Law:

Section:

Section 4, read with section 2(24), of the Income-tax Act, 1961, and sections 15(1) proviso (d), and 2(1)(iii) of Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 - Income - Assessable as - Assessment years 1963-64 and 1964-65 - Whether compassionate payment received by assessee under proviso (d) to section 15(1) of Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 was capital receipt and could not be treated as 'income' - Held, yes Interpretation of statutes - Aids to construction - Marginal heading to a section FACTS Under a Huzur Order dated 8-4-1947, the assessee was granted a cash allowance per month from 1-4-1947 after the merger of Kolhapur State in the then State of Bombay. The allowance was continued for some time up to 31-7-1955. Thereafter, it was discontinued because of the provisions of the Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955, which was passed to abolish miscellaneous alienations of various kinds prevailing in the merged territories in Bombay. Under sub-section (1)(d) of section 15 of the said Act it was provided that a cash allowance could be paid as a compassionate payment notwithstanding the abolition of all alienations under section 4. The assessee continued to receive -cash allowance as compassionate payment from 1-8-1956 on modified terms and the sanction of the same was conveyed to the assessee. For the assessment years 1963-64 and 1964-65, the assessee claimed that the amounts received by him were not assessable to income-tax as those receipts were of a capital nature. The ITO disallowed the assessee's claim and subjected the respective amounts to tax in each of the assessment years. On appeal, the AAC as well as the Tribunal confirmed the order of the ITO. On reference, the High Court, relying on the case of H.H. Maharani Shri Vijaykuverba Saheb of Morviv. CIT [1963] 49 ITR 594 (Bom.) came to the conclusion that the amounts received by the assessee during the relevant financial years were income within the meaning of section 2( 24) and could not be regarded as capital receipts in the hands of the assessee. It, accordingly, affirmed the view taken by the taxing…

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