Judgement

MOHAN, J.:- All these appeals, arisinng out of a judgment of the High Court of Bombay (Nagpur Bench), can be dealt with under a commonjudgment since they relate to one and same assessee, the appellant before us.

2. Shrimant Padmaraje R. Kadambande is the assessee and the only child of Late Chhatrapati Raja Ram Maharaj, the ruling Chief of the former State of Kolhapur. Under the Huzur Order dated April 8, 1947 the assessee was granted a cash allowance of Rs.3,000/- per month from April 1, 1947. This order was passed by the successor of Chhatrapati Raja Ram Maharaj. After the merger of Kholhapur State in the then State of Bombay, the allowance was continued for some time up to July 31, 1955. Thereafter it was discontinued. This was because of the provisions of the Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 (hereinafter referred to as the Act . It may be stated at this stage that the Act was passed to abolish miscellaneous alienations of various kinds prevailing in the merged territories in the State of Bombay.

3. The Districts Treasury Officer, Kolhapur, by his letter dated April 14, 1956 communicated of the said allowance. Under sub-sec. (1), Cl. (d) of S. 15 of the Act it was provided that a cash allowance could be paid as a compassionate payment notwithstanding the abolition of all alterations under S. 4 of the Act. The assessee continued to receive cash allowance from August 1, 1956 on modified terms. The sanction of this cash allowance was conveyed to the appellant by the Collector of Kolhapur through his letter dated October 6, 1959. It appears that an amount of Rs. 10 lakhs out of a trust property in the Bank of Kolhapur in accordance with the provisions of Indenture of Trust dated October 19, 1947 was misappropriated. The cash allowance that was to be paid to the assessee under order dated October 6, 1959 was to be reduced in the circumstances mentioned therein.

4. For the assessment year 1963-64 the assessee received a sum of Rs. 36,000/-. For the assessment year 1964-65 she received a sum of Rs. 33,992/-. Before the Income-tax Officer a question arose whether the amounts received by the assessee were subject to income-tax. It was urged on behalf of the assessee that these receipts were of a capital nature and, therefore, would not be subject to income-tax. This contention was negatived by the Income-tax Officer who subjected the respective amounts to tax each of the assessment years.

5. Being aggrieved by the said assessment orders an appeal was preferred by the assessee before the Appellate Assistant Commissioner. Two alternative contentions were urged on behalf of the assessee.-

(i) the receipts were of a capital nature and, therefore, would be exempt from income-tax.

(ii) having regard to the casual and non-recurring nature of this income it would be exempt under S. 10(3) of the Income-tax Act.

6. Rejecting these two contentions, the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer.

7. The appeal to the Tribunal was preferred urging the same contentions but without success. Thereafter a reference was made for determination by the High Court for the assessment years 1963-64 and 1964-65 which reads as under..-

"Whether the amounts of Rs. 36,000 and Rs.33,992/ -received by Shrimant Padamaraje R. Kadambande of Kolhapur from the Government of Maharashtra during. the financial years ended 31-3-1963 and 31-3-1964 are receipts of an income nature and taxable under the provisions of the Indian Income-tax Act, 1922 (sic) (1961)?"

8. The High Court on reference to the statutory provisions of the Act and relying on the case in H. H. Mararani Shri Vij aykuverba Saheb of Morvi v. Commr. of Income-tax, Bombay City lI, (1963) 49 ITR 594 (Bom) came to the conclusion that the decision of the taxing authorities 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. They could not be r