Ex gratia periodic payments without enforceable rights are casual receipts and not wealth-taxable assets.

Voluntary periodic ex gratia payments from the Government, though repeated over several years, were held to be casual and non-recurring receipts because the assessee had no enforceable legal right to demand them. They were therefore exempt from income-tax under the Income-tax Act, 1922, despite falling within income in a broad sense. The Government's bare promise to continue such payments was also held not to be property or a vested right, so it could not be treated as an asset includible in net wealth under the Wealth-tax Act, 1957. The references were answered against the Revenue.

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Issues: (i) Whether the periodical ex gratia payments received from the Government of India constituted taxable income or were exempt as casual and non-recurring receipts under the Income-tax Act, 1922. (ii) Whether the Government's promise to make such periodical ex gratia payments constituted an asset includible in net wealth under the Wealth-tax Act, 1957.

Issue (i): Whether the periodical ex gratia payments received from the Government of India constituted taxable income or were exempt as casual and non-recurring receipts under the Income-tax Act, 1922.

Analysis: The receipts were made annually under an ex gratia arrangement and depended entirely on the Government's goodwill. Though repeated over several years, each payment remained voluntary and there was no enforceable legal right in the assessee to demand them. The Court treated the receipts as income in the broad statutory sense, but held that they fell within the exemption for casual and non-recurring receipts because they did not arise from business, profession, vocation or occupation and had no binding source capable of yielding a legal claim.

Conclusion: The receipts were not taxable income and were exempt as casual and non-recurring receipts; the answer was in favour of the assessee.

Issue (ii): Whether the Government's promise to make such periodical ex gratia payments constituted an asset includible in net wealth under the Wealth-tax Act, 1957.

Analysis: For wealth-tax purposes, an asset must amount to property or a vested right belonging to the assessee. The assessee had no right, title or interest in the payments, and the arrangement created no legally enforceable claim. Since the promise was purely ex gratia, it could not be treated as property or an asset for inclusion in net wealth.

Conclusion: The promise did not constitute an asset and was not includible in net wealth; the answer was in favour of the assessee.

Final Conclusion: The references were answered against the Revenue, holding that the receipts were exempt from income-tax and that the ex gratia promise was not a wealth-taxable asset.

Ratio Decidendi: A voluntary periodic payment made only ex gratia, without an enforceable right in the recipient, may be treated as income in a broad sense but is exempt when it is casual and non-recurring, and such a bare promise does not amount to an asset for wealth-tax purposes.

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