Taxability of interim estate abolition payments affirmed, while CBDT directions could not control the assessing officer's statutory judgment.

Interim payments received under section 50 of the Madras Estates Abolition Act, 1948 were treated as revenue receipts, not capital compensation, and were therefore taxable under the Income-tax Act. The assessing officer's quasi-judicial function was held to depend on the statute, so a CBDT letter or prior departmental treatment could not bind the officer or create an enforceable article 14 claim. As no lack of jurisdiction was shown in the reopening notices, writ relief by prohibition was unavailable; mandamus also failed because there was no legal duty to assess contrary to the Act or the officer's independent judgment.

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Issues: (i) Whether interim payments received under section 50 of the Madras Estates Abolition Act, 1948 were capital receipts or income receipts liable to assessment under the Income-tax Act; (ii) Whether the Central Board of Direct Taxes' letter and past treatment of similar estates created an enforceable right under article 14 or bound the Income-tax Officer in assessment proceedings; (iii) Whether writ relief in the nature of prohibition or mandamus could be granted to restrain reopening or assessment of the interim payments.

Issue (i): Whether interim payments received under section 50 of the Madras Estates Abolition Act, 1948 were capital receipts or income receipts liable to assessment under the Income-tax Act.

Analysis: The interim payments were examined in the light of the statutory scheme of the Abolition Act and the court's earlier pronouncement on the same question. The payments were held to be amounts received in lieu of the non-payment of compensation and not part of capital compensation itself. The court accepted the earlier reasoning that such payments had the character of revenue receipts and distinguished the contrary Madras view.

Conclusion: The interim payments under section 50 of the Madras Estates Abolition Act, 1948 were income receipts and were liable to be assessed under the Income-tax Act, against the assessee.

Issue (ii): Whether the Central Board of Direct Taxes' letter and past treatment of similar estates created an enforceable right under article 14 or bound the Income-tax Officer in assessment proceedings.

Analysis: The assessment function of the Income-tax Officer was treated as quasi-judicial, and the statutory scheme was read as requiring the officer to act according to law rather than administrative preference. The Board's communication was held to be confined to the cases it referred to and, in any event, not capable of controlling the officer's independent statutory judgment. No enforceable equality claim arose merely because different views had been taken in other matters, since the departmental authority could alter its view and the officer was not bound by such administrative directions in making a particular assessment.

Conclusion: No relief was available under article 14, and the Board's letter did not bind the Income-tax Officer.

Issue (iii): Whether writ relief in the nature of prohibition or mandamus could be granted to restrain reopening or assessment of the interim payments.

Analysis: A writ of prohibition was unavailable because the notices showed no want of jurisdiction in the Income-tax Officer to initiate reopening proceedings. A writ of mandamus also failed because no legal duty existed requiring the officer to assess in accordance with the Board's letter rather than the statute. The Board was likewise free to revise its administrative view, and therefore no mandatory direction could be issued against it.

Conclusion: Neither writ prohibition nor mandamus was maintainable on the facts.

Final Conclusion: The challenges to the reopening notices and proposed assessments failed, the interim payments were held taxable as income, and the alleged discrimination under article 14 was rejected.

Ratio Decidendi: Interim payments made under section 50 of the Madras Estates Abolition Act, 1948 are income receipts, and administrative directions of the tax department cannot control the quasi-judicial discretion of the assessing officer or create an enforceable claim under article 14.

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