S.K. Mal Lodha, J. - (1.) THIS reference by the Income-tax Appellate Tribunal, Bombay Bench " A ", Bombay (for short " the Tribunal "), has arisen in the following circumstances : Udaipur State known as Mewar was an Indian State prior to the independence of the country in 1947. After the Independence Act, 1947, the United State of Rajasthan was formed and with effect from that very date, the very said State of Udaipur known as Mewar was integrated along with other Indian States into the United State of Rajasthan. A covenant was entered into between the Government of India and the said integrated State including Mewar (State of Udaipur). The covenant was signed by the Maharana of Mewar, Maharaja Bhupal Singh, and according to that covenant, the said Maharana of Mewar was to be paid an annual privy purse of Rs. 10,00,000. 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."
(2.) MAHARANA Bhupal Singh ji died in 1955. The President of India, in exercise of his political power under Article 366(22) of the Constitution recognised MAHARANA Bhagwat Singh as the MAHARANA of Mewar so as to entitle him to the privy purse payable under the said covenant. Junior Raj-mata late Smt. Gulab Kunwar of Udiapur was the step-mother and was being regularly paid by said MAHARANA Bhagwat Singh a sum of Rs. 36,000 per year as " Hath Kharch Allowance ". This amount was paid in the first year. In the second year, the amount paid was Rs. 25,500. The deceased-assessee (Junior Rajmata Smt. Gulab Kunwar) was paid the said allowance at the rate of Rs. 3,000 per month up to August, 1970, and at the rate of Rs. 1,500 per month from September, 1970, onwards. The assessment years involved are 1970-71 and 1971-72. The Income-tax Officer assuming that the deceased-assessee was paid Rs. 36,000 as allowance for each of the years added Rs. 36,000 to the total income of the deceased-assessee for each of the years under consideration observing that the said amount was assessable in her hands, as had been held by the Appellate Assistant Commissioner in the appellate order for the accounting period relevant to the assessment year 1968-69 and also for the following reasons : " The monthly Hath Kharch Allowance in the hands of the assessee is attributable to legally enforceable custom or statutory obligation arising under the Hindu Adoption and Maintenance Act, 1956. It is not dependant upon the whim or bounty of the Ruler. 2. Scrutiny shows that the flow of the allowance is regular and was being received by the assessee regularly every month. However, the special feature of this year is that, the Ruler made an attempt to reduce the quantum of monthly Hath Kharch Allowance from Rs. 3,000 to Rs. 1,500 per mensem. Accordingly cheques of Rs. 1,500 were given every month with effect from September, 1970, but it appears that the assessee, namely, Jr. Rajmata, did not accept this arrangement and refused to encash these cheques. These cheques remained with her for some time and I am informed that these were returned to the Ruler in March, 1972 and in lieu thereof cash was obtained. As such, the fact remains that the Jr. Rajmata claimed the amount of Hath Kharch Allowance at the rate of Rs. 3,000 per mensem. In the circumstances, the amount had fallen due and, therefore, assessable in the hands of the assessee. (3) The amount is 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. Rajrnata Sirit. Gulab Kun-war) 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) during 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 Kunwar, of Udaipur to the Tribunal. The same was dismissed. The Tribunal considered the question of exemption under Sections 10(19) and 10(2) of the Income-tax Act, 1961 (XLIII of 1961) (for short "the Act"), and recorded the following findings: (1) That the deceased-assessee has all along in the past been receiving the said allowance by way of periodical receipts accruing to her and that there can be no manner of doubt that the said allowance is income. The deceased-appellant succeeded in showing that her case falls under the statutory exemption provided in Section 10 of the Act; (2) that the deceased-assessee is not entitled to exemption claimed under Section 10(2) of the Act and further that the exemption claimed under Section 10(19) is not available to her. An application under Section 256(1) of the Act was filed by Maharana, Bhagwat Singh of Mewar, as legal heir of Junior Rajmata Smt. Gulab Kunwarji, to the Tribunal, praying that the following questions of law arise out of the order dated April 27, 1976, and they may be referred to this court for its opinion : " 1. Whether the Tribunal erred in law in holding that the amounts of Rs. 36,000 and Rs. 25,000 received as 'Hath Karch' by the deceased in the financial years relevant to the assessment years 1970-71 and 1971-72, respectively, from Maharana Bhagwat Singh of Mewar out of the privy purse received by him was not exempt from income-tax under the provisions of Section 10(19) and/or Section 10(2) of the Income-tax Act, 1961, or otherwise ? 2. Whether there was any evidence, before the Tribunal to hold that the annual 'Hath Kharch allowance ' which was being paid to the assessee was in pursuance of an enforceable custom and, therefore, was not exempt from tax under Section 10(19)of the Income-tax Act, 1961 ? 3. Whether the Tribunal erred in not following the view of the Supreme Court in the case of Kunwar Shri Vir Rajendra Singh v. Union of India, AIR 1970 SC 1946, wherein it has been held that the privy purse is not an item of private property to which the Ruler succeeds and consequently rejecting the contention of the assessee that such payments made out of privy purse are exempt under Section 10(2) as they are payments made to the Hindu undivided family out of the joint family property ? 4. Whether the Tribunal erred in interpreting the Covenant of Merger dated March 30, 1949, guaranteed 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 purse 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 ? "
(3.) AFTER carefully examining the findings recorded by the Tribunal in its order dated April 27, 1976, and the controversial points arising therefrom, we consider it proper to reframe the question formulated by the Tribunal before answering it so as to bring out the real issue between the parties. Learned counsel for the Revenue did not question the proposition that it is open to this court, without raising new and different questions, to resettle or reframe the questions formulated by the Tribunal, before answering them so that the real controversy between the parties may find place in it. In our opinion, the following question arises for our consideration in this case : " Whether, on the facts and in the circumstances on the case, the Tribunal was justified in holding that the payments received by the deceased-assessee, Junior Rajmata Smt. Gulab Kunwar of Udaipur, in the respective financial years relevant to the assessment years 1970-71 and 1971-72 from out of the privy purse paid to Maharana Bhagwat Singh, was not liable to be taxed in the hands of the deceased-assessee as her income ? " Before we proceed to consider, examine and answer the above question formulated by us, we may state that the Tribunal while agreeing with the Appellate Assistant Commissioner with what was stated by him in paras. 12 to 14 of his order held that there is a custom and usage in the erstwhile royal family of Mewar for grant of the allowance for maintenance to the Maharanis of Mewar or that an admission to that effect was brought out by the Appellate Assistant Commissioner, from the legal heir of the deceased-assessee, which has not been proved to be wrong, and that abundantly proves the said custom. Mr. Rajendra Mehta appearing for Arvind Singh who is the legal heir of Maharana Bhagwat Singh who was legal heir of the deceased-assessee (Junior Rajmata Smt. Gulab Kunwar), submitted that this finding of the Tribunal was not questioned in the reference application filed under Section 256(1) of the Act and that the legal heir of the deceased-assessee did not desire any question to be referred to this court for answer covering the aforesaid finding that it was on account of usage and custom that allowance for maintenance was paid to the deceased-assessee by the Maharana of Mewar. In our considered opinion, this is not of much significance for the reason that we have to see whether 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." ;