Ramaswami, J. - (1.) This appeal is brought by special leave on behalf of Ramanathan Chettiar (hereinafter called the 'assessee') from the judgment of the High Court of Madras, dated September 24, 1962 in T. C. No. 144 of l960.
(2.) Arunachalam Chettiar (senior) was a resident of Devakottai, Ramanathapuram District who owned extensive properties including properties in Ceylon. He married three wives, viz., Valami Achi, Lakshimi Achi and Nachiar Achi. Valami Achi died in 1913 leaving behind her a son Arunachalam Chettiar (junior) and three daughters. Lakshimi Achi and Nachiar Achi did not have natural born sons. Arunachalam Chettiar (junior) died on July 9, 1934. Arunachalam Chettiar (senior) died on February 23, 1938. He was survived by his two widows Lakshimi Achi and Nachiar Achi and by the widow of his predeceased Son, Arunachalam Chettiar (junior), viz., Umayal Achi. After the death of Arunachalam Chettiar (senior) disputes arose between his two widows and the widow of Arunachalam Chettiar (junior) Umayal Achi, in respect of the estate of Arunachalam Chettiar (senior). Umayal Achi filed 0. S. No. 93 of 1938 in the Subordinate Judge's Court of Devakottai for administration and partition of the estate of deceased Arunachalam Chettiar (senior). She claimed a half-share in the properties under the provisions of the Hindu Women's Rights to Property Act. During the pendency of the suit the Subordinate Judge appointed two Advocates as Receivers for the administration of the estate. On the death of Arunachalam Chettiar (junior) the Estate Duty Authorities of Ceylon levied Estate Duty on what was described as the "deceased's half share of the assets of the business carried on by the family in Ceylon". Estate Duty was also levied on the death of Arunachalam Chettiar (senior) in 1938. The two Advocate Receivers who were administering the estate paid under protest to the Commissioner of Estate Duty in Ceylon the Estate Duty claimed from them. The administrators subsequently filed a suit in the Court of the District Judge, Colombo questioning the validity of the Estate Duties. The District Judge upheld the levies, but the Supreme Court of Ceylon allowed the appeal of the administrators and ordered the rebound of the Estate Duty together with interest. The Attorney-General of Ceylon took the matter in appeal to the Judicial Committee in P. C. A. Nos. 16 and 17 of 1955. By its judgment, dated July 10, 1957 the Judicial Committee affirmed the judgment of the Supreme Court of Ceylon and dismissed the appeals. In consequence of this decision the Estate Duty Authorities of Ceylon had to refund a sum of Rs. 7, 97,072 as interest payable on the amount of Estate Duty formerly collected. Meanwhile, the litigation in O. S. No. 93 of 1938 filed in the Subordinate Judge's Court of Devakottai had also reached the Judicial Committee and at that stage the parties compromised. In pursuance of this compromise the two widows of Arunachalam Chettiar (senior) took a boy each in adoption on June 17, 1945, Lakshimi Achi taking in adoption one Arunachalam Chettiar and Nachiar Achi taking in adoption one Ramanathan Chettiar. The widow of Arunachalam Chettiar (junior) Umayal Achi also adopted a son to her deccased husband, a boy called Veerappa Chettiar on June 17, 1945. The estate was divided into three equal shares, Lakshimi Achi and her adopted son taking one-third share, Nachiar Achi and her adopted son taking another one-third share, and Umayal Achi and her adopted son Veerappa taking the balance of one-third share.
(3.) Ramanathan, the adopted son of Arunachalam Chettiar (senior) taken in adoption by Nachiar Achi was assessed to income-tax for the assessment year 1958-.59, the relevant previous year being the year ending March 31, 1958. He was assessed in the status of a Hindu undivided family, on a total income of Rs. 2. 53,828 and a total tax of Rs. 1,79,412.12 P. was levied. The assessment included a sum of Rupees 1,93,328 which was received by the assessee as his share of the amount of interest paid by the Estate Duty Authorities of Ceylon consequent to the judgment of the Supreme Court of Ceylon ordering the refund of the amount. The assessee objected to the inclusion of this amount on the ground that it was not a revenue receipt assessable to income-tax and that, in any event, the receipt was of a casual and non-recurring nature falling within the exemption under S. 4 (3) (vii) of the Income Tax Act, 1922 (hereinafter referred to as the 'Act'). The Income-tax Officer overruled the objection and his order was affirmed in appeal by the appellate Assistant Commissioner and by the appellate Tribunal. Before the appellate Tribunal the assessee contended that the amount of Rs.1,93,328 received from the Estate Duty Authorities, Ceylon was not income, but was only damages received for the unlawful retention of money and even assuming that it was a revenue receipt, it was of a casual and non-recurring nature and, therefore, was not liable to assessment. The contentions of the assessee were overruled by the appellate Tribunal. At the instance of the assessee the appellate Tribunal referred the following questions of law to the High Court: "1. Whether the aforesaid interest receipt constitutes income 2. If so, whether it is exempt under S. 4 (3) (vii) of the Income Tax Act as a receipt of a casual and non-recurring nature - By its judgment dated September 24, 1962 the High Court answered the Reference against the assessee and held that the receipt in question was a revenue receipt and could not be held to be receipt of a casual and non-recurring nature and the amount was rightly assessed in the year of assessment.;