COMMISSIONER INCOME-TAX, U. P. vs. KUNWAR TRIVIKRAM NARAIN SINGH

CIVIL APPEAL No. 68/1964Supreme Court[1965] 3 S.C.R. 70009 April 1965Bench: 3 JudgesAuthor: K. SUBBA RAO, J.C. SHAH, S.M. SIKRI INCOME8 pages
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What were the facts?

The respondent, head of a Hindu undivided family and descendant of a Jagirdar, received a perpetual pension calculated as one-fourth of the Jagir's revenue. This arrangement arose from a 1837 compromise between the British Government and the then Jagirdar, wherein Zamindars began paying revenue directly to the Government, and the Jagirdar and successors were entitled only to the pension. The Income-tax Officer assessed this pension as regular income. The Appellate Assistant Commissioner considered it agricultural income. The Income-tax Appellate Tribunal reversed this, and the High Court ruled in favour of the respondent, stating the right was to a share of net land revenue collections and the amount varied annually. The Supreme Court heard the appeal against the High Court's decision.

What did the Supreme Court hold?

The Supreme Court held that the income was not agricultural income. The source of the income was the 1837 arrangement and not land itself, therefore it did not fall within the definition of agricultural income under Section 2(1)(a) of the Act, even if it varied annually. The Court also held that the amount received was revenue income and taxable, not a capital receipt. It reasoned that exchanging a capital asset for a perpetual annuity is ordinarily taxable income, and there was no material to show it was an instalment payment of capital. The appeal was allowed, and the question referred to the High Court was answered in the affirmative.

What were the issues?

1. Whether the sum received by the assessee is revenue income liable to tax under the Indian Income-tax Act, 1922, considering Section 4(3)(viii) and Section 2(1)(a) of the Act, which define agricultural income. The assessee contended that the amount received was agricultural income. The revenue contended that it was regular income and not agricultural income. The High Court had ruled in favour of the assessee. 2. Whether the amount received by the respondent was a capital receipt or revenue income. The assessee argued it was a capital receipt, representing compensation for relinquishing title to the Jagir lands. The revenue contended it was taxable revenue income.

Which sections of the Income-tax Act were involved?

Section 4(3)(viii),Section 2(1)(a),Section 66A(2)

AI-generated summary — verify with the full judgment below

COMMISSIONER INCOME-TAX, U. P. v. KUNWAR TRIVIKRAM NARAIN SINGH April 9, 1965 [K. SUBBA RAO, J. c. SHAH AND s. M. Snrn, JJ.] focome Tax Act, 1922 (11 of 1922), ss. 2(1)(a) and 4(3) (viii;- .Agricultural Income-Nature of.

The respondent was the head oI a Hindu undivided family and was the descendant of a J agirdar. Certain disputes between the .Jagirdar and the Zamindars in the district had been settled in 1837 b:Y a compromise between the British Government and the then Jagirdar, whereby, the Government granted the Jagirdar and his heirs a pension in perpetuity to be calculated on the basi; of one- fourth of the revenue of the Jagir. By this arrangement the collec- tions from the Jagir became payable by the Zamindai's direct to the Government and the Jagirdar and his successors no longer remained the proprietors of the J agir and became entitled only to a pension.

The Income-tax Officer assessed the receipt of the pension by the respondent as part of his regular income and rejected the latter's contention that the amount received was agricultural income within the meaning of s. 4(3)(:-"iii) of the Income-tax Act, 1922. In appeal, the Assistant Commissioner accepte

The order continues below.

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