SHANMUGHA RAJESWARA SETHUPATHI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN W.P. Nos. 343, 391 to 396 and 418 of 1960, the ex -zamindar of Ramnad is the petitioner. He prays for the issue of a writ of certiorari to call for the records of the First Additional Income -tax Officer, Karaikudi, and to quash the orders of assessment made by that officer for the assessment years 1951 -52 to 1955 -56, 1957 -58, 1958 -59 and 1959 -60 in respect of certain receipts of the petitioner by way of interim payments provided for in the Madras Estates (Abolition and Conversion into Ryotwari) Act (XXVI of 1948). W.P. No. 849 of 1960 is directed against a notice of demand issued under section 29 of the Act calling upon the petitioner to pay advance tax under section 18A(1) of the Act for the assessment year 1960 -61.

(2.) SINCE the question calling for determination in all these petitions is identical in so far as it relates to the assessability to tax of the interim payments, the details of one petition will be set out. In W.P. No. 343 of 1960, the ex -landholder (zamindar) of the Ramnad zamindari estate is the petitioner. The estate was taken over on September 7, 1949, and an amount of Rs. 19, 74, 144 was deposited by way of advance compensation under section 54A of the Act. For each of the faslis from fasli 1359, the Government also deposited a sum of Rs. 1, 60, 470 as interim payment under section 50 of the Act. In due course, the Tribunal adjudicated upon the claim of the several persons entitled to these amounts and the petitioner received his share thereof. In July, 1959, the Income -tax Officer issued a notice to the petitioner calling for his objections to the assessment to income -tax of the interim payments received by the petitioner. The petitioner contended that the interim payment was part of the compensation which he received for the loss of his estate and should, therefore, be regarded as capital and not income. These objections were overruled and an order of assessment was in due course made on March 25, 1960, under section 23(3) read with section 34(1)(a) of the Income -tax Act. This assessment was in respect of the assessment year 1951 -52 as the receipt of the relevant interim payment was during the accounting period ending on the 30th June, 1950. Similar notices were issued by the Income -tax Officer in respect of the assessment years 1952 -53, 1953 -54, 1954 -55, 1955 -56, 1957 -58 and 1958 -59. But no final assessments had been made in respect of these assessment years by the date the connected Writ Petitions Nos. 391 to 396 were filed in this court. Contending that the Income -tax Officer lacked jurisdiction to start the proceedings under section 34 of the Act, and further that these interim payments are not income but part of the compensation which the landholder was entitled to by reason of the deprivation of his estate which was his income -producing asset, the writ petitions were filed in this court. In W.P. No. 343 of 1960, the petitioner sought for the issue of a writ of certiorari to quash the order of assessment made by the Income -tax Officer, and in the other writ petitions, he sought for writs of prohibition to restrain the Income -tax Officer from proceeding further with the assessment proceedings. By the time, however these writ petitions came on for hearing, orders of assessment had been made in respect of the subsequent assessment years also and the prayer in regard to those years stands amended to suit the circumstances, viz., writs of certiorari are also prayed for in respect of these cases.We have noticed above that the main contention raised by the petitioners in these writ petitions is that the interim payments made under section 50 of the Act constitute items of capital receipt. The contention of the department, however, is that under the scheme of the Estates Abolition Act, there is a sharp distinction between compensation for the acquisition of the estate by the Government and the payments made under section 50. This interim payment it is said was necessitated by the fact that long delay was bound to occur before the determination of the final compensation and its payment to the landholder. While under the Act the Government took immediate possession of the estates, since the landholder was deprived of the possession of the estate and the income therefrom without any actual payment of the compensation to him on such dispossession, it was provided that an annual and recurring payment was to be made to him pending the final payment and that this should, therefore, be regarded as a measure to provide an income to the landholder during the period referred to. The department's claim is accordingly that the interim payment is in the nature of a substituted annual income and that in any event could be regarded as interest on the compensation amount remaining payable to him. The further contention was that unless this receipt could be brought within any of the exempting provisions of the Indian Income -tax Act, it cannot escape assessment.

(3.) ORIGINALLY , this clause (e) ran :