S. R. Y. SIVARAM PRASAD BAHADUR versus THE COMMISSIONER OF INCOME TAX HYDERABAD

Citation: [1972] 1 S.C.R. 320 · Decided: 19-08-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

320 
S. R. Y. SIV ARAM PRASAD BAHADUR 
v. 
THE COMMISSIONER OF INCOME TAX HYDERABAD 
August 19, 1971 
[K. S, HEGDE AND A. N. GROVER, JJ.] 
hicome-Tax-Capital and Revenue-Interim payment received under 
s. 50(2) of Madras Estates (Abolition of Conversion into Ryotwari) 
A.ct, 28 of 1948 whether capital receipt-Whether in lieu of interest on 
f'OnJpensation. 
The assessee was a Hindu Undivided Family. Its estate vested in the 
State Government of Madras under the Madras Estates (Abolition and 
Conversion into Ryotwari) Act 1948. It received interim payments under 
s. 50(2) -0f the Act. The question in the Income-tax proceedings 
was 
whether the payment S-O received was a capital or a revenue receipt. The 
Income-tax Officer and the Appellate Assistant Commissioner held that it 
was revenue. 
The Tribunal held that the payments were made to 
the 
assessee as compensation for destroying its income producing assets 
and 
therefore must be considered as capital receipts. The High Court decided 
that question in fawur of the Department. The assessee appealed to this 
Court bv certificate. 
HELD : While it is true that the terminology used by the legislature in 
respect of a payment is not conclusive of the true character of the pay-
ment, it would be proper to proceed on the basis that the legislature knew 
what it was saying. The Word compensation must be given its 
normal and natural meaning. In cl. (e) of s. (3) of the Act the legisla-
ture definitely says that the holder or holders of the Estate falling within 
cl. (b) and (c) of s. 3 "shall be entitled only to compensation from the 
Government as provided in this Act". From this it follows that all pay-
ments made to them under the Act are compensation payable to them for 
taking over their Estates. [325 D-F] 
· 
Moreover the final determination oi the compensation under s. 39 was 
made years after the Estate vested in the Government, though some 
advance compensation was paid. Hence there was force in the contention 
of the assessee that the interim payments made were given as compensa-
tio.n for depriving the assessees of the income that they would have got 
from their agricultural lands, which income would not have been assess-
able to tax under the Act. The quantum of interim payments payable to 
the former holders of those estates was determined by taking into considera-
tion the income that the former oV(ners would have received had they conti-
nued to be the owner of those Estates. This prbna fc.cie showed that the 
G-Ovemment was compensating the former holders for taking away their 
income producing assets. [325 H-326 CJ 
A 
B 
c 
D 
E 
F 
G 
The contention that the interim payment was in lieu of interest on the 
compensation payable overlooked the fact that the liability of the Gov-
ernment to pay the compensation excepting to the extent provided in 
s. 54A arose only after the compensation payable was finally determined 
under s. 39. The interim payment< were not fixed on the basis of esti-
mated compensation. They were fixed on the basis of loss of income to 
the former owners. 
Under these circumstances it was not possible to 
H 
accept the contention that the interim payments were paid in lieu of inte-
rest or even that thev represented compensation for los.s of interest (326 
D-E] 
, . 
f 
I~ 
I 
! 
A 
B 
c 
D 
E 
S.R.Y. SIVARAM PRASAD BAHADUR V. C.I.T., HYDERABAD 
321 
(Hegde, /.) 
Sub-section ( 8) of s~ 50 instead of assisting the Department supports 
the case of the assessee. 
All that the provision says is that the interim 
payn1ents 1nade under s. 50(2) are not to be considered as compensation 
\vhich t;!ie Government is required to. deposit under s. 41 ( 1) or to any ex-
tent 8 to be in lieu of such compensation. That section does not say .that 
the interim payn1ents arc not compensation. It only says that it is nO part 
of the con1pensation required to be deposited under s~ 41 or to any extent 
in lieu of compensation. That does not mean ,that it cannot be con1pen-
sation for the ret:urring loss caused to the owner because of the taking 
a\\.'ay .of an incon1c producing asset without payment of compen~ation. [327 
D-EJ 
Dr. Shain Lal v. Co1n111issi9ner of lnconze-tax, Punjab, 53 I.T.R. 151, 
Senairan1 Doongannnll v. Co1n!nissioner 
of 
Tnron1e 
Tax, 
Assani, 
42 
l.T.R. 392 nnli Si111pson (H.M. Inspector of Taxes) 
v. 
Executors 
oJ' 
Bonner Maurh:e as Exec11fo/' of Edward Kay, (!929) 14 T.C. 580, relied 
on. 
Raja Ra111esliwara Rao v. C7i1n111is

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