MAHESH ANANTRAI PATTANI AND ANOTHER versus THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH,AHMEDABAD

Citation: [1961] 2 S.C.R. 742 · Decided: 29-11-1960 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

Iy6o 
November z9 
742 
SUPREME COURT REPORTS 
MAHESH ANANTRAI PATTANI 
AND ANOTHER 
v. 
[1961] 
THE COMMISSIONER OF INCOME-TAX, 
BOMBAYNORTH,AHMEDABAD 
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) 
Income Tax-Gift or Remuneration for past services-Payment 
to retired Dewan. of 1-ndian State ~Ex-Ruler-Liability to· tax-
Indian Income-tax Act, r922 (II of r922), s.7(r), Explanation (2). 
A who was the Dewan of the State of Bhavnagar before 
responsible government was introduced in the State, was grant-
ed a monthly pension of Rs. 2,000 by the Maharaja of the State 
by an order dated January 15, 1948. On March I, 1948 the 
State of Bhavnagar was merged in the United States of Saurash-
tra and the Maharajah ceased to be the Ruler of the State. 
Subsequently on May 31, 1950, the Maharaja directed his banker 
in Bombay to pay A a sum of Rs. 5 lakhs out of the amount 
lying to his credit an<l when he was asked for instructions as to 
how that sum was to be entered in the books of account he pass-
ed an order on December 27, 1950, to the effect that in conside-
ration of A having rendered loyal and meritorious services the 
said sum was given to him as a gift and that the amount should 
be debited to his personal expense account. The liability of the 
above sum for income-tax was raised during tbe course of the 
assessment proceedings of A for the year 1951-52, and the asses-
see produced a• letter dated March IO, 1953, written by the 
Maharajah at the request of the former, as follows: "I confirm 
that in June 1950, I gave you a sum of Rs. 5 lakhs which was a 
gift as a token of my affection and regard for you and your 
family ..... .''. The Income-tax Officer held that the amount was 
liable to income-tax under s. 7(1), read with explanation (2), of the 
Indian Income-tax Act, 1922. The Appellate Tribunal took into 
account the two documents dated December 27, 1950, and March 
ro, 1953, written by the Maharajah and considered that the 
first which clearly mentioned why the said sum was paid to the 
assessee, was more reliable for the reason that it was contempo-
raneous, than the second which was written more than 2 years 
later and the correctness of which they were not inclined to 
accept. The Tribunal agreed with the Income-tax Officer that 
the amount was a taxable receipt. 
Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), 
that on the facts of the case the sum of Rs. 5 lakhs was given 
to the assessee not as a payment in consideration of the services 
already rendered by him as the Dewan of the State, but merely 
as a gift in token of the Maharajah's affection and regard for 
the assessee, and, therefore, was not liable to be assessed to tax 
2 S.C.R. SUPREME COURT REPORTS 
743 
under s. 7{I), explanation (2), of the Indian Income-tax Ac.t, 
r922 
The Tribunal was in error in treating the document dated Mahes~ Anantrai 
December 27, 1950, as a contemporaneous document while as a Pattani &·Another 
matter of fact it was written six months after the fact of pay-
v ... 
ment, and because of this erroneous approach as a result of which The Commissioner 
the second letter had been rejected, the finding given by the 
of Income-tax, 
Tribunal could not be treated as binding on the Court. 
Bombay North, 
P. Krishna Menon v. The Commissioner of Income-tax, 
Mysore, Travancore-Cochin and Coorg, Bangalore, [r959] Supp. I 
S.C.R. 133, distinguished. 
Per Hidayatullah, J.-The use of the word "contempora-
neous" to describe the order to the banker meant no more than 
this that it was earlier in time and very soon after the amount 
was given. The word "gift" did not alter the nature of pay-
ment; the Maharaja indeed made a gift, as he had stated over 
again, but the order disclosed that it was by way of remunera-
tion for past services. 
The Tribunal was within its rights in accepting one piece 
of evidence in preference to another, and the finding on the 
evidentiary value of the letter of the Maharaja was a matter 
essentially for the Tribunal to decide finally. 
The decision in 
P. Krishna Menon v. The Commissioner of Income-tax, Mysore, 
Travancore-Cochin and Coorg, Bangalore, [r959] Supp. r S.C.R. 
r33, was applicable and concluded the present case. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 
232 of 1960. 
Appeal from the Judgment and Order dated Octo-
ber 6, 1958, of the Bombay High Court in Income 
Tax Reference No. 10 of 1958. 
R. J. Kolah, Dwaraka Das, S. N. Andley, Rameshwar 
Nath, J.B. Dadachanj

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