1. The question that arises for our decision on this reference is :
'Whether there was material for the Tribunal to hold that the sum of Rs. 35,807 granted to the assessee was a maintainace allowance exempt within the meaning of paragraph 15(i) of the Part B States (Taxation Concessions) Order, 1950 ?'
2. In order to bring out the real dispute between the parties we re-formulated is as under :
'Whether on the facts and circumstances of the case the sum of Rs. 35,807 granted to the assessee was a maintenance allowance exempt within the meaning of paragraph 15(i) of the Part B States (Taxation Concessions) Order, 1950 ?'
3. The assessee is Her Highness Maharani Shri Kesarkunwerba Saheb of Movi and wife of His Highness Lukhdhirji of Morvi, who abdicated in favour of his son on 21st January, 1948. The Morvi State, which was formerly an independent State before its manager with the Union of the States of Saurashtra, intergrated in Saurashtra on 16th March, 1948. The question which we are called upon to determine requires us in effect to decided the real nature of a Resolution passed by the Saurashtra Government on 30th March, 1950. It will be convenient immediately to refer to that Resolution, which is as under :
'In pursuance of the decision taken at the Jamnagar conference of December, 1948/January, 1949, the grant of the village, Mota Dahisara, made by the Ruler to the person named below has been decided to be resumed and the grantee is to be paid cash annuity in lieu thereof as stated against name of the grantee. The cash annuity is in lieu of the village and it is payable to the grantee from the date possession of the village was made over to the Government in pursuance of the above decision.
Morvi Cash Annuity Maharani Shri Kesarkunwerba Saheb in lieu of the village, Mota Dahisara... ... Rs. 35,807. The grantee is also to be paid her jiwai as Raj Mata Rs. 24,193 per annum as decided at the Cabinet meeting on 14th January, 1950.
The combined cash allowance is payable to the grantee only for her lifetime.'
4. The reference arises in these circumstance. Paragraph 15(i) of the Part B States (Taxation Concessions) Order, 1950, reads as under :
'Any income falling within the following classes shall be exempt from income-tax and super-tax and shall not be included in the total income or total world income of the person receiving them :
(i) any sum which the widow or the mother of a person who was the Ruler of an Indian State receives as her maintenance allowance out of public revenues.'
5. The case for the revenue was that the amount of Rs. 35,807 given in the form of cash annuity to the Maharani Saheb of Movri was not a maintenance allowance out of public revenue, and, therefore, chargeable to income-tax. On the other hand, the contention of the assessee was that the whole amount of Rs. 60,000 described as combined cash allowance in the Resolution was being received by her maintenance allowance out of public revenue, and, therefore, under paragraph 15(i) of the Part B States (Taxation Concessions) Order, 1950, was exempt from income-tax and super-tax.
6. On a plain reading of the Resolution, it is apparent that the cash annuity falls under two heads. The sum of Rs. 35,807 is given to the Maharani Saheb in lieu of the village of Mota Dahisara. In terms the Resolution states that the grantee is to be paid her jiwai - which means maintenance - as Raj Mata. The last part of the Resolution speaks of combined cash allowance. Therefore, it is absolutely clear from the Resolution itself that there are two district heads of this cash annuity; one is in lieu of the village of Mota Dahisara and other is as and by way of maintenance as Raj Mata. When the matter was carried to the Tribunal, the Tribunal took the view that the whole amount of Rs. 60,000 paid as cash annuity to the assessee was her maintenance allowance out of public revenue and decided the matter in favour of the assessee. The reference has been made to this court at the instance of the Commissioner of Income-tax.
7. Now, it is not merely by looking at the Resolution that this reference has to be decided. It is certainly open to the assessee to ask us to look not merely at the working of the Resolution itself, but to take into account the real nature of the transactions, and it has been argued before us by Mr. Palkhivala, learned counsel for the assessee, that the facts and circumstances which happened prior to the passing of the Resolution clearly show that the whole amount of Rs. 60,000 although paid in the form of a cash annuity under the two heads was nothing short of a maintenance allowance. It becomes necessary for us, therefore, to examine the background and the circumstances in which this Resolution came to be passed.
8. The first fact to which our attention has been drawn is a Royal Resolution of the Maharaja of Morvi, dated 26th September, 1947, the material part of the which is as under :
'By H.A. No. 13712 dated 26th September, 1947, the following monthly jiwai has been sanctioned and it has been resolved that the same be handed over in the same manner and the provision be made by the Treasury Officer in the budget in the same manner as it is being made at present.'
9. On the material before us, it is only possible to say that from 26th September, 1947, Raj Mata was granted jiwai (maintenance) at Rs. 5,000 per month by the Maharaja Saheb. Within two or three months of 26th December, 1947, to be precise on 16th March, 1948, a formal grant of the village of Mota Dahisara was made by the Maharaja Saheb in favour of the assessee. Freely translated, the material part of that grant is as under :
'It has been the tradition of our family since the times of our forefathers that for the purpose of permanently maintaining the status and the reputation of the Maharanis they be granted one village each. As our mother Kesarkunwerba Saheb has not thus far received a village to which she is entitled as a Maharani it is resolved that the village of Mota Dahisara having the attached area and boundaries be and is hereby given to her.'
10. Paragraph 6 of the grant is as under :
'As written above the said village is given to you for the purpose of maintaining your status and reputation as the Raj Mata and that you may enjoy the same independently.'
11. The grant, it will be noticed, was made by the son of the assessee, because as we have already pointed out, the Maharaja Saheb had already abdicated in favour of his son on 21st January, 1948. Considerable controversy has taken place on the nature and import of this grant. It has been strenuously urged before us on behalf of the Revenue that this grant made within 2 or 3 months of the grant of maintenance of Rs. 5,000 a month is nothing short of a gift or a bounty by the son in favour of his mother, the Maharani. Jiwai was granted to the Maharani as late as December, 1947, although as of September, 1947, and the grant of a whole village having substantial revenue must, in the circumstances, be treated as a pure matter of bounty presumably out of natural love and affection.
12. On the other hand, it has been urged before us by Mr. Palkhivala that the village was given to the assessee for maintaining her status and reputation. It was said that under Hindu law the amount of maintenance to be fixed in favour of a widow or a mother must depend upon her position and status. The proposition of Hindu law is unquestionably correctly stated, but that consideration arises when you look at the whole amount which is being paid on the first occasion when the amount is fixed. The position here is certainly distinguishable because there was already a grant of jiwai in favour of the assessee made in December, 1947. Therefore, the question yet remains whether this grant of the village was a mere matter of gift or bounty or was given in lieu of additional maintenance. Considering the fact that it was only in December, 1947, that the jiwai payable to the Maharani was fixed by her husband at Rs. 5,000 per month, it is difficult for us to accept the contention urged on behalf of the assessee. In our opinion, the grant of the village was not for what can properly be regarded as maintenance within the meaning of that expression but was a mere gift.
13. After the merger of the Morvi State into Saurashtra on 20th March, 1948, the Saurashtra Government refused to allow the maintenance allowance of Rs. 5,000 a month to the assessee. The Saurashtra Government also declined to recognise the grant of the village in favour of the assessee, and it appears that for a considerable time thereafter the assessee got neither the jiwai nor the revenue of the village. On 23rd March, 1949. the Maharaja wrote a letter to the Rajpramukh of Saurashtra. In the letter it is stated inter alia as follows :
'Your Highness already knows that the Saurashtra Government has unconstitutionally and illegally deprived my mother of her rightful possession of her village of Mota Dahisara and they also want to deprive her of her legitimate jiwai which was sanctioned by my father from 1st October, 1947. It is not necessary for me to explain what an embarrassing position my mother has been placed in without her jiwai and village, as I am sure Your Highness can well appreciate.'
14. Without making any comments on this letter, we must point out that in this letter a clear distinction was made by the Maharaja Saheb between jiwai and village. On 19th May, 1949, the Rajpramukh of Saurashtra wrote to the Maharaja Saheb, the assessee's son, as under :
'Regarding the village, it has been decided by the Adviser, Ministry of States, with the concurrence of the Government of Saurashtra, that this village will be resumed and an amount on the basis of the average revenue of the village for the last three years should be given as cash allowance for lifetime.'
15. It may be observed that there is only a reference to the cash allowance for life in this letter and there is no reference to jiwai. On 27th June, 1949, a letter was written by the Deputy collector, Morvi sub-division, to the personnel assistant of the Maharaja of Morvi, enclosing a copy of the order passed by the political department. The order reads as follows :
'This village (Mota Dahisara) will be resumed and an amount on the basis of the average revenue of the village for the last three years should be given as cash allowance for lifetime.'
16. Here also, it may be observed that the reference is only to a cash allowance, and there is no mention about jiwai. A few days before the resolution was passed, the assessee herself had addressed a letter to the Rajpramukh. That letter is of some importance. In that letter she stated :
'Instead of showing any sympathy or heading me, Your Highness has thought it fit to advise me to give up my jiwai which I have been getting for the last 27 years, and also to give up my claim to the possession of my village and to accept cash on the basis of three years' income in lieu of my claims.'
17. In this part of her letter the assessee does refer both to the jiwai and the village, and states that she understood the order, of which she had already received intimation, was that she was going to be paid cash allowance in lieu of both the village and the jiwai. In that letter she goes on to make some references to other Maharanis. It is not necessary for the present purpose to set it out here.
18. On 19th November, 1949, the assessee's husband, the Ex-Maharaja of Morvi addressed a letter to Mr. Buch, who was Regional Commissioner and adviser to the Rajpramukh. In that letter he stated as follow :
'After the return of my son Mahendrasinghji we have with great difficulty been able to persuade her to accept one or the other and she has agreed that if she gets Rs. 5,000 a month she is no exception; and says her abru would go if she loses her village, so we suggested that if she gets the income of the village, whatever it may be, and any amount over and above that will be given to her as a jiwai, making a total of Rs. 60,000 a year; with this she can say she got both the things and her prestige will not suffer. She has agreed to this proposal and I hope the State Ministry will approve of it and pass orders accordingly. By this the Saurashtra Government will be gainers by Rs. 46,000 (the income of the village), and it will satisfy my wife.'
19. It is clear from this letter that the Maharani was all along insisting on her village. It had become a matter of prestige with her and whatever be the amount of the jiwai that she would get her insistence was on the village, or the income of the village. The effort made by her through her husband clearly was that she must not lose her village and in any case she must get an amount in lieu of her income from the village and over and above that she should get jiwai and the aggregate should be Rs. 60,000 a year. It is in these circumstances and in this background that the resolution of 19th June 1950, which we have already set out in the earlier part of our judgment came to be passed. We have already made reference to Mr. Palkhivala's argument about the nature of the grant of the village to the assessee on 16th March, 1948, and observed that it is difficult to make the view that it was given to her in augmentation of the amount of her maintenance. Mr. Palkhivala has asked us to read that grant along with the Resolution of 19th June,1950, and the submission is that if the wording of the grant is borne in mind it is possible to read the resolution as referable to cash annuity paid in lieu of only maintenance. It was said that although there was the original Royal Resolution relating to the payment of Rs. 5,000 a month in favour of the assessee, that amount must have been regarded as not a sufficient for maintaining the status and reputation of the Maharani and it could only have been in those circumstances that the grant of the village must have been made. It is not for us to speculate as to the circumstances under which that grant was made; but as we have already pointed out, reading the grant and taking into consideration the fact that only two or three month before that the jiwai had been fixed by the husband of the assessee, it is difficult to read the grant of the village made in March, 1948, as supplementary to the grant of jiwai already made. We are unable to see any substance in this suggestion that that grant of the of the village must be read as maintenance in kind. Then it was said that there was nothing to show that the grant of the village was for life, whereas the cash allowance is for life. Mr. palkhivala is right when he says that there is nothing to show that the grant of the village made in March, 1948, was for life. We shall take it that it was a grant in perpetuity. But that in our opinion makes little difference in the matter of ascertainment of the real nature of the resolution with which we are in the main concerned.
20. Mr. Palkhivala has also drawn our attention and placed some reliance on the view taken by the Tribunal. The Tribunal took the view that the village was granted to the assessee for the purpose of maintaining the assessee's status and reputation as Raj Mata, and, therefore, it must be treated as given to her for her maintenance. The suggestion was that we should be slow in disturbing this finding of the Tribunal and taking a contrary view. We are slow in matters of this kind in taking a view contrary from that taken by the Tribunal. But What we are concerned with is the Resolution which, as we have already pointed out, was purely the result of an agreement between the assessee and the Saurashtra Government. The assessee insisted, so did her son and so did her husband, that she must get something on lieu of the village which she had lost, and if that village was not given to her in lieu of maintenance, as we have already held, the first part of the cash annuity of Rs. 35,807 in terms given in lieu of the village cannot be treated as given to her by way of maintenance.
21. In the course of the arguments at the bar, there was some suggestion about the true nature and substance of the transaction. Now, it is not open to this court in a matter of this kind to test the matter by trying to find out 'the substance of the transaction'. The supposed doctrine that in revenue cases 'the substance of the matter' may be regarded as distinguished from the form or the strict legal position, was given its quietus by the House of Lords in Duke of Westminster v. Commissioner of Income-tax Revenue and by the Privy Council in Bank of Chettinad Ltd. v. Commissioner of Income-tax. We can only have regard to the real nature of the transaction and considering all the facts and circumstances of the case, and particularly the grant of the village, which was no more then a bounty, and the fact that the resolution was clearly the result of a mutual agreement between the assessee and the Saurashtra Government, we are of the opinion that the sum of Rs. 35,807 granted to the assessee was not a maintenance allowance exempt within the meaning of paragraph 15(i) of the Part B States (Taxation Concessions) Order, 1950.
22. The question will be answered accordingly.
23. Assessee to pay the costs of the reference.
24. Reference answered accordingly.