Rm. Ar. Ar. Rm. Ar. Ramanathan Chetiiar v. Commissioner Of Income-Tax, Madras

Rm. Ar. Ar. Rm. Ar. RAMANATHAN CHETIIAR COMMISSIONER OF INCOME-TAX, MADRAS October 27, 1966 [J. C. SHAH, V. RAMAsWAMI AND V. BHARGAVA, JJ.j Income-tax Act (11 of 1922), s. 4(3) (vii)-lnterest under decree-Whether capital receipt or income of a recurring nature-Casual receipt-What ia-Jurisdiction of High Court hearing reference under s. 65-Umils. On the death of two male members of a family which owned extensivo properties in India and Ceylon, disputes arose between their widows and c a auit was filed for partition of the estate. When each of the two members died the Estate Duty Authorities of Ceylon levied estate duty. The re-ceivers appointed in the partition suit paid the estate duties under protest and filed a suit questioning the validity of the duties. The suit was dis-missed by the trial Court but was decreed by the Supreme Court of Ceylon on appeal. In consequence of the decision of the Supreme Court of Ceylon, confirmed by the Judicial Committee, the Estate Duty Authorities had to refund the estate duty collected with interest thereon. The parti-D tion suit ended in a compromise and the assessee (the appellant's branch of the family) took one third share of the estate. For the assessment year 1958-59, the total income of the assessee was assessed and it included the amount received by the assessee ·as its share of the interest paid by the Estate Duty authorities of Ceylon.. The assessee objected to the inclusion of that amount, but the Department, the Appellate Tribunal and the High Court on a reference, held against the assessee. E In appeal to this Court, HELD : ( 1) The interest paid to the assessee under the decree of the Supreme Court of Ceylon on the amount of estate duty directed to be refunded was income liable to be taxed under the Indian Income.tax Act, and there is no warrant for treating the amount as a capital receipt being in the nature of damages for wrongful retention of money. The Supreme Court of Ceylon ordered the refund of the estate duty with legal interest thereon, under s. 192 of the Ceylon Ordinance II of 1889, and the ex-I' pression "interest" in that section should be given its natural meaning. [969 E, F; 970 Bl Dr. Sham/al Narula v. C./.T., Punjab [1964] 7 S.C.R. 668, followed. (2) The receipt was not of a casual or non-recurring natnrc (i) It is true that the assessee received the amount as a lump-sum pa:Yment. But that does not mean, that the receipt is not of a recurring G natnre. The interest was granted under the decree of the Court from the date of institution of the proceedings in the trial court and was calculated upon the footing that it accrued de die In diem and hence has the essential quality of recurrence which is sufficient to bring it within the scope of the Act. [971 F-H] (ii) A receipt of interest which is foreseen and anticipated cannot be regarded as casual even if it not likely to recur .. gain. When the action Was commenced it was well within the contemplation and anticipation· of H the receivers-plaintifl\s that a successful termination of the action would not merely result in a decree for the estate duty illegally collected, but would also make tho defendants liable to pay mterest on that amount. L972 A-B'] (3) It is of the essence of the jurisdiction of the High Court under s. 66 of the Act, that in hearing a reference, it can decide only questions which are referred to it or arise out of the order of the Tribunal. [972 HJ C.1.T., Bombay v. Scindia Steam Navigation Co. Ltd. [1962] I S.C.R. 788, followed CIVIL 1965. APPELLATE JURISDICTI0:--1 : Civil Appeal No. 728 of Appeal by special leave from the judgment and order dated September 24, 1962 of the Madras High Court in T.C. No. 144 of 1960. A.K. Sen and R. Ganapathy Iyer, for the appellant. B. Sen, A.N. Kirpa/ and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by [971 F.H] [972 A-B] S – 1967-1-965-973 1 S – 1967-1-965-973 2 S – 1967-1-965-973 3 S – 1967-1-965-973 4