Compassionate monthly payments after abolition of an allowance were taxable income, not capital compensation.

Monthly payments received under a Government order following abolition of an allowance were held to be taxable income, not capital compensation. The Court distinguished the statutory scheme for compensation under section 15(1) from the separate compassionate-payment proviso, noting that the assessee received relief under the latter because of personal circumstances rather than as statutory compensation for extinction of a vested capital right. Once sanctioned, the order created an enforceable source of receipt, bringing the recurring payments within the inclusive definition of income under section 2(24) of the Income-tax Act, 1961. Authorities treating comparable receipts as capital were distinguished because they arose under materially different provisions.

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Issues: Whether the monthly amounts received by the assessee under the Government order were capital receipts by way of compensation for abolition of alienation, or income liable to tax under the Income-tax Act.

Analysis: The cash allowance originally enjoyed by the assessee stood abolished under the Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955, but the assessee's later receipts did not arise under the ordinary compensation provisions of section 15(1). The statutory scheme distinguished between compensation payable under clauses (i), (ii) and (iii), and a separate compassionate payment under clause (d) of the proviso to section 15(1). The assessee's application was granted only under the compassionate-payment clause, and the resulting monthly payment was made because of her personal circumstances, not as a lump-sum or statutory compensation for extinction of a vested right. The Court further held that once the Government order was made, the payment became legally enforceable and was referable to a definite source, bringing it within the inclusive concept of income under section 2(24) of the Income-tax Act, 1961. The authorities relied upon for capital-receipt treatment were distinguished on the ground that they arose under materially different statutory provisions.

Conclusion: The amounts received by the assessee were income and not capital receipts, and were taxable in her hands.

Ratio Decidendi: A payment made under a statutory compassionate-payment provision, though connected with the abolition of an allowance, is taxable income where it is not statutory compensation for the extinguishment of a capital asset or right but a recurring receipt referable to an enforceable source.

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