TaxTMI 
TaxTMI 
1965 (12) TMI 13
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.... assessment of the interim payments made by the Government under the Estates Abolition Act (hereinafter called the Abolition Act). For the purposes of these writ petitions, I have ignored the amounts paid to each of the petitioners or the dates of the notices, as these are not relevant or material for the determination of the question before me. It is contended on behalf of the petitioners that after the estate was notified and taken over by the State, the Government deposited in the office of the Estates Abolition Tribunal advance compensation in respect of the shares of each of them under section 4A of the Abolition Act. They have also further deposited interim payments in respect of the above estate for the years commencing from 1950 onwards. It is averred that the advance compensation, interim payments, final compensation, etc., are all parts of the scheme of compensation provided for under the Abolition Act in respect of the estate which was taken over, and they being in the nature of capital receipts, are not assessable to income-tax. The petitioners allege that even though the estates were notified in 1949, and interim payments were being paid since 1950, at no time was it e....
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....appeal from a judgment of the Division Bench of this court consisting of Chandra Reddy C. J. (as he then was) and Srinivasa Chari J., in construing payments made by way of interim allowances under the Hyderabad (Abolition of Jagirs) Regulation, 1358 Fasli, should be applied in determining the nature of the payments under the provisions of the Act, in which case, there will be no difficulty in arriving at the conclusion that these interim payments are income liable to assessment under the Income-tax Act. It may be stated that in the above case before their Lordships of the Supreme Court, the decision of the Madras High Court already cited (Shanmugha Rajeswara Sethupathi v. Income-tax Officer, Karaikudi) was referred to in support of the view that the interim maintenance allowance was not income, but capital. While their Lordships recognised that the Madras case took a different view, they did not think it necessary in that case to fix the precise point of time when the jagir was taken away from the appellant and, therefore, proceeded on the basis of the appellant's contention, namely, that jagirs were taken away in September, 1949, under section 5 of the Abolition of jagirs Act. Sr....
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...., 1949, and, consequently, the construction placed on that definition by the Madras Benches is not applicable to these cases. I will presently deal with the effect of the variation in the two definitions and the several provisions of the Abolition Act, but before I do so, it must be observed that in Shanmugha Rajeswara's case Srinivasan J. delivering the judgment made certain observations, which indicate the basis of the approach of the Bench in determining the question whether interim pay ments are income or capital. He observed at page 866 : " What we are at present dealing with is whether these payments constitute part of the compensation which a person obtains for the loss of a capital asset for purposes of the application of the Indian Income-tax Act. We must repel the suggestion that the State legislature could therefore so define any amount in a State enactment as to affect the rights and liabilities under the Indian Income-tax Act. It is obvious that in coming to any conclusion in relation to the application of any of the provisions of the Indian Income-tax Act, we cannot accept the nomenclature used in the State enactment as conclusive. Whatever difference might exist in....
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....of the words " interim income " payable to the company under the Coal Industry Nationalisation Act, 1946, and the Coal Industry (No. 2) Act, 1949, can be said to arise from trade, business or investment or some other piece of property that admits of use or enjoyment, or whether under section 22(2)(a) of the 1946 Act, was paid as " a money payment of an amount 'equal to' interest for that period " on each amount of compensation that came to be satisfied, or whether all such payments 'equal to' interest on a future sum covering the period until it was paid was not income from an investment or interest on a loan but an indemnity against loss suffered by the deferment of the payment, held that in fact, the bulk of the money received was received as ' revenue payments ' under section 22(3) and for the years 1947 and 1948, at any rate, these payments remained the property of the recipients, without accountability, whatever might prove to be their ultimate amount of compensation or the prescribed rate of interest upon it. It was also pointed out that such payments do not present themselves as natural subjects of the profits tax charge ; nor is it the same thing as a charge on the income o....
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....the notified date by the principal or any other landholder. Clause (e) of the Abolition Act as well as the said provision after the Madras amendment in 1956 is given in juxtaposition below: Andhra Act: - The principal or any other landholder and any other person whose rights stand transferred under clause (b) or cease and determine under clause (e) shall be entitled only to compensation from the Government as provided in this Act. Madras Act: - The principal or any other landholder and any other person whose rights stand transferred under clause (b) or cease and determine under clause (c) shall be entitled only to such rights and privileges as are recognised or conferred on him by or under this Act. Be it noted that the words " compensation from the Government as provided in this Act " have been substituted by the Madras Amendment by the words, " such rights or privileges as are conferred on him by or under this Act ", so that under the Abolition Act before amendment, a landholder would be entitled only to compensation in terms of those provisions which provide for payment of compensation, while under its more extended meaning after the amendment to " such rights and privileges ....
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....urvey and settlement had taken place, and the precise quantum of the basic annual sum had been computed, and since this would take a long time, the Government provided for making interim payments under section 50 of the Abolition Act, the relevant provisions of which may be read as below : "50. (1) The provisions of this section shall apply in every case not governed by section 38. (2) After the notified date and before the compensation has been finally determined and paid in pursuance of this Act, interim payments shall be made by the Government every Fasli year to the principal landholder and to the other persons referred to in section 44, sub-section (1), as follows : (3) In respect of the Fasli year in which the estate is notified, they shall together be entitled to such amount as the Government may, on a rough calculation, determine to be the basic annual sum referred to in section 26 if the deposit in pursuance of section 54A has not been already made, and to an amount equal to one-half of the basic annual sum as so calculated, if the deposit aforesaid has been already made : . . . (4) In respect of each subsequent Fasli year, they shall together be entitled to the amoun....
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....urther instalment or instalments of compensation deposited up to the end of the Fasli year concerned bears to the compensation as finally determined under section 39. (c) If the aggregate interim payment thus determined less the deductions already made under sub-sections (3) and (4) exceeds, or is less than the aggregate of the amounts already deposited under sub-section (5), the balance with interest thereon at three per cent. per annum shall be deposited by the Government with the Tribunal after deducting the amounts of the nature specified in the proviso to sub-section (3) and still due to the Government or, as the case may be, the amount of deficiency shall be intimated by the Government to the Tribunal. Explanation.- Any amount collected by the Government on behalf of the landholder as rent from the ryots in excess of the rent determined under the Madras Estates Land (Reduction of Rent) Act, 1947 (Madras Act XXX of 1947) and paid to the landholder shall, for the purpose of this sub-section, be deemed to be an amount collected by the landholder. (8) No interim payment made under this section shall be deemed to constitute any part of the compensation which the Government are ....
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....nterim payments are made so that there are provisions dealing with what has to be done if there are excess payments or under-payments of this interim payment. Sub-section (4) says that the excess or deficiency in respect of the amount already deposited in the previous Fasli or Faslis shall either be adjusted towards the interim payments due for that Fasli or subsequent Faslis, or deposited in addition, as the case may be. Sub-section (4A), which is added in 1958, relates to amounts deposited under section 54A and provides that where on subsequent calculation it is found that the amount deposited is in excess of the amount that should properly have been deposited, such excess shall also be deducted out of the amounts to be deposited under sub-section (3) or (4) of section 50, namely, the interim payments will suffer deduction. Sub-section (7) of section 50 of the Abolition Act requires the aggregation of interim payments after the compensation has been finally determined, and if the aggregate interim payment thus determined less the deductions already made under sub-sections (3) and (4) exceeds, or is less than the aggregate of the amounts already deposited under sub-section (5), th....
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....ovisions to which I have made a reference, have not been taken into account. With respect to the argument of the Advocate General, it was pointed out that in the Bil, as it was originally published, sub-section (8) did not appear, though interim payment was provided for. It was according to the learned judge, therefore, doubtful if these payments would be adjusted against the total compensation payable to the landholder. This provision, according to him, seems to have been inserted in order to remove any such doubts, and to make it clear that these payments were in addition to the compensation determined under section 39 of the Act ; as such, it was held in that case that the fact that it was not part of compensation so computed under section 39 of the Act, and liable to be deposited under section 41(1), does not mean that it is not compensation for all purposes. It is in this context that the Bench, as already pointed out, observed that what they were dealing with was whether these payments constitute part of compensation which a person obtains for the loss of a capital asset for purposes of the application of the Indian Income-tax Act. With great respect, this approach is not war....
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....ompensation depended upon whether the mortgagors, who are the landholders, are entitled to these amounts, and not whether interim payments are part of compensation. Sub-section (2) of section 50 clearly envisages interim payments to the principal landholder and to the other persons referred to in sub-section (1) of section 44. Sub-section (1) of section 44 says that the Tribunal shall apportion the compensation among the principal landholder and any other persons whose rights or interests in the estate stand transferred to the Government under section 3, clause (b), or cease and determine under section 3, clause (c), including persons who are entitled to be maintained from the estate and its income, as far as possible, in accordance with the value of their respective interests in the estate. While this indicates that interim payments are also to be paid to the same persons to whom compensation is to be paid under sub-section (1) of section 44 and does not in any way determine the nature of the payments, namely, that interim payments are part of compensation, section 52, to which a reference has been made, provides in clause (a) thereof that the jurisdiction of the Tribunal and the ....
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....an wishes to lay emphasis on any inhibition or with respect to any interdiction, he has recourse to negatives. When the provision categorically says that no interim payment shall be deemed to constitute any part of the compensation or to any extent to be in lieu of such compensation, I presume it was added for the benefit of the landholder, lest by any mischance it could, in the remotest sense, be construed to include interim payment as part of compensation. It was intended to clarify and leave beyond doubt that interim payment is something different and apart from the compensation for depriving him of his estate that sub-section (8) was added. Section 41(2) of the Abolition Act clarifies the position beyond doubt. It provides that on the making of deposit as finally determined, the Government shall be deemed to have been completely discharged in respect of all claims to, or enforceable against, the compensation aforesaid. This would be irrespective of the interim payments liable to be paid by the Government under the provisions of section 50 of the Abolition Act. While the interim payment, as pointed out by Lord Radcliffe in relation to the payments under the Coal Industry Nationa....