NAYUDU J. - The single point that arises for determination, which is common to all the reference applications, is whether ad interim compensation paid to the petitioner under section 20(2) of the Assam State Acquisition of Zamindaris Act, 1951, can be regarded as income receipt for purposes of income-tax or whether it is in the nature of capital receipt.
It is not disputed that if the latter is the case, the amount is not assessable to income-tax. In order to determine this question, relevant provisions of the Assam State Acquisition of Zamindaris Act, 1951, hereinafter referred to as the Act, have to be noticed. Section 3 of the Act provides for notification declaring that the estate or zamindari in question stands transferred to and vested in the State free from all encumbrances. Thereafter, several steps are indicated in the Act for the purpose of determining the net income and the preparation of the compensation statement indicating the amount that is finally payable to the petitioner for the acquisition of his estate or zamindari. In the instant case, we are mainly concerned with sections 20 and 21 of the Act. Section 20 provides for the payment of ad interim compensation and the relevant portion is in the following words :
"20. After the date of vesting and before the final publication of the compensation statement, ad interim payment to the outgoing proprietor or tenure-holder of an estate or a tenure vesting in the State may be made as follows :
(1) the Compensation Officer shall calculate the probable amount of compensation which shall be finally payable;
(2) two and half per cent of such probable compensation shall be paid and interim to each proprietor or tenure-holder in cash every year, until such time as the compensation statement has been finally published...."
Section 21 provides for the payment of compensation, which is at a much later stage after the compensation statement had been finally published. The relevant portion of this section reads as follows :
"21. (1)....
(a) where any ad interim payment has been made to any outgoing proprietor or tenure-holder under section 20, any such payment in excess of two and half per cent per annum of the amount of compensation payable under section 18...."
In the instant case, the petitioner had received payment of ad interim compensation in varying figures and as the section itself indicates, the payment represents roughly two and half per cent of probable compensation determined by the Compensation Officer. There is nothing to show that this payment has been made in lieu of the income on the estate or the profits derivable or towards interest on the capital value of the estate. On the other hand, the language makes it clear to our minds that what is being paid is part of the compensation and is only a fraction of the compensation under the section before the final figure of compensation payable is determined and it has been advisedly describe as ad interim payment of compensation. The payment contemplated under section 20, therefore, is payment towards compensation and not payment towards interest or income. We experience no difficulty whatsoever in coming to the conclusion that the amounts received by the petitioner during the several assessment years covered by these references, namely, Rs. 22,621 for 1957-58; Rs. 11,310 for 1958-59; Rs. 50,897 for 1959-60; Rs. 28,486 for 1960-61 and Rs. 25,448 for 1961-62., are amounts representing part of the compensation payable to him, and as compensation takes the place of the zamindari as such, the receipt must be regarded as a capital receipt and not as an income or revenue receipt. Hence, we are satisfied that these sums have been received by the petitioner as ad interim payments of part of the compensation payable to him by reason of the acquisition of his zamindari and do not partake of revenue receipts. The assessments, therefore, are not competent.
We accordingly answer the reference in the negative, namely, that the amounts received by the assessee do not represent revenue receipts.
Reference has been made by the learned counsel for the respondent to Raja Rameswar Rao v. Commissioner of Income-tax, the decision whereof was confirmed in Raja Rameshwar Rao v. Commissioner of Income-tax by the Supreme Court. In Raja Rameswara Rao v. Commissioner of Income-tax. the case related to the Hyderabad (Abolition of Jagirs) Regulation 1358F. In that case it was expressly found that the amount on which tax was assessed was paid to the jagirdar as an interim allowance equal to the income that used to be derived from the jagir after adjusting the expenses of the management. Obviously, therefore, that was a case of receipt of income and the learned judges of the Andhra Pradesh High Court held that it was properly assessed to income-tax. This decision has been confirmed by the Supreme Court in Raja Rameshwar Rao v. Commissioner of Income-tax. These decisions have no application to the facts of the instant case.
Another decision cited by the learned counsel for the respondent is the one in Jagdambika Pratap Narain Sing v. Commissioner of Income-tax. That was again a case where although the compensation was not immediately paid and the amounts were paid gradually, specific amount was paid towards interest on the amount so withheld at the rate of two and half per cent. That was a case where the compensation was determined and compensation bonds had been issued and interest at the rate of two and half per cent, was paid thereon. Obviously, the amount representing two and half per cent, interest on the capital partook of the nature of income and it was held rightly by the Full Bench in that case that the income was properly assessed to income-tax. That case again has no application to the instant case.
Another decision cited by Mr. Pathak is the one in the case of Shanmughu Rajeswara Sethupathi v. Income-tax Officer, Karaikudi. It is not understood how this decision would help the respondent. It was held therein on the facts of that case that the interim payments made to the landholders were not as income or as interest on the undeposited portion of the compensation but were paid to compensate for deprivation of the estate and for the loss of an income producing asset of the landholders. The learned judges in that case held that this income was of a capital nature and not liable to income-tax. The facts seem more or less parallel to the case before us and the decision supports the stand we have taken.
Lastly, the decision cited by Mr. Pathak is the one in the case of Gillanders Arbuthnot and Co. Ltd. v. Commissioner of Income-tax That was not a case of land acquisition or acquisition of a zamindari. The case related to the cancellation of an agency and payment of compensation as a result thereof. It was therein held that the amounts received by the appellant therein for the cancellation of the explosives agency did not represent the price paid for the loss of a capital asset but that they were of the nature of income. Accordingly, their lordships held that it was assessable to income-tax. This decision has not application to the facts of the instant case.
On a careful consideration of the provisions of the Act, we are satisfied as already pointed out, that the amounts received by the petitioner in the instant case during the different years were received as ad interim compensation for the loss of the zamindari acquired by the Government and therefore represented capital receipts and not receipts by way of income or revenue receipts.
The reference is accordingly answered in the negative as indicated above. The petitioner will get costs, one set. Advocates fee Rs. 100.
Reference answered in the negative.