Interim payments under the Estates Abolition Act were compensation, not income, and could not be treated as revenue receipt.

Interim payments deposited by the Government under the Estates Abolition Act were treated as compensation for the taking over of the estate, not as income of the erstwhile holder. Section 50(8) was construed as preventing adjustment of interim payments against the final compensation under Section 41(1), rather than characterising those payments as income. The court followed earlier Bench decisions and held that the link between the amount and annual income did not alter its capital nature. The Supreme Court ruling under the Hyderabad Jagirs Regulation was distinguished because it concerned maintenance allowances under a different statutory scheme. The appellant succeeded, and the respondent was entitled only to the proportionate share of compensation found by the Tribunal.

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Issues: Whether the interim payments deposited by the Government under the Estates Abolition Act constituted income of the erstwhile holder of the estate or formed part of the compensation payable for the taking over of the estate.

Analysis: The statutory scheme treated interim payments as distinct from the final compensation machinery. Section 50(8) was construed as preventing adjustment of interim payments against the compensation payable under Section 41(1), and not as declaring that such payments were income in the hands of the estate holder. The earlier Bench decisions were followed, holding that interim payments were in the nature of compensation for the loss of a capital asset and that the fact that their quantum was linked to annual income did not alter their true character. The Supreme Court decision under the Hyderabad Jagirs Regulation was distinguished because the payments there were maintenance allowances of an income nature under a different statutory scheme.

Conclusion: The interim payments were compensation and not income. The appellant succeeded, and the respondent was entitled only to the share of compensation corresponding to the proportion found by the Tribunal.

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