Case: Raja Rameswara Rao Vs. Commissioner Of Income-Tax,Hyderabad

1. The appellant was the proprietor of the Wanaparthi Jagir in the former Indian State of Hyderabad. Certain payments described as interim maintenance allowances, were made to him under the Hyderabad (Abolition of Jagirs) Regulation 1358-F, hereafter called the Abolition Regulation. These payments were brought to tax under the Income-tax Act, 1922 as income. The appellant contended that they were capital and not liable to be taxed. He took various proceedings and eventually a case was stated to the High Court of Andhra Pradesh for decision of the following questionthe interim maintenance allowances received by the assessee under the Hyderabad (Abolition of Jagirs) Regulation 1358 Fasli, are income and therefore liable toquestion was answered against the appellant by the High Court and hence this appeal.

Court's reasoning:
It seems to us impossible to accept this contention for that would make the two the same, which, as we have shown earlier, they could not be. "Final commutation" meant the only commutation that the Jagirdar was to get in respect of his rights in the Jagir, that is to say, he was to get no other commutation. In fact, as already stated, if any interim maintenance allowance was paid after the commutation became payable, that was to be recovered from and not added to, the commutation.11. We have earlier said that it is not in dispute that the commutation sum was paid as compensation for the loss of the Jagir and was, therefore, capital which was not liable to be taxed. We thus find that the Regulations make a clear distinction between the commutation sum or compensation and the interim maintenance allowances. These allowances were obviously not intended to be compensation.It appears that there were in this case four payments totalling Rs. 1,47,857-4-0 of which the first was made on January 25, 1950 and the other three on April 10, 1950, July 3, 1950 and August 3, 1950, respectively. It does not appear to have been found whether the last three payments, which it will be noticed had been made after April 1, 1950, were in respect of the commutation sum or interim maintenance. It was for that reason that the Tribunal directed the Income-tax Officer concerned to institute an enquiry as to the nature of these three payments. Apparently, the High Court approved of that order. We also take the same view.We think that the question was answered correctly by the High Court by saying that the interim maintenance allowances received by the assessee which do not form part of the commutation amount are income and are liable to be taxed and that the payments made subsequent to April 1, 1950 towards commutation amount are not income and not liable to be taxed.