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Kumara Rajah of Venkatagiri and Others Vs. Income-tax Officer, A-ward, Nellore, and Another. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petitions Nos. 539, 540, 541 and 1540 of 1964
Reported in[1967]64ITR264(AP)
AppellantKumara Rajah of Venkatagiri and Others
Respondentincome-tax Officer, A-ward, Nellore, and Another.
Excerpt:
- - income-tax officer, karaikudi which in the clearest terms held that interim payments made to the landholder were not in the nature of income, but that the said payments were clearly an addition to the compensation provided for in section 39 of the abolition act to compensate the landholder for the deprivation of the estate and for the loss of the income producing asset of the landholders as such they are of a capital nature, and are not liable to assessment. income-tax officer, karaikudi, that it was based on a careful analysis of the provisions of the hyderabad regulation under which the payment in question was clearly payments made under the madras act. ' having regard to this as well as to shanmugha rajeswaras case, it was further observed at page 146 :as we have earlier said,.....the petitioner in writ petition no. 541/1964, raja of venkatagiri challenges the notice issued to him in or about march, 1964, for the proposed reopening of assessments from 1950-51 onwards under section 148 of the indian income-tax act on the ground that interim payments made by the government under the madras estates abolition act xxvi of 1948 are income, and, as such, they have escaped assessment. writ petitions nos. 539 and 540 of 1964 are filed by kumararaja of venkatagiri, the son of the petitioner in w. p. no. 541 of 1964, the former of which he has filed as karta of the hindu undivided family consisting of himself and his two minor sons and the latter as individual. writ petition no. 1540 of 1964 is by the minor son of the petitioner in writ petitioner nos. 539 and 540 of 1964.in.....
Judgment:

The petitioner in Writ Petition No. 541/1964, Raja of Venkatagiri challenges the notice issued to him in or about March, 1964, for the proposed reopening of assessments from 1950-51 onwards under section 148 of the Indian Income-tax Act on the ground that interim payments made by the Government under the Madras Estates Abolition Act XXVI of 1948 are income, and, as such, they have escaped assessment. Writ Petitions Nos. 539 and 540 of 1964 are filed by Kumararaja of Venkatagiri, the son of the petitioner in W. P. No. 541 of 1964, the former of which he has filed as karta of the Hindu undivided family consisting of himself and his two minor sons and the latter as individual. Writ Petition No. 1540 of 1964 is by the minor son of the petitioner in Writ Petitioner Nos. 539 and 540 of 1964.

In all these petitions, the petitioners challenge the notice and the proposed reopening of the 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 that after the estate was notified and 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 even doubted that such payments were ever liable to payment of income-tax. In respect of these interim payments made to different landholders, the income-tax department never attempted to levy the tax, though such payments were being made for more than a decade. Ultimately, in March, 1964, the Income-tax Officer proposed to reopen assessment under section 148 of the Indian Income-tax Act for the year 1955-56. But, in reply to the respective notices, petitioner pointed out that interim payments were not liable to income-tax under the Income-tax Act, 1961, as they were part of the compensation payable, and are not assessable. It was further stated that in view of the decision of the Madras High Court in Shanmugha Rajeswara Sethupathi v. Income-tax Officer, Karaikudi which in the clearest terms held that interim payments made to the landholder were not in the nature of income, but that the said payments were clearly an addition to the compensation provided for in section 39 of the Abolition Act to compensate the landholder for the deprivation of the estate and for the loss of the income producing asset of the landholders as such they are of a capital nature, and are not liable to assessment. In that judgment, it was contended, the High Court had itself explained the meaning and scope of section 50 (8) of the Abolition Act in that interim payments were in addition to the compensation determined under section 39 of the Abolition Act. For these reasons, the petitioners allege that the Income-tax Officer had no jurisdiction to reopen the assessments already made by misconstruing the provisions of the Abolition Act.

The respondents in each of these petitions, namely, the Income-tax Officer, Mica Circle, Nellore, and the Income-tax Officer, A-Ward, Nellore, do not appear to have filed their counters, at any rate, they are not before me, but it is contended by Sri Kondaiah, the learned advocate for the department, that the decision in Shanmugha Rajeswara Sethupathi v. Income-tax Officer, Karaikuddi, has not taken into consideration, would show that the interim payments are income liable to assessment under the Income-tax Act. It is further contended by him that the basis of the decision of their Lordships of the Supreme Court in Raja Rameshwara Rao v. Commissioner of Income-tax, which was an 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, Karaikuddi 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 appellants contention, namely, that jagirs were taken away in September, 1949, under section 5 of the Abolition of Jagirs Act.

Sri K. Ramachandrarao, the learned advocate for the petitioners, state that after the above decision of the Supreme Court, the Madras High Court again considered this question with reference to the Abolition Act in Ramachandran v. A. N. Krishnamoorthy Iyer by a Bench of that court consisting of Ramachandra Iyer C.J. and Ramamurthi J. In that case it was pointed out that the argument based on the judgment of the Supreme Court lacks substance inasmuch as the Supreme Court judgment was case in appeal from Raja Rameswar Rao v. Commissioner of Income-tax, which arose under the Hyderabad (Abolition of Jagirs) Regulation and as pointed out by Srinivasan J. in Shanmugha Rajeswara Sethupathi v. Income-tax Officer, Karaikudi, that it was based on a careful analysis of the provisions of the Hyderabad Regulation under which the payment in question was clearly payments made under the Madras Act. Ramamurthi J. pointed out that the Supreme Court had referred to this position, but did not express any opinion about its correctness or otherwise. It held on the interpretation of the provisions of the Hyderabad Act that interim allowances were income within the meaning of the Income-tax Act. The observations of the Supreme Court, particularly towards the end, were cited :

'....... Regulation advisedly called the payments maintenance allowances, a nomenclature peculiarly suited to payments of the nature of income.....'

That these payments were made as interim payments to be collected by the Government through the jagir administrator on April 1, 1950, when the compensation for the loss of the jagir first became payable were relied upon for the view that the payments were by way of compensation for the loss of income in the interim period.

It is contended by Sri Kondaiah that the two decisions of the Madras High Court have not taken into consideration the several provisions of the Abolition Act, which, if carefully analysed, would show that there is a difference between interim payments and compensation, advance compensation, and additional compensation. Further, the Abolition act as amended and applied to the Andhra area would show that there is a difference between section 3 (e) of that Act, and the Madras Act, which was amended by Madras Act 54 of 1956, with retrospective effect as from April 19, 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 Rajeswaras 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 payments 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 character if final compensation and interim payment, in so far as the Abolition Act is concerned, they cannot be taken bodily over into the scheme of the Indian Income-tax Act.'

Their Lordships of the Supreme Court, however, approached this question somewhat differently. Sarkar J. observed at page 145 :

'The point at issue is whether these payments constituted capital or income. The answer to this question will have to be found in the Abolition Regulation under which the payments were made and another Regulation called the Hyderabad Jagirs (Commutation) Regulation, 1359 F. (hereinafter called the Commutation Regulation), which was intended to be supplementary to the earlier Regulation. The material provisions of these Regulations may, therefore, be referred to at once.'

Having regard to this as well as to Shanmugha Rajeswaras case, it was further observed at page 146 :

'As we have earlier said, the real point for decision is whether the payments were of income nature or the nature of capital. If they were made as compensation for the deprivation of the jagir, they would undoubtedly be capital.'

At page 147, His Lordship pointed out that the allowances were measured as a fraction of the current income while the commutation was a multiple of annual revenue. The allowances were recurring payments for a certain time while the commutation sum was a fixed sum payable at once or by installments. It was further observed :

'Then we find that under section 14 of the Abolition Regulation the interim maintenance allowances were payable until such time as the terms for the commutation of jagirs are determined. In other words, after the terms for commutation are determined, the interim maintenance allowances are to cease to be payable. It follows that when compensation begins to be paid, the payment of the maintenance allowances have to stop.'

These passages clearly indicate that the determination of the question whether the nature of the amount paid on abolition of their jagir would depend on the provisions of the jagir Abolition Regulation and Jagir Commutation Regulation, and not on the provision of the Indian Income-tax Act. A similar approach was made in Commissioners of Inland Revenue v. Butterley Co. Ltd., which was referred to by the Supreme Court. Lord Radcliffe in his speech in the House of Lords, after considering the question whether the use 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 of 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 of 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 of 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 or profits of a person or company carrying on a trade or business. On the contrary, it is a charge on the profits properly attributable to a defined source. These payments were regarded as sui generis. Earlier, at page 449, the approach to the whole question is stated in the following passage :

'In my opinion the determining factor is the very special nature of the receipts involved. The Coal Industry Nationalisation Act, 1946, legislated for a revolution in the coal industry of this country and in the system of ownership, management and working upon which the industry was based. It was inevitable that the far-reaching disturbance of rights which this involved should require a period of several years for the adjustment of its consequences. These interim income payments which are now it does not seem to me at all surprising that they cannot well be related to any of those other kinds of receipt which normally come into the accounts of a company conducting a trade or business. They are sui generis and it would, I think, lead to confusion if they were described in any terms except those which are strictly applicable to their own special circumstances.'

In my view, having regard to the basis adopted by their Lordships of the Supreme Court and the House of the Lords, I think the proper approach to this question is to consider the payment under the Abolition Act as sui generis arising out of far reaching revolutionary social legislation abolishing the zamindaris, and seeking to adjust the disturbance of rights of the zamindars over a period of several years. The simple question would be whether these interim payments are of a capital nature or of a revenue nature, i.e., whether they are paid as compensation or as interim payments till compensation is determined, consequently revenue payments.

I will now examine the relevant provisions of the Abolition Act in the light of what I have stated above. Section 3 of the Abolition Act provides in clause (b) that the entire estate including minor in as included in the assets of the zamindari estate at the permanent settlement of that estate detailed in the section shall stand transferred to the Government and vest in them, free of all encumbrances. Clause (c) of the same section further deals with all rights and interest created in or over the estate before 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 as are recognised and conferred on him by or under this Act, namely, the interim payments, etc., are also included along with compensation payable for the loss of the estate. It is, therefore, contented that under the unamended Act as applied to the Andhra area, a landholder is entitled only to compensation under the Act for the loss of the estate which is determined under sections 24, 25, 27 to 30, in case of inam estate section 31 to 35, and in the case of under-tenure estate sections 36 and 37, and apart from this, any payments under any of the provisions of the Act such as interim payments are not part of the compensation payable as a result of their rights being transferred to Government under clause (b) but are in the nature of revenue payments.

On a reading of the aforesaid provisions, it is clear that in the case of Zamindari and inam estates, the total compensation was fixed on a sliding scale. It was to be so many multiples of the basic annual sum as determined in respect of that state, the multiples varying according as the basic annual sum was above or below certain figures. Under section 40 of the Act, compensation payable under the Act was to be in such form or manner and at such time to times and in one or more installments as may be prescribed by rules made by the Government. The Government had to deposit in the office of the Tribunal under section 41 the compensation in respect of each estate as finally determined under section 39 by applying the several provisions referred to above in such form and manner, and at such time or times and in one or more installments, as may be prescribed by the Rules under section 40. While providing for such payment in installments and in such manner as laid down in the Rules, section 54A, however, required the Government to estimate roughly the amount of compensation payable in respect of the estate and to deposit one-half of that amount within six months from the notified date in the office of the Tribunal as advance payment on account of compensation.

It is unnecessary to deal with the other provisions relating to the ascertainment of ryotwari demand or the carrying out of the ryotwari settlement of the estate or the manner of determination of land revenue before the settlement was brought in force. I only mention this to point out that compensation could not be accurately ascertained till after the survey 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 has been already made :...

(4) In respect of each subsequent Fasli year, they shall together be entitled to the amount estimated under sub-section (3) to be one-half of the basic annual sum, unless data for the better calculation thereof have since become available, in which case the amount to be paid shall be revised by the Government with reference to such data and the excess or deficiency in respect of the amount already deposited for 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 :...

(4A). If the amount deposited under section 54A is, on subsequent calculation either because data for better calculation have since become available or because of mistake in the method of calculation adopted before the deposit was made under that section, found to be 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) of section 4.

(5) The Government shall deposit all such amounts in the office of the Tribunal and the Tribunal shall, after such enquiry, if any, as it thinks fit, apportion the amounts among the principal landholder and the other persons referred to in sub-section (2) as far as possible in accordance with the value of their respective interests.

(6) On the making of such deposit, the Government shall be deemed to have been completely discharged in respect of all claims to, or enforceable against the amount so deposited.

(7) After the compensation has been finally determined, the Government shall ascertain, in the manner specified below, the aggregate interim payment due in respect of the estate as follows :

(a) In respect of the Fasli year in which the estate is notified, the basic annual sum as finally determined under section 39 after deducting therefrom an amount bearing to the basic annual sum the same proportion as the amount of the advance compensation referred to in section 54A bears to compensation as finally determined under section 39, in case the deposit in pursuance of section 54A is made in the final year in which the estate is notified.

(b) In respect of each of the subsequent Fasli years, the basic annual sum as finally determined under section 39 after deducting therefrom an amount bearing to the basic annual sum the same proportion as the amount of the advance compensation referred to in section 54A together with any further instalments or installments 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 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 toots 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 liable to deposit under section 41, sub-section (1), or to any extent to be in lieu of such compensation.

(9) The Tribunal shall revise the apportionment of the interim payments its reference to the aggregate interim payments as finally determined by the Government under sub-section (7) on the basis that each of the persons entitled to receive any portion of the interim payments shall be entitled separately to the same share of the said aggregate interim payments as the share of the compensation to which he is finally held to be entitled under section 44. Any excess payment disclosed by such revision which has not already been deducted under the proviso to sub-section (1) of section 41 shall be deducted by the Tribunal, with interest thereon at three per cent. per annum from the compensation payable to the person concerned.'

It will be seen from the provisions which have been referred to above that the Abolition Act makes a distinction between the payment of compensation and interim payments. In so far as compensation is concerned, half of the estimated total compensation has to be deposited in the office of the Tribunal within six months of the notified date, and no so far as interim payments are concerned from that Fasli year in which the estate is notified, the landholder and other persons are entitled to an interim payment equal to the basic annual sum, if the deposit required under section 54A of the Abolition Act has not been made within that Fasli year. If the deposit is made, the interim payment is limited to one-half only of the estimated basic annual sum.

As already stated, section 54A of the Abolition Act deals with the advance payment of compensation and under its provisions, if for subsequent Faslis the deposit under section 54A has been made, the landholder and the other persons would be entitled to the interim payment of one-half of the estimated basic annual sum, and these interim payments continue till the date when the balance of the interim payments is deposited in the office of the Tribunal.

A careful analysis of the provisions of section 50 of the Abolition Act would show that the Government has to pay interim payments to every landholder and other persons referred to in section 44, sub-section (1), till the compensation has been finally determined, and paid in pursuance of the Act. It is only on the basis of an estimate that these interim 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), the balance with interest thereon at 3% 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. This provision indicates that compensation and interim payments are of two different categories of payments. If these interim payments are part of the compensation for the abolition of the estate, that would not have been treated separately or in relation to one another. Had the legislature intended to include interim payments as part of compensation, it would have clearly provided that the interim payments would be taken into account at the time of payment of final compensation and made provision to pay only the balance as compensation after deduction of the interim payments already made. This, however, is not what the legislature has done. On the other hand, sub-section (8) of section 50 of the Abolition Act makes it very clear that no interim payment made under that section shall be deemed to constitute any part of the compensation, which the Government are liable to deposit under sub-section (1) of section 41, or to any extent to be in lieu of such compensation. No clearer terms could have been used to provide that the payment of compensation has nothing to do with interim payments, nor would interim payments be deemed to be compensation, or in lieu of compensation. Further, on the other hand, under sub-section (9), if interim payments are in excess of those that are payable, the excess shall be deducted with interest at 3% per annum from the compensation payable to the person concerned.

From these provisions, it appears to me clear that the legislature intended to pay apart from compensation for the abolition of the estate, interim payments also till such time as final compensation is paid, and that these interim payments decrease as the amount of compensation payable is being decreased by the payment from time to time.

I cannot, with great respect, agree with Srinivasan J. in Shanmugha Rajeswara Sethupathi v. Income-tax Officer, Karaikudi that 'no distinction is made in this regard between the interim payments and compensation'. While no doubt, reliance by the Advocate-General placed on section 50 (8) was considered, the other provisions 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 Bill, 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 warranted either on the language of the provisions of the Abolition Act or on the high authority of the Supreme Court and the House of Lords. In the subsequent case of Ramachandran v. A. N. Krishnamoorthy Iyer Ramamurthy J. seems to have relied upon certain observations of Rajamannar C.J. (sic) in S. T. As Nos. 21 and 22 of 1960. As pointed out in that case, when a mortgage creditor applied for payment out of the interim payments, the sons of the zamindar relying upon section 50 (8) opposed the claim on the ground that interim payments did not represent compensation. In rejecting this contention, the learned Chief Justice made the following observations which were cited in that decision :

'It was then contended that section 50 (2) will have to be read with section 50 (8) of the Act which stated that interim payments made under the section should not be deemed to constitute any part of the compensation amount which the Government were liable to deposit under section 41 (1) of the Act. Basing on this it is sought to be argued that as the interim payment is not regarded as compensation amount under the Act, the mortgagee will not be entitled to have recourse against that amount. This argument, however, runs counter to the express provisions in section 52 of the Act. Apart from that consideration, we are of opinion that section 50 (8) was enacted for a different purpose altogether. While section 50 (2) creates rights in certain persons to have their shares in the interim compensation amount, section 50 (8) is intended to preclude the Government from taking credit for interim payments towards compensation which they are liable to pay for the taking over of the estate under the provisions of the Act. The two provisions being intended for different purposes cannot be read together in any manner so as to nullify the effect of each other.'

Relying on the aforesaid observations of Rajamannar, Chief Justice, Ramamurthi J. Conclude that 'in view of the clear pronouncement of the law, we hold that there is no substance in the contention of the learned counsel for the respondent'. On a careful analysis of the observations of Rajamannar, Chief Justice, I find that no assistance can be derived therefrom in support of the contention that interim payments are part of compensation. The question whether the mortgagee is entitled to have recourse against interim payments as well as compensation 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 a portion 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 Special Tribunal is limited to the apportionment of the compensation among the persons referred to in section 43, and the apportionment of the interim payments among the persons referred to in section 50. Section 43 of the Abolition Act prescribes the duty of the Tribunal to make enquiries into the validity of the claims received by it after notice to all persons, and to any others to whom it considers, and determine the persons who, in its opinion, are entitled to the compensation deposited and the amount to which each of them is entitled. This provision also does not throw any light on the nature of the interim payments. It may be pointed out that Rajamannar, Chief justice, has in the observations cited above made it clear that sub-section (8) of section 50 was enacted for a different purpose altogether, but did not say for what purpose it was. So, no help can be taken from these observations in coming to the conclusion that interim payments are part of compensation amounts. With great respect, I am unable to subscribe to the view that the observations of Rajamannar C.J. in any way conclude the matter before me. It may be that compensation was due for the loss of the estate, but the legislature has taken into consideration that, pending the payment of compensation, which has to be ascertained after a good deal of spade work of survey and settlement, collection of materials, the landholder has to be provided for loss of his income from his estate, and for his maintenance and till the final compensation is paid, interim payments are made to compensate for the loss of his revenue, which he would have otherwise had if the estate had not been take over. If these interim payments are part of the compensation or in the nature of compensation, where was the need for the legislature in sub-sections (7) and (9) to provide for the deduction of any excess amount from out of the compensation payable under sections 39, 41 and 44, nor under sub-section (4A) of section 50 was there any need or necessity providing for contingency of any excess amount being deposited by mistake. Whether sub-section (8) of section 50 of the Abolition Act was there or not in the Bill in the initial stages, and was only added by the legislature subsequently, with great respect, makes little difference. In my view, full meaning and import must be given to that sub-section. Whenever the draftsman 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 from the benefit of the landholder, lest by any mischance it could, in the remotest sense, be construed to include interim payments 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 Nationalisation Act, cannot be brought strictly into any one of the terms of interest or income or profits or investments derived from trade or business, they are, in my view, in lieu of consequential loss to the landholder for the non-receipt of compensation which, had it been received immediately on his being deprived of his estate, he would have earned as income therefrom.

It is interesting to note that under section 54 (b) additional compensation is also payable if it is found that the aggregate of the amount of compensation payable in respect of all the estates falls short of 12 1/2 crores of rupees and the Government is under an obligation to distribute an amount equal to that by which the aggregate so falls short, the sum payable in respect of each such estate being in proportion to the amount of compensation as finally determined in respect thereof under section 39. This amount was also to be deposited in the office of the Tribunal under sub-section (2) of section 54B, and the Tribunal is enjoined after enquiry to distribute the same among the landholders and other persons referred to in section 42, as far as possible in accordance with the value of their respective interests, and the provisions of sections 42 to 46 (both inclusive), 48, 49, 51, 52 and 53 shall apply mutandis in respect of the sum so deposited.

It may be noted that section 50 of the Abolition Act has not been included in the above provisions so that while additional compensation is part of the compensation payable to a landholder for the loss of his estate, interim payments are not payable for the non-payment of additional compensation. None the less, these interim payments are in the nature of revenue amounts payable for the non-payment of compensation on the abolition of the estate, on which date, ordinarily, the landholder would be entitled to it.

The learned advocate for the petitioner has urged that the Abolition Act was passed in exercise of the powers conferred by the legislature b items 9 and 21 of List II read with section 299 of the Government of India Act. He submits that there was no provision under that Act, as there is no provision under article 31 of the Constitution for the payment of an amount which can be construed as income, but these powers are only confined to payment of compensation for deprivation of property. I am unable to appreciate this argument because the power to make such amounts, whether of a revenue nature or of interest for the non-payment of compensation immediately on the deprivation of property, are incidental and consequential. It could not be said that the power to pay interest under the Land Acquisition Act on the market value of the property acquired till such time as the compensation is not deposited is ultra vires the powers of the legislature.

In the result, these petitions are dismissed with costs. Advocates fee Rs. 50 in each.

Mr. Kondaiah states that he has filed counters on February 19, 1965, but these counters have not been placed before me. Mr. K. Ramachandrarao also says that he has not got them. Be that as it may, this fact is mentioned merely to record the same as they are now brought up before me and shown.

Petitions dismissed.


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