1. Shrimant Padmaraje R. Kadambande, the assessee, is the daughter and the only child of late H. H. Chhatrapati Rajaram Maharaj, a ruling chief of the erstwhile Indian State of Kolhapur. Under the Huzur Order dated April 8, 1947, passed by his successor, H. H. Shahu Chhatrapati Maharaj, the assessee was granted a cash allowance of Rs. 3,000 per month from April 1, 1947. After the merger of the Kolhapur State in the then Bombay State, the allowance was continued for some time up to July 31, 1955. Thereafter, it was discontinued in accordance with the provisions of the Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 (hereinafter referred to as 'the Act'). The discontinuance of the said allowance was communicated to the assessee by the District Treasury Officer, Kolhapur, by his letter bearing No. WS-XXI-53 dated April 14, 1956. The Act provided for a similar cash allowance being paid as per the provisions of s. 15 of the Act. The assessee continued to receive the cash allowance from August 1, 1956, though on modified terms. The sanction of the Government continuing the cash allowance was conveyed to the assessee by the Collector of Kolhapur through his letter No. RB/WTN. 16, dated October 6, 1959. It appears that an amount of Rs. 10 lakhs out of a trust property which was invested in the Bank of Kolhapur in accordance with the provisions of the indenture of trust dated October 19, 1947, was misappropriated. The cash allowance that was to be paid to the assessee under the order dated October 6, 1959, was to be reduced under the circumstances therein mentioned.
2. For the assessment year 1963-64, the assessee received Rs. 36,000 and for the assessment year 1964-65 she received Rs. 33,992. Before the ITO, for these two assessment years a question arose whether the amounts received by the assessee during these two years were subject to income-tax. It was sought to be contended, on behalf of the assessee, that these receipts were of a capital nature and were not subject to income-tax. That contention of the assessee was rejected. The ITO subjected the respective amounts to tax in each of the assessment years.
3. In an appeal by the assessee before the AAC, two alternative contentions were sought to be urged on behalf of the assessee : (1) The receipts in question were receipts of a capital nature and were therefore, exempt from taxation, and (2) If they were receipts of income nature, they were exempt under s. 10(3) of the I.T. Act, because they were of a casual and non-recurring nature. Both these contentions were rejected by the AAC and he confirmed the orders of the ITO subjecting the amounts to tax.
4. In a further appeal before the Tribunal, the very same contentions that were urged before the AAC were advanced on behalf of the assessee, and the same were rejected. Considering the nature of the claim made by the assessee, as disclosed by the information given to the Government in her application and the various other relevant factors, the Tribunal came to the conclusion that the amounts that were received by her were receipts of income nature and that they were not casual or non-recurring receipts. Accordingly, the Tribunal confirmed the order that was passed by the taxing authorities.
5. From this order of the Tribunal, the following question has been referred to us for our determination :
For the assessment years 1963-64 and 1964-65
'Whether the amounts of Rs. 36,000 and Rs. 33,992 received by Shrimant Padmaraje R. Kadambande of Kolhapur from the Government of Maharashtra during the financial years ended March 31, 1963, and March 31, 1964, are receipts of an income nature and taxable under the provisions of the Indian Income-tax Act, 1922 (sic)  ?'
6. Mr. Munim, on behalf of the assessee, submitted that by reason of the provisions of the Act, especially s. 4 thereof, all alienations were abolished and it was by way of compensation for abolition of such alienations that under the provisions of s. 15(d) of the Act the Government passed the order which was communicated to the assessee by the Collector of Kolhapur by his letter dated October 6, 1959. He submitted that if regard be had to the language of the relevant provisions of the Act as well as of this order which was, inter alia, communicated to the assessee, what was paid to the assessee was mere compensation for abolition of alienation in her favour and what is received by her pursuant to this order is compensation and is a capital receipt. He urged that both under the provisions of the Act as well as the order that was communicated by the Collector by the letter dated October 6, 1959, the amounts to be paid to her from time to time are described as compensation and that they were accordingly capital receipts by way of compensation for extinction of the rights as a result of abolition of alienation. In short, his submission was that what was received by the assessee pursuant to this order was a capital receipt and cannot be regarded as income, since the receipt is not of a revenue nature. His submission was that both the taxing authorities as well as the Tribunal were in error in subjecting the amounts to tax holding it as income in her hands.
7. It will be appropriate to refer to the relevant provisions of the Act (Bombay Act XXII of 1955) in order that the contentions urged by Mr. Munim, on behalf of the assessee, may be properly appreciated.
8. The word 'alienation' is defined in s. 2(1)(i) of the Act. The relevant part of the definition for our present purpose is as under :
'2. (1) In this Act, unless there is anything repugnant in the subject or context, -
(i) 'alienation' means a grant or recognition as a grant, - ......
(III) of cash allowance or allowance in kind to any person by whatever name called, by the ruling authority for the time being before merger or by the State Government after merger......'
9. Thus, what the assessee used to receive prior to the enactment was alienation within the meaning of this definition. By s. 4 of the Act :
'Notwithstanding anything contained in any usage, settlement, grant, agreement, sanad, order, rule, notification or Vat Hukum or any decree or order of a court or any law for the time being applicable to any alienation in the merged territories with effect from and on the appointed date -
(i) all alienations shall be deemed to have been abolished;
(ii) save as expressly provided by or under this Act all rights legally subsisting on the said date in respect of such alienations and all other incidents of such alienations shall be deemed to have been extinguished.'
10. The appointed date under the Act means the date on which the Act came into force. It was August 1, 1955. Chap. III of the Act provides for compensation and award thereof. Section 14 thereof deals with compensation in respect of alienation consisting of assignment of land revenue. Section 15 deals with compensation in respect of allowances cash or kind, and its provisions are as under :
'15. (1) In the case of an alienation consisting of cash allowance or allowance in kind, the alienee shall be paid -
(i) seven times the amount of the cash allowance or of the value of the allowance in kind, as the case may be, if the alienation was hereditary without being subjected to deduction or cut at the time of each succession;
(ii) five times the amount of the cash allowance or the value of the allowance in kind, as the case may be, if the alienation was hereditary but subject to a deduction or cut at the time of each succession; or.
(iii) three times the amount of cash allowance or the value of the allowance in kind, as the case may be, if the alienation was continuable for the lifetime of the alienee :
Provided that if under the terms of a grant any cash allowance or allowance in kind -
(a) is received by a widow for the purpose of maintenance, she shall be paid an amount equal to such allowance for the remainder of her life;
(b) is received by an alienee for the purpose of education, he shall be paid an amount equal to such allowance during a like period, and subject to the like conditions, as are contained in the grant;
(c) is received by an alienee who is -
(i) a male minor, he shall be paid an amount equal to the allowance till he attains the age of twenty-one years;
(ii) an unmarried female shall be paid an amount equal to the allowance till she marries,
or, the amount calculated in accordance with the provisions of this section, whichever is greater;
(d) is received by an alienee in respect of whom, upon application made to it, in the manner prescribed, before the first day of August, 1958, the State Government is satisfied after such inquiry (if any) as it thinks fit, that he had no other source of income, or that if he has any other source of income it is insufficient for his livelihood, or that on account of old age, mental or physical infirmity or other reason he is incapable of earning a livelihood, or maintaining himself in a reasonable manner, there shall be paid to such alienee as a compassionate payment an amount equal to such allowance during his lifetime, or for such lesser period as the State Government in the circumstances thinks just.
(2) For the purpose of sub-section (1), the amounts of cash allowance shall be the amount paid or payable to the alienee for the year immediately preceding the appointed date and the value of the allowance in kind shall be the value of the allowance in kind paid or payable to the alienee for the year immediately preceding the appointed date, such value being determined in the prescribed manner.'
11. Section 17 provides for the method in respect of awarding compensation to the alienee. Section 19 provides for right of appeal and s. 20 provides for right of appeal from the award made by the Collector under s. 17 to the Tribunal constituted under the Bombay Revenue Tribunal Act, 1939. Section 26 provides for the manner in which the amount of compensation is to be paid and its provisions are as under :
'26. The amount of compensation payable under the provisions of the Act shall be payable in transferable bonds carrying interest at the rate of three per cent. per annum from the date of the issue of such bonds and shall be repayable during a period of twenty years from the date of the issue of such bonds by equated annual instalments of principal and interest. The bonds shall be of such denominations and shall be in such forms as may be prescribed : Provided that the amount of compensation payable under the proviso to sub-section (1) of section 15 may be paid in cash.'
12. In view of the provisions of this Act, an application was made by the assessee on May 23, 1958, for compassionate payment under clause (d) of the proviso to s. 15(1) of the Act. At the time when the application was made, the assessee was a minor and she was unmarried. It is stated in this application that she used to receive a cash allowance of Rs. 3,000 per month. Such cash allowance was sanctioned under Huzur Order No. 6 dated April 8, 1947, and the Government Order No. F-B-1(5)/49, dated December 30, 1949. This was described to be 'Non-service allowance and was payable for lifetime'. This application for compassionate payment was considered by the Government and the decision of the Government was communicated by the letter of the Collector dated October 6, 1959. It is stated in this letter that 'Government is pleased to sanction under clause (d) of the proviso to s. 15(1) of the Act to making of a compassionate payment of Rs. 3,000 per month with effect from August 1, 1955, to the assessee during her lifetime as compensation for the abolition of the cash allowance held by her subject to certain conditions therein laid down.' The condition related to relaxation of the amount of compensation depending upon the realisation of the amount out of the misappropriated amount of Rs. 10 lakhs from her trust properties. It was specifically stated that the pro rata reduction should be effected in such a way that the total amount of income of the assessee should not be less than Rs. 49,800 per year during her lifetime, subject to the further condition that the Government securities of the face value of Rs. 6,22,900 held by the trustees if encashed the assessee would be presumed to be getting Rs. 13,800 as interest on this sum whether this sum is invested in Government securities or otherwise and this interest of Rs. 13,800 would be taken into consideration for deciding her annual income.
13. Certain adjustments were provided in this order, but we are not concerned with the same.
14. It is pursuant to this order of the Government that during the assess assessment year 1963-64, the assessee received Rs. 36,000 and during the assessment year 1964-65, she received Rs. 33,992 from the Government. The question that we have to consider is whether the taxing authorities and the Tribunal were right in subjecting this amount to tax treating it as income of the assessee.
15. The only contention that has been urged Mr. Munim, on behalf of the assessee, is that since, in view of the provisions of the Act, pursuant to the order of the Government what has been paid to the assessee is compensation for the abolition of alienation, it is capital receipt and cannot be regarded as income or a revenue receipt. Strong reliance was placed by him upon the various provisions of the Act, where reference has been made to payment of compensation as a result of the abolition of alienation and his contention is that since what has been paid to the assessee under the Act is compensation, it cannot be subjected to tax because it cannot be regarded as income. Actually, it is a capital receipt for loss of source of income according to his submission.
16. The definition of the word 'income' given under s. 2(24) of the I.T. Act is a mere inclusive definition. Normally, the expression 'income' shall include such things as the word signifies. If having regard to the provisions of the Act and the natural import, the amounts received by the assessee for the two assessment years are income, then the taxing authorities and the Tribunal were right in subjecting the same to tax. What we have to consider in the present case is whether having regard to the provisions of the Act and the order passed by the Government, can the contention of Mr. Munim that the payment received by the assessee is of capital nature be accepted It is undoubtedly true that having regard to the provisions of s. 4 of the Act, the alienation in favour of the assessee has been abolished with effect from the appointed date, viz., August 1, 1955. If the assessee was paid compensation as is provided in sub-cls. (i), (ii) or (iii) of sub-s. (1) of s. 15, viz., either at seven times, five times or three times, depending upon the facts of the case, there can be no difficulty in taking the view that what has been received by the assessee was compensation and is a receipt of capital nature. It is common ground that the assessee has not received compensation in accordance with the provisions of any one of the three clauses. There is a proviso to this sub-s. (1). Clause (a) thereof provides for the amount to be paid to a widow; clause (b) of the proviso provides for the amount to be paid to an alienee for education; clause (c) provides for the payment either to a male minor or an unmarried female. We are not concerned with any one of these three cases, because the amounts paid to the assessee do not fall under any of these categories mentioned in the proviso. The assessee made an application in the prescribed form for payment of compassionate payment, as contemplated by clause (d) to sub-s. (1) of s. 15. We have reproduced the provisions of the said section earlier and it is quite apparent from clause (d) of the proviso that any payment to an alienee like an assessee in view of her application as a compassionate payment cannot be regarded as compensation. Ordinarily, the word 'compensation' suggests an idea of just equivalent or something to be received by a person whose asset or interest in property is taken away as a matter or legal right. If the amounts so received by the assessee fall under either of cls. (i), (ii) or (iii) of sub-s. (1) of s. 15, there could be no difficulty in holding that the amounts so received by her would be compensation and would be capital receipts. But she has not received the amounts under any of those clauses. The assessee had made an application, as contemplated by clause (d) of the proviso. Such application can only be made by those who have no other source of income and whose other sources of income were insufficient, or those who suffer from old age, mental or physical infirmity or for any other reason are incapable of earning a livelihood or maintaining themselves in a reasonable manner. When applications are made on such considerations, what is paid under the order of the Government is not really as a matter of right, but, as indicated in the section, merely by way of mercy or compassion. It is undoubtedly true that once an order is made by the Government, as contemplated in clause (d) of the proviso, the person in whose favour the order is made will be having a legal right and can enforce the same by appropriate legal proceedings. So far as the assessee is concerned, she has not been awarded any lump-sum payment. Under the order of the Government, which was communicated by the Collector by his letter dated October 6, 1959, payment is to be made to the assessee at the rate of Rs. 3,000 per month with effect from August 1, 1955, subject to such adjustments as per provided in that letter. Such a receipt by an assessee, pursuant to this order of the Government cannot be regarded as a capital receipt. It is a monthly payment to be received by her in view of an application made by her having regard to the special provisions contained in clause (d) of the proviso to s. 15(1). Any payment received pursuant to an order of the Government on an application made is not by way of compensation in lieu of abolition of the alienation but is a compassionate payment by reason of the various circumstances mentioned in clause (d) of the proviso. The provisions contained in the Act relating to the right of appeal would not be applicable when the amount is payable to a person, like the assessee, in view of the application made under clause (d) of the proviso. Once an order is made by the Government, there is no provision in the Act which permits the Government to vary the said order and any right created thereby pursuant to the order can be legally enforced. Thus, even though the amount that may be sanctioned may be on compassion, once the order is made it is a legal right and payment in accordance with the order has to be made and, if not made, can be enforced by adopting appropriate legal proceedings. A payment received by a person under clause (d) of the proviso has to be distinguished from the amount of compensation receivable under clause (i), (ii) or (iii) of sub-s. (10 of s. 15. These two payments are of entirely different character.
17. It will not be inappropriate if reference is made to certain observations made by this court in the case of H. H. Maharani Shri Vijaykuverba Saheb of Morvi v. CIT : 49ITR594(Bom) . It was observed :
'There is no doubt that under the Indian Income-tax Act even payments, which are voluntarily made, may constitute 'income' of person receiving them. It is not necessary that in order that the payments may constitute 'income' they must proceed from a legal source; in that if the payments are not made the enforcement of the payments could be sought by the payee in a court of law. It does not, however, mean that every voluntary payment will constitute 'income'. Thus, voluntary and gratuitous payments, which are connected with the office, profession, vocation or occupation may constitute 'income'although if the payments were not made, the enforcement thereof cannot be insisted upon. These payments constitute 'income' because they are referable to a definite source, which is the office, profession, vocation or occupation. It could, therefore, be said that such a voluntary payment is taxable as having an origin in the office, profession or vocation of the payee, which constitutes a definite source for the income. What is taxed under the Indian Income-tax Act is income from every source (barring the exceptions provided in the Act itself) and even a voluntary payment, which can be regarded as having an origin, which a practical man regard as a real source of income, will fall in the category of 'income', which is taxable under the Act. Where, however, a voluntary payment is made entirely without consideration and is not traceable to any source, which a practical man may regard as a real source of his income, but depends entirely on the whim of the donor, cannot fall in the category of 'income'.'
18. If regard be had to these observations, then it is quite evident that once an order is made, as contemplated by clause (d) of the proviso to s. 15(1) of the Act, then any amount payable under such an order made thereunder can be legally enforced in a court of law and stands on a much stronger footing than a mere voluntary payment which was considered by the Division Bench of this court.
19. In the present case, pursuant to the order that has been made by the Government sanctioning payment of Rs. 3,000 to the assessee subject to certain deductions as therein provided whatever amount received of receivable by the assessee would amount to income and if payment is not made the assessee would have the right to enforce the same in a court of law.
20. Reliance was placed by Mr. Munim upon the decision of the Supreme Court in the case of S. R. Y. Sivaram Prasad Bahadur v. CIT : 82ITR527(SC) . The Supreme Court there took the view that interim payments under s. 50(2) of the Madras Estate (Abolition and Conversion into Ryotwari) Act, 1948 (as applicable to Andhra Pradesh), received every year by a former holder of an estate which was abolished under the Act, during the period between the taking over of the estate and final determination and deposit of compensation under the Act, are of a capital nature and not liable to income-tax. This view was taken by the Supreme Court having regard to the special provisions of the Act. At page 532, the Supreme Court points out :
'While it is true that the terminology used by the legislature in respect of a payment is not conclusive of the true character of that payment, it would be proper to proceed on the basis that the legislature knew what it was saying. The word 'compensation' is a well-known expression in law. When the legislature says that all payments made under the Act are in respect of the compensation payable to the former holders unless there are clear and convincing circumstances to show that one or more items of payment do form part of the compensation payable, we must hold that those payments are what they are said to be by the statute. We must give the word 'compensation' its normal and natural meaning.'
21. This view was taken by the Supreme Court upon scrutiny of the various provisions of the Act with which the court was concerned. There were no provisions in the Act that came for consideration before the court similar to those contained in clause (d) of the proviso to s. 15(1) of the Act with which we are concerned. In the case before the Supreme Court, there was no question of any payment being made for lifetime. Thus, they view that has been taken by the Supreme Court in this case is based upon the relevant provisions of the statute with which the court was concerned. There is no similarity in the provisions of the statute that came up for consideration before the Supreme Court and the Act with which we are concerned. We have carefully analysed the provisions of the Act and especially the provisions of s. 15, and we find that there is no similarity between the said provisions and the provisions that came up for consideration before the Supreme Court. Thus, these observations, though they are entitled to great respect, will have no applicability to the facts of the case before us.
22. Having regard to the various provisions of the Act which we have referred to above and the nature of the application made by the assessee and the order passed by the Government, we are clearly of the view that the decision of the taxing authorities and the Tribunal that the amounts received by the assessee during the two relevant financial years are income within the meaning of the I.T. Act and they cannot be regarded as capital receipts in the hands of the assessee is correct. Accordingly, our answer to the question referred to us is in the affirmative and in favour of the revenue. The assessee shall pay the costs of the revenue.