SHRIMANT PADMARAJE R. KADAMBANDE versus COMMISSIONER OF INCOME TAX, PUNE

Citation: [1992] 2 S.C.R. 705 · Decided: 22-04-1992 · Supreme Court of India · Bench: S. MOHAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

SHRIMANT PADMARAJE R. KADAMBANDE 
A 
v. 
COMMISSIONER OF INCOME TAX, PUNE 
APRIL 22, 1992 
[S. MOHAN AND G. N. RAY, JJ.] 
B 
Income Tax Act, 1961: 
Section 2(24 )-Asses see in receip~ of compassionate payment in lieu of 
cash allowance abolished-Payment purely compassionate, discretionary and C 
voluntary, at the request of the assessee-Assessee having no right to demand 
payment-Absence of any foundation for source of any Income-Whether 
payment constituted capital receipt and hence not taxable-Whether payment 
was capital receipt or income depends on nature and quality of payment and 
source of income and not its nomenclature or periodicity. Bombay Merged 
Territories Miscellaneous Alienations Abolition Act, 1955: Section 15(1). 
D 
Interpretation of Statutes-Internal aids-Marginal Heading of a Sec-
tion--Wliether can control meaning of Section, when it is clear and unam• 
biguous. 
The appellant-assessee, the descendant of the late ruler of Kolhapur 
State was sanctioned a monthly cash allowance by the successor to the late 
ruler. After the merger of the princely State with the then State of Bombay, 
the cash allowance was discontinued, in view of the provisions of the 
Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 
which abolished miscellaneous alienations of various kinds prevailings in 
the merged territories. However, in view of sub-section (1) clause (d) of 
Section 15 of the Act which provided that a aish allownace could be paid 
E 
F 
as a compassionate payment notwithstanding the abolition of all aliena-
tions under Section 4 of the Ac:t, the assesses continued to receive the cash 
allowance on modified terms. 'This amount was also reduced sub'sequently G 
on ilccotint of misappropriation of a part of the trust amount deposited in 
a Bank. 
For the assessment years 1963-64 and 1964-65 the assessee received 
Rs.36,000 and Rs.33,992 respectively. The contention of the assessee that 
these receipts were of a capital nature and, therefore, would not be subject H 
705 
A 
B 
c 
D 
E 
F 
706 
SUPREME COURT REPORTS 
[1992) 2 S.C.R. 
to income tax, was negatived by the Income Tax Officer, and the amounts 
~ere assessed to ta.x in each of the assessment years. 
The assessee's appeals against the Income Tax Officer's orders were 
rejected by the Appellate Assistant Commissioner, as well as the Appellate 
Tribunal. 
On a reference made to it, the High Court upheld the decision of the 
taxing 3uthorities and the Tribunal that the amounts received by the 
assessee during the two· relevant financial years were income within the 
meaning of Income Tax Act and that they could not be regarded as capital 
receipts in the hands of the assessee. 
Hence the assessee filed appeals, by special leave, before this Court 
not only in respect of the aforesaid assessment years, but also in respect 
of the assessment years 1965-66 to 1969-70. 
On behalf of the appellant-assessee it was contended that where any 
cash allowance, which was included in the definition of alienation was 
granted under Section 15(l)(d) of the Bombay Merged Territories Miscel-
laneous Alienation Act, the said payment was on compassionate ground, 
and was entirely different from those allowances paid under clauses (i),(ii) 
and (iii) of the Section, and therefore, the High Court was not correct in 
holding that it was a receipt of revenue and would not amount to compen-
sation when the statute declares otherwise, and that the interpretation of 
Section 15 ran counter to the spirit of the Section. 
Ou behalf of the respondent-Revenue, it was contended that if it was 
not windfall and if there was regularity in paymen!, that would be enough 
to constitute income; that where the assessee was paid maintenance al-
lowance periodically it could not be claimed as compensation; and that 
though the marginal heading of the Section was compensation that did not 
control the operation of the Section or the interpretation of Section 15. 
G 
Allllwing the appeals, this Court, 
HELD: 1.1. The amounts received by the assessee in lieu of cash 
allowance abolished by Section 4 of the Bombay Merged Territories Mis-
cellaneous Alienations Abolition Act, 1955 during tht' financial years in 
question are capital receipts and, therefore, are not income within the 
H 
meaning of Section 2(24) of the Income Tax Act, 1961. [725 G] 
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.: 
SHRIMANT KADAMBANDE . v. C. I. T. 
707 
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1.2. Neither the nomenclature nor the period

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