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S.S. Laxmibaisaheb N. Patwardhan Ranisaheb of Miraj Vs. Commissioner of Income-tax, Poona - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 92 of 1974
Judge
Reported in(1983)37CTR(Bom)1; [1984]150ITR289(Bom); [1983]15TAXMAN185(Bom)
ActsIncome Tax Act, 1961 - Sections 256(1)
AppellantS.S. Laxmibaisaheb N. Patwardhan Ranisaheb of Miraj
RespondentCommissioner of Income-tax, Poona
Excerpt:
direct taxation - privy purse - section 256 (1) of income tax act, 1961 - whether tribunal justified in holding that amount received out of privy purse amount from raja of miraj as income of applicant - assessee was wife of rajasaheb - he received annual privy purse from government under agreement - such privy purse was tax free - held, amount received by assessee-wife of rajasaheb out of such privy purse not liable to tax. - .....of the case, the tribunal was justified in holding the amount of rs. 12,000 received out of the privy purse amount from the raja of miraj (senior) as income of the applicant for the assessment year 1969-70 ?'2. the assessee is the wife of the rajasaheb of miraj. he received an annual privy purse of rs. 85,8000. the assessee received during the assessment year 1969-70 a sum of rs. 12,000 out of the privy purse. the ito held that she had a claim for maintenance on the rajasaheb and that the privy purse was being received by him since the merger of the sangli state. according to a circular of the central board of revenue, the amount of 12,000 having been received by the assessee in pursuance of an actionable claim for maintenance, was assessed as income. in appeal, the aac upheld the.....
Judgment:

Bharucha, J.

1. The question that is referred to us at the instance of the assessee in this reference under s. 256(1) of the I.T. Act, 1961, reads thus :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding the amount of Rs. 12,000 received out of the privy purse amount from the Raja of Miraj (Senior) as income of the applicant for the assessment year 1969-70 ?'

2. The assessee is the wife of the Rajasaheb of Miraj. He received an annual privy purse of Rs. 85,8000. The assessee received during the assessment year 1969-70 a sum of Rs. 12,000 out of the privy purse. The ITO held that she had a claim for maintenance on the Rajasaheb and that the privy purse was being received by him since the merger of the Sangli State. According to a circular of the Central Board of Revenue, the amount of 12,000 having been received by the assessee in pursuance of an actionable claim for maintenance, was assessed as income. In appeal, the AAC upheld the ITO's order observing that if the Rajasaheb did not give the amount towards her expenditure, the assessee could obtain it form the Government and hence the amount had been received by the assessee both as custom and usage and was enforceable under article 2 of the covenant entered into by Rajasaheb with the Government. The assessee preferred a second appeal to the Income-tax Appellate Tribunal, Poona. The Tribunal after referring to the judgments of this court in H.H. Maharani Shri Vijaykuverba Saheb of Morvi v. CIT : [1963]49ITR594(Bom) , of the Gujarat High Court in Smt. Shirajben R Amin v. CIT : [1968]70ITR194(Guj) and of the Punjab High Court in Princess Ruby Rajibar Kaur v. CIT , noticed article 2 of the agreement entered into on March 8, 1948, between the Governor-General of India and the Rajasaheb. The relevant part of article 2 reads thus :

'The Raja shall with effect from the said day be entitled to receive from the revenues of the State annually for his privy purse the sum of Rs. 85,800 (Rupees eighty-five thousand eight hundred) free of taxes. This amount is intended to cover all the expenses of the Ruler and his family including expenses on account of his personal staff, maintenance of his residences, marriages and other ceremonies, etc., and will neither be increased nor reduced for any reason whatsoever.'

3. The Tribunal then observed that the source of the payment of Rs. 12,000 to the assessee seems to us to be the direction of the Government to pay that allowance and that direction seems to have been based upon custom and the commitment flowing from it. The Tribunal rejected the argument advanced on behalf of the assessee that the privy purse received by the Rajasaheb should be treated as the income of his HUF and found that the privy purse was the personal income of the Rajasaheb and it was free from income-tax. The Tribunal dismissed the assessee's appeal.

4. The finding of the Tribunal is based entirely upon the said article which provides that the Rajasaheb is to receive annually as and by way of his privy purse and clarifies so that the Rajasaheb may make no claim on such amount, that it covers all the expenses of the Rajasaheb and his family including expenses on account of his personal staff, maintenance of his residences, marriages and other ceremonies, etc. We find nothing in the article which can lead us to the conclusion the Tribunal drew, viz., that the payment of Rs. 12,000 to the assessee seemed to be at the direction of the Government or that that direction was based upon custom or any commitment flowing from it. In our view, the Tribunal was in error in holding that the said amount of Rs. 12,000 was income of the assessee liable to income-tax.

5. Accordingly, we answer the question framed for our consideration in the negative, that is, in favour of the assessee. The Revenue shall pay to the assessee the costs of the reference.


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