, until the father Maharaja died on the 4th May, 1957. In the asst. yr. 1953-54 the ITO brought to tax the sum of Rs. 1,20,000 in respect of the said payment which the assessee had received during that year. In reply to the inquiries, which the ITO had made during the said assessment proceedings, the chartered accountants under instructions from the assessee had referred to the said payment as an amount of personal allowance of Rs. 10,000 allowed to H. H. Maharaja Lukhdhirji by his son, H. H. Maharaja Mahendrasinhji, and in another letter, which they had sent on the 27th June, 1957, they had stated that on the adbication of His Highness the Maharaja Lukhdhirji Bahadur on 21st Jan., 1948, His Highness was being paid at Morvi Rs. 10,000 per month by way of jiwai. It was contended before the ITO that the amount was exempted from tax being in the nature of jiwai of maintenance allowance. This contention, however, was not accepted by the ITO, who took the view that the payment was in the nature of an annuity, which was taxable under the Act.

In the appeal before the AAC, it was contended on behalf of the assessee that the jiwai allowance received by the assessee was an ex gratia payment made to him by his son without there being any legal obligation on him to make the said payment or in the absence of any legal custom binding on him. It was, therefore, not "income" at all, and hence, not taxable. The AAC held that the payment made by the son Maharaja to the father Maharaja in the present case was not under any contractual or other legally binding obligation, nor could it be said to be in consideration of the father having abdicated the gadi in favour of his son. According to him, therefore, the amount of the payments was not income, which was taxable under the India IT Act. He accordingly accepted the contention of the assessee and modified the order passed by the ITO to the extent. Against this part of the AAC's order, the Department appealed to the Tribunal. Before the Tribunal the argument advanced by the assessee was two-fold. It was contended in the first place that the payment was not "income" under the Indian IT Act, and, secondly, if it was income at all, it was exempt under s. 4(3) (vii), being of a casual and non- recurring nature. It was contended, on the other hand, by the Department that the monthly payment of Rs. 10,000 made by the son Maharaja to the father Maharaja represented a customary payment made by the ruling chief to a relation of his for maintenance and, therefore, constituted "income" under the Indian IT Act, as being income from a definite source. It was further urged that since the payment was being made periodically over a long period of time, it could not be regarded as casual or non- recurring. The Tribunal accepted the contentions put forward on behalf of the Department and allowed the appeal filed by the Department. It has then drawn up a statement of the case and referred to this Court the two questions relating to this part of its order, which we have already stated.

(3.)MR. Palkhivala, the learned counsel appearing for the assessee, has urged that on the facts found in the present case, the payment made to the assessee by his son Maharaja could not be said to be the assessee's income from any source. It was found by the AAC that the payment was not made in pursuance of any contractual or other legally bindings obligation; it was also not in consideration of the abdication of the gadi by the father Maharaja in favour of his son and the payment, therefore, was a purely ex gratia payment made by the son to his father as by way of allowance. MR. Palkhivala complains that the Tribunal has erred in taking the view that the payment was made in accordance with the custom and usage and the custom and usage, therefore, provided the source for the said payment and thus constituted it the income of the assessee. According to him, there was no material whatsoever before the Tribunal for the said conclusion, and the three pieces of evidence on which it sought to rely in that connection do not supply any such evidence. Now, the said three pieces of evidence are : the two statements of the chartered accountants in the letters which they had written to the ITO in reply to his enquiries to which we have already made reference earlier. In one of them, they referred to the payment as the personal allowance given by the son Maharaja to the father Maharaja and in the other they referred to it as a jiwai allowance. The third piece of evidence was a note appearing in the son Maharaja's return for the asst. yr. 1948-49, in which in referring to a similar allowance of Rs. 10,000 which the father Maharaja before his abdication was paying to his son, the son had stated that he was receiving it as jiwai allowance. MR. Palkhivala says that the fact a payment is being made by way of jiwai allowance or a personal allowance does not constitute it a payment made under either a contractual or legal obligation unless the right to such allowance is possessed or acquired by the person to whom the allowance is made under a legal or contractual provision or under a custom or usage having the force of law. There is no evidence whatsoever of any such legal or contrctual obligation nor is there any evidence of any such custom or usage. The circumstance that a father was paying a similar allowance to the son by way of allowance will not constitute any evidence of a custom that a son, on succeeding to the gadi on the abdication of the gadi by the father, is required to make such an allowance in favour of his father. MR. Palkhivala points out that in the history of Morvi the present abdication was the only abdication that had taken place and, therefore, there could be no possibility of any custom or usage being established under which a father Maharaja on an abdication of the gadi will be entitled to receive a jiwai or personal allowance from the son succeeding to the gadi. According to MR. Palkhivala, therefore, the payment in the present case could not be said to be customary at all in the sense of being made in pursuance of a legally binding custom. It can at the most be customary in the sense of habitual, and a habitual payment, without there being any right in the person to whom the payment is made to enforce the said payment if not made, cannot be anything but an ex gratia or voluntary payment. The payment in the present case, therefore, is a purely voluntary payment. The payment, moreover, is in no way connected with the office, profession or vocation of the person to whom the payment is made. Such a payment, MR. Palkhivala argues, is a payment, which does not proceed from any definite source and cannot, therefore, quality to be "income" under the Indian IT Act. MR. Palkhivala's further argument is that, at any rate, even if it is held to be "income", it would be an income of a casual and non- recurring nature.
Now, there can be no doubt that the payments made by the son Maharaja to the father Maharaja in the present case were voluntary payments in the sense that if the payment were discontinued, there would have been no right in the father Maharaja to have them enforced against the son. Further, there was no contractual or other legal obligation in pursuance of Which the payments were made. The Tribunal has, no doubt, taken the view that they could be regarded as having been made in accordance with a custom or usage requiring the ruling chief to make a maintenance allowance to a relation. There is, however, no evidence whatsoever of such a custom or usage, which could be said to have a binding force. The said inference is drawn by the Tribunal because the payment has been referred to as a jiwai allowance by the accountants in their letter under instructions from the Maharaja and because it appeared that the son Maharaja was in receipt of a jiwai allowance from his father, while the father was the rule. Now, neither of these facts can, in our opinion, be sufficient to warrant a legal inference that there was a custom or usage having the force of law requiring such payments to be made. The mere circumstance that an allowance was paid by the father to his son without anything more would not suffice to draw an inference that the allowance was paid under the obligation of a binding custom or usage. Nor could the circumstance be sufficient to hold in favour of a custom requiring the ruling chief to make a maintenance allowance in favour of any relation of his. It must also be noted that what militates against such an inference is the fact that on the material on the record in the present case, while the abdication took place in January, 1948, the payment of allowance started more than a year later from April, 1949. If the payment was in pursuance of a legally binding obligation, whether arising from contract or from a custom or usage having the force of law, the payment would have started immediately after the abdication and would not have been postponed till a year thereafter. There is no evidence also to connect the said payment with the abdication of the gadi in any way excepting the bare fact that the payment has come to be made some time after the abdication. In there circumstance, it must be held that the payment is wholly voluntary. The only features of the payment, which may have to be considered are that the payments have been made to a person, who had held the gadi; that the payments have been made subsequent to his having relinquished the gadi in favour of his son and that the payments have been made over fairly a long period right up to the death of the payee with almost an unbroken regularity. What has got to be considered is whether the voluntary payments made in such circumstances would constitute the income of the payee.



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