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PETITIONER: MAHESH ANANTRAI PATTANI AND ANOTHER

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, AHMEDABAD

DATE OF JUDGMENT: 29/11/1960

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1961 AIR  946            1961 SCR  (2) 742  CITATOR INFO :  R          1963 SC1343  (13,37,38)

ACT: Income  tax-Gift or Remuneration for Past services--Payment to  retired Dewan of Indian State by Ex-Ruler--Liability  to tax--Indian  Income-tax  Act,  1922 (11  of  1922),  s.7(1), Explanation (2).

HEADNOTE: A  who  was  the  Dewan of the  State  of  Bhavnagar  before responsible  government  was introduced in  the  State,  was granted  a monthly pension of Rs. 2,000 by the  Maharaja  of the  State by an order dated January 15, 1948.  On March  1, 1948 the State of Bhavnagar was merged in the United  States of  Saurashtra and the Maharajah ceased to be the  Ruler  of the  State.   Subsequently  on May 31,  1950,  the  Maharaja directed his banker in Bombay to pay A a sum of Rs. 5  lakhs out of the amount lying to his credit and when he was  asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered  loyal and meritorious services the said sum was given to him as  a gift  and that the amount should be debited to his  personal expense account.  The liability of the above sum for income- tax   was  raised  during  the  course  of  the   assessment proceedings  of  A for the year 1951-52,  and  the  assessee produced  a  letter  dated March 10, 1953,  written  by  the Maharajah  at  the  request of the former,  as  follows:  "I confirm  that in June 1950, I gave you a sum of Rs. 5  lakhs which  was a gift as a token of my affection and regard  for you  and  your family......... The Income-tax  Officer  held that the amount was liable to income-tax under S. 7(1), read with  explanation (2), of the Indian Income-tax  Act,  1922. The  Appellate Tribunal took into account the two  documents dated December 27, 1950, and March 10, 1953, written by  the Maharajah  and  considered  that  the  first  which  clearly mentioned  why  the said sum was paid to the  assessee,  was more  reliable for the reason that it  was  contemporaneous, than  the second which was written more than 2  years  later and  the  correctness  of which they were  not  inclined  to accept.   The  Tribunal agreed with the  Income-tax  Officer

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that the amount was a taxable receipt. Held,   (per   Kapur  and  Shah,  JJ.;   Hidayatullah,   J., dissenting), that on the facts of the case the sum of Rs.  5 lakhs  was  given  to  the assessee  not  as  a  payment  in consideration of the services already rendered by him as the Dewan  of  the State, but merely as a gift in token  of  the Maharajah’s  affection  and regard for  the  assessee,  and, therefore, was not liable to be assessed to tax 743 under  s.  7(1), explanation (2), of the  Indian  Income-tax Act,1922. The  Tribunal  was in error in treating the  document  dated December 27, 1950,’as a contemporaneous document while as  a matter  of fact it was written six months after the fact  of payment, and because of this erroneous approach as a  result of  which the second letter had been rejected,  the  finding given by the Tribunal could not be treated as binding on the Court. P. Krishna Menon v. The Commissioner of Income-tax,  Mysore, Travancore-Cochin  and  Coorg, Bangalore,  [1959]  Supp.   1 S.C.R. 133, distinguished. Per  Hidayatullah, J.-The use of the word  "contemporaneous" to describe the order to the banker meant no more than  this that  it was earlier in time and very soon after the  amount was given.  The word "gift" did not alter the nature of pay- ment; the Maharaja indeed made a gift, as he had stated over again,  but  the  order  disclosed that it  was  by  way  of remuneration for past services. The Tribunal was within its rights in accepting one piece of evidence  in preference to another, and the finding  on  the evidentiary value of the letter of the Maharaja was a matter essentially  for  the  Tribunal  to  decide  finally.    The decision in P. Krishna Menon v. The Commissioner of  Income- tax, Mysore, Travancore-Cochin and Coorg, Bangalore,  [1959] Supp.  11  S.C.R.  133, was  applicable  and  concluded  the present case.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the  Bombay  High Court in Income Tax Reference  No.  10  of 1958. R.  J. Kolah, Dwaraka Das, S. N. Andley, Rameshwar Nath,  J. B. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. 1960.   November 29.  The Judgment of J. L. Kapur and J.  C. Shah,  JJ., was delivered by Kapur, J. M. Hidayatullah,  J., delivered a separate Judgment. KAPUR, J.-This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of  that Court in Income-tax Reference No. 10 of 1958, answering  the question  referred  to it against the assesses  whose  legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income-tax. The  facts which have given rise to the appeal are that  the late  Mr.  Annantrai  P.  Pattani,  hereinafter  called  the assessee  was,  by  Hazur Order  dated  December  10,  1937, appointed  the Chief Dewan of Bhavnagar State.   On  January 15,  1948, the Maharaja of Bhavnagar introduced  responsible Government  in his State and appointed the assessee  as  the Chairman  of  the Bhavnagar Durbar Bank but he  received  no

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salary  for  that post.  On the same date by  another  Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the  assessee.   The order was in  the  following  terms: "He  looked  after  us well in our  childhood  and  rendered valuable  services sincerely and with single-minded  loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place  of  pride in India.  In appreciation of this,  it  is (hereby) decided to grant him a monthly pension of Rs. 2,000 two  thousand which is the monthly salary he is  drawing  at present.  Date 22-1-1948." On  May 31, 1950, the Maharaja directed  Messrs.   Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by  cheque to Mr. A.P. Pattani Rs. 5 lacs out of the  amount lying  to the credit of my account with you." This  sum  was paid  to the assessee on June 12, 1950.  It is  stated  that the accountant of the Maharaja asked for instructions as  to how  that  amount of Rs. 5 lacs was to be  adjusted  in  the accounts and on December 27, 1950, the Maharaja made the following order:-  "In consideration of Shri Annantrai P. Pattani the Ex-Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift.  Therefore, it is ordered that the said amount  should be debited to our Personal Expense Account." On  March 1, 1948, Bhavnagar State was merged in the  United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date.   The  assessability  of this sum of Rs.  5  lacs  was raised  in the course of the assessment proceedings for  the assessment year 1951-52 and at the request of the’  assessee which  is stated to be oral the Maharaja wrote on March  10, 1953, the following: "I  confirm  that in June 1950, 1 gave you a sum  of  rupees five  lacs (Rs. 5,00,000) which wag a gift as a token of  my affection  and regard for you and your family.  This  amount was paid to you by Premchand Roychand & Sons according to my letter  of  31st May, 1950, from moneys in my  account  with them." On these facts the Income-tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income-tax under s. 7(1)  read with explanation (2) of that section as it  stood before the amendment by the Finance Act, 1955.  The assessee took  an  appeal to the  Appellate  Assistant  -Commissioner which was dismissed.  Against that order an appeal was taken to  the Income-tax Appellate Tribunal but the Tribunal  also dismissed the appeal.  The Tribunal held that looking to the circumstances  they  would  attach more  importance  to  the "contemporaneous  document,  i.e.,  the order  of  the  27th December, 1950"; which clearly mentioned why the sum of  Rs. 5,00,000  was  paid to the assessee.  The Tribunal  was  not inclined  to  "believe in the contents of  that  letter  and would  leave  the matter at that." The reference is  to  the letter  of the Maharaja dated March 10, 1953.  The  Tribunal further held that there was no distinction between the Maha- raja and the State and "assuming  for a moment that this view of ours is not  found to be correct, still it is clear from the Huzur Order No. 13 dated  22-1-1948  (vide  para 2  above)  that  the  assessee rendered  services not only to the State, if it is  distinct from.  the  Maharaja but to the Maharaja as well;  for  that Huzur  Order clearly refers to assessee rendering  "valuable services sincerely and conscientiously to us and our State".

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We would, therefore, hold that the amount of Rs. 5 lacs is a taxable  receipt  falling  under  Section  7(1)  read   with Explanation  2."  At  the  instance  of  the  assessee   the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax  in  the hands of the assessee for the  assessment  year 1951-52?" and  a further question as to the applicability of  s.  4(3) (vii)  of the Income-tax Act was not referred on the  ground that it did not arise out of the order of the Tribunal. The  High Court, on the findings given by the Tribunal  came to  the  conclusion  that s. 7(1)  explanation  (2)  of  the Income-tax Act applied.  It-held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall  nor  as  a  personal  gift  of  the  nature  of  a testimonial;  that the gift was not made in appreciation  of the  personality  or character of the assessee  nor  was  it symbolical  of its appreciation of his  personal  qualities; that  the consideration for the gift was in terms stated  to be past services and therefore it could not be treated as  a mere  gift by an employer to an employee when the Court  did not  know  what motivated the making of that gift.   On  the facts  of  the case the High Court reached  the  conclusion, though  with some reluctance, that the case fell within  the ambit of s. 7(1), Explanation (2).  The High Court also held that  this sum could not be exempted from tax on the  ground that it was merely a casual or nonrecurring receipt  because once  connection with the employment was  established  there was  no question of considering the recurring or the  casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee  died and his heirs and legal representatives  were brought on the record and hence they are the appellants. It  was  argued on behalf of the appellants that  the  facts showed  that  the  sum  paid cannot  fall  within  s.  7(1), Explanation  (2),  of the Income-tax Act.   By  Hazur  Order dated  January  22, 1948, the Maharaja had  compensated  the assessee  for valuable services rendered  and  single-minded loyalty  to  the  Maharaja  and  to  his  State  during  the difficult period of the war and thereafter, which had  added to  the  prestige  and  prosperity  of  the  State  and   in appreciation of that the 747 Maharaja  had granted to the assessee a monthly  pension  of Rs.  2,000,  which was paid to the assessee even  after  the merger  and of the establishment of the.. United  States  of Saurashtra from out of the public revenue.  At the time when Rs.  5,00,000 were paid, the State of Bhavnagar as such  had ceased to exist.  The Maharaja was no longer a Ruling  Chief but  was the Governor of the State of Madras.  The order  by which  Messrs.   Premchand  Roychand &  Sons,  Bombay,  were directed  to pay the sum of Rs. 5,00,000 out of the  account of  the  Maharaja does not mention any reason  for  payment. When as is alleged an accountant of the Maharaja asked as to how  that amount of Rs. 5,00,000 was to be adjusted  in  the accounts,  the Maharaja wrote on December 27, 1950, what  is described  as an order and directed that the sum  should  be debited  to his Personal Expense Account.  It  also  stated, why  it is not clear, that that sum was to be given  to  the assessee  in  consideration  of  the  assessee’s  loyal  and meritorious services as a gift.  When asked later to clarify the reasons for making this gift the Maharaja made it  clear that the gift was as a token of affection and regard for the assessee  and  his family and that the amount  was  paid  by

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Messrs.   Premchand Roychand & Sons from out of the  private monies of the Maharaja with that firm. The Income-tax Appellate Tribunal took into account the  two documents the first of which has been described as an  order of   December   27,   1950,   which   was   treated   as   a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later.  The Tribunal did not accept the correctness of what was stated in the  letter but  attached a great deal of importance to the document  of December  27,  1950, which the Tribunal thought was  a  con- temporaneous document. It appears to us that the Tribunal was in error in  treating the  document  of December 27, 1950,  as  a  contemporaneous document and because of this erroneous approach the  finding that  it  has given cannot be treated as a finding  of  fact which should bind the court in its decision.  It is  obvious that the reason why the 748 Tribunal  attached  all this importance to the  document  of December  27,  1950, was that it  was  contemporaneous.   It would  be  difficult to accept that a document  written  six months  after  the  fact  of  payment  could  be  termed  as contemporaneous  document  particularly when the  object  of that  document was only to instruct an accountant as to  how he  should  make a particular entry.  The letter  which  was written  by  the Maharaja on March 10,  1953,  was  rejected because  of the circumstances of the case one of  which  was the contemporaneous document.  It does not appear to us that the  Tribunal  gave sufficient or any consideration  to  the fact  that  the Maharaja had already passed an  order  of  a liberal and almost generous grant of a pension of Rs.  2,000 per mensem which was in lieu of the services rendered by the assessee  both to the State as well as to the  Maharaja  and his family and that pension was ordered before the merger of the  State  and when the employment of the assessee  as  the Dewan terminated. According  to what was stated in the letter of the  Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift  in  token of Maharaja’s affection and regard  for  the assessee  and  the assessee’s family.  There  is  no  reason shown  why  the Maharaja should have aided and  abetted  the assessee in escaping income-tax.  The only reason stated  by the  Tribunal  is  based on a wrong assumption  as.  to  the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought  within the purview of s. 7(1) of the Act read with explanation (2). This section at the relevant time provided:- S.  7(1) "The tax shall be payable by an assessee under  the head  "Salaries"  in  respect of any salary  or  wages,  any annuity,  pension  or gratuity and  any  fees,  commissions, perquisites  or profits in lieu of, or in addition  to,  any salary or wages, which are due to him from; whether paid  or not  or  are  paid by or  on  behalf  of...............  any private employer........................... Explanation 2: A payment due to or received by 749 an  assessee from an employer or former employer or  from  a provident or other fund, is to the extent to, which it  does not  consist of contributions by the’, assessee or  interest on  such contributions a profit received in lieu  of  salary for  the purpose of this subsection, unless the  payment  is made  solely as compensation for loss of employment and  not by       way       of      remuneration       for       past services;........................ Counsel  for the appellants contended that the  payment  did

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not  fall within this section because it was a gift made  on account  of  personal qualifications and was  a  testimonial unconnected  with any service rendered.  The submission  was that  the  assessee  had already been  compensated  for  his services  to the Maharaja personally and the State and  this sum  of  Rs.  5 lacs was a gift in token  of  affection  and regard and not as a payment in consideration of the services already  rendered to the State or the Maharaja or both.   It will  not be inappropriate to mention that in  the  document dated December 27, 1950, it is stated that Rs. 5,00,000  was -paid  to  the assessee as ex-Dewan of  Bhavnagar  State  in consideration  of his having rendered loyal and  meritorious services  to  Bhavnagar State.  There is no mention  in  the document of December, 1950, of any services rendered to  the Maharaja and it does not seem to have been considered by the Tribunal  as  to  why the Maharaja should make  out  of  his personal  account  the  gift  of such  a  large  amount  for something which was not done for the Maharaja  specifically, particularly  when  the  services to the State  and  to  the Maharaja  and his family had already been well  compensated. This lends support to the submission of the appellants  that the amount was paid merely as a gift in token of  Maharaja’s affection and regard for the assessee. Mr.  Kolah  for the appellants relied on  several  cases  in support of his contention that the amount was not liable  to tax  under  s.  7.  In Beynon v.  Thorpe  (1)  the  assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) [1928] 14 T.C. 1. 95 750 not  attend any Board meetings and received no  remuneration as a Director of the Company.  It was, however, a custom  of the  company  to give to its  retiring  employees  voluntary pension  or allowance and the    company  voted a pension of pound  5,000 a year to the assessee but this resolution  was rescinded and by another resolution pound 5,000 was voted to the  assessee" not as or because he is a Director but  as  a personal  gift".  The assessee was assessed  under  Schedule ’E’ in respect of both the pension and the final payment but these  assessments were discharged on appeal by the  Special Commissioners who decided that the allowances were gifts  of personal  nature only.  It was hold that the  payments  were not  income  assessable to income-tax in the  hands  of  the assessee.  Rowlatt, J., said at p. 14: "Now  the question is whether this ceases to be a mere  gift because  what  has  led  to it  is  a  past  employment,  an employment  which has ceased.  It has been. made  abundantly clear by the Court in Scotland in Duncan’s case(1) that this sort of sums received by a person cannot possibly be put  as receipts  from  his office or in respect of  his  office  or employment,  and they said in terms of that kind in  a  case like  this  that  these emoluments  cannot  be  taxed  under Schedule ’E’, and I am bound to say I think that goes a very long  way  to  conclude  this case.  But  it  is  said  that nevertheless  they are in respect of the employment.  -Well, it  seems to me that is a complete fallacy.  It  is  nothing but a gift moved by the remembrance of past services already efficiently  remunerated as services in them. selves; it  is merely  a gift moved by that sort of gratitude or that  sort of  moral obligation if you please: it is merely a  gift  of that  kind.   In this ease it happens to be very  large;  in many  cases it is very small, but in all the cases it  seems to me, whether it is large gift like this or whether it is a

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small gift to a humble servant they are exactly on the  same footing  as gifts which are made to a child or  gifts  which are made to any other person whom the giver thinks he  ought to supply with funds for one reason or another; and as the (1) [1909] 5 T.C. 417 751 Lord President in Scotland points out it is only a matter of history  that  the  feeling between the  parties  which  has generated the gift arises out of an employment." Mr. Kolah also relied on Reed v. Seymour (1).  In that  case a  committee of a Cricket Club granted a benefit match to  a professional cricketer in their service.  Out of the profits of  the benefit match the beneficiary, who was the  assessee purchased  a  farm  and assessment was  made  on  him  under Schedule’E’ in respect of the proceeds of the benefit  match but  this  was  discharged by the  General  Commissioner  on appeal.  This sum was held to be in the nature of a personal gift  and not assessable *to income-tax.  Viscount  Cave  in his speech posed the question which Rowlatt, J., put,  i.e., "is it in the end a personal gift or is it remuneration"; if the  latter it is subject to tax, if the former it  is  not. In that case the test applied by Viscount Cave was that  the terms of the assessee’s employment did not en-title him to a benefit;  the purpose for which the amount was paid  was  to express gratitude of the employers and of the cricket-loving public for what he had done and in their appreciation of his personal qualities.  It was also stated that if the  benefit had taken place after Seymour’s retirement no one would have sought   to  tax  the  proceeds  as  his  income   and   the circumstance  that it was given before but in  contemplation of, retirement does not alter its quality and the whole  sum was a testimonial and not a perquisite and therefore it  was not a remuneration for services but a personal gift. Counsel  also relied on Moorehouse v. Dooland (2).  In  that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the  rules for  the  time being of the employing Cricket  League  Club. The  assessee played twenty matches and on eleven  occasions collections  were made on his behalf under the rules of  the Club  and a total sum of pound 48 15s. was collected.   This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625.        (2) [1955] 28 I.T.R. 86. 752 arising from his employment.  It was held that (1) the  test of  liability  to  tax  on  voluntary  payments  from    the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration  of  his services; (2) that if  the  assessee’s contract  of  employment entitled him to  receive  voluntary payments  and  (3) that the payment was of  a  periodic  and recurring  character.   On  the other hand  if  a  voluntary payment  was made in circumstances which showed that it  was given  by  way  of a present or  a  testimonial  on  grounds personal  to the recipient, the proper conclusion  was  that the  payment  was not profit accruing to  the  recipient  by virtue  of his office or employment but a gift to him as  an individual paid and received by reason of his personal needs or  by  reason of his personal  qualities.   Applying  these principles the proceeds were by the terms of the contract of employment  received by way of remuneration and were  liable to  tax.   In  that case the payment was  treated  as  being subject  to tax because it was substantially in  respect  of services  and  accrued  to the assessee  by  reason  of  his office.   It  is  quite clear that had the gift  been  as  a

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testimonial  or  a  contribution  for  specific  performance peculiarly  due to the personal qualities of the  recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell v. Commissioner of  Income-tax  (1)  where the test  laid  was  whether  the payment  was  made in appreciation of .the  personality  and character  of  the  assessee  or  in  appreciation  of   the professional  services rendered by him in order to give  him an extra profit over and above the share of profit he  might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by  the Maharaja  was  not in respect of personal qualities  of  the recipient  but was relatable to his office although made  by an ex-employer and was therefore taxable; that the gift  was voluntary is clear but it is not quite clear how the  amount can  be  said  to be relatable to the  office  held  by  the recipient.  Even (1)  [1956] 30 I.T.R. 701. 753 according to the case of the respondent the amount was  paid about  two  years  after the assessee had ceased  to  be  an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted  him a pension from out of the public funds for  his services to the State as Dewan and for services rendered  to the  Maharaja  and  his family a  handsome  and  a  generous monthly  pension  of Rs. 2,000 per mensem.  Apart  from  the fact that the Tribunal relied upon a document which was  not contemporaneous,  it seems to have overlooked the fact  that there  was  a  gap of two years before  the  amount  of  Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel  for the respondent relied upon a judgment  of  this Court in P. Krishna Xenon v. The Commissioner of Income-tax, Mysore, Travancore-Cochin and Coorg, Bangalore (1).  In that case  the  assessee was a teacher who taught  his  disciples Vedanta philosophy without any motive or intention of making any profit.  One of the disciples made gifts of money to him on  several occasions and it was contended by  the  assessee that  he was not liable to tax on the amounts received  from his disciple as he was not carrying on any vocation.  But it was  held that in teaching Vedanta philosophy  the  assessee was carrying on a vocation and that the payments made by the disciple  were received by the recipient from his  vocation. It  was  also held that if the voluntary payments  had  been made  for  reasons  purely personal to  the  donee  and  not connected  with  his office or vocation, they would  not  be taxable  but  if they were made because of the  office  they would  be  taxable.   The question was not  what  the  donor thought  he  was doing but why the donee received  it.   The first  thing to notice about that case is that  those  gifts were  not made by the disciple as a gift to mark his  esteem and  affection  for his preceptor but as was stated  by  the disciple in his affidavit he had paid those amounts  because he  had  obtained  the  benefit  of  the  teachings  by  the preceptor  on  Vedanta.  It was found in that case  and  the disciple admitted (1)  [1959] Supp. 1 S.C.R. 133. 754 that  he  had  received benefit from the  teaching  of  his preceptor and that the gifts that he had made, even   though as  a  mark  of esteem and affection,  were  the  result  of teaching  imparted by the preceptor and because the  amounts were paid to the preceptor as preceptor and the imparting of the  teaching  was the causa causans of the  making  of  the gift,;  it was not merely causa sine qua non.  The  payments

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were repeated and came with some regularity as the  disciple visited the preceptor for receiving instructions.  It was in these circumstances that this court held the payments to the preceptor  as  payments  because of  the  imparting  of  the teaching  and  therefore they were income arising  from  the vocation   of  the  recipient  as  a  teacher   of   Vedanta philosophy. In  our opinion the sum of Rs. 5,00,000 was not paid to  the assessee in token of appreciation for the services  rendered as  a Dewan of Bhavnagar- State but as a personal  gift  for the  personal  qualities of the assessee and as a  token  of personal esteem. The  appeal is therefore allowed and the order of  the  High Court  set aside and the reference is answered  against  the Commissioner of Income-tax.  The appellants will have  their costs throughout. HIDAYATULLAH,  J.-I  have had the advantage of  reading  the judgment  just delivered by my brother, Kapur, J.  I  regret very  much my inability to agree that the appeal  should  be allowed  and the order of the High Court set aside.   In  my opinion, the High Court had correctly answered the  question referred to it. The  facts  of the case have been stated in  detail  in  the judgment  of my learned brother, and I need not repeat  them but refer only to some of them briefly.  On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the  predecessor of the appellants, who was an  ex-Dewan  of the  State.  This was paid by Messrs.  Premchand Roychand  & Sons, Bombay, with whom the Maharaja had an account.   There is  no contemporaneous record to show why this  payment  was made;  but  it  appears  that when  the  accountant  of  the Maharaja enquired how the amount 755 was  to  be entered in the books of  account,  the  Maharaja issued  an  order  on December 27, 1950,  to  the  following effect: "In consideration of Shri Annantrai P. Pattani the  Ex-Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift.  Therefore, it is ordered that the said amount  should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the  original  assessee  produced a letter  written  by  the Maharaja on March 10, 1953, as follows: "I  confirm that in June, 1950, I gave you a sum  of  rupees five  lacs (Rs. 5,00,000) which was a gift as a token of  my affection  and regard for you and your family.  This  amount was paid to you by Premchand Roychand & Sons according to my letter  of  31st May, 1950, from moneys in my  account  with them." The question in this case was whether s. 7(1) of the Income- tax Act read with Explanation 2 to that section as it  stood prior  to  the amendment in 1955, applied to  this  payment. That section, so far as it is material, is as follows: "7(1).   The tax shall be payable by an assessee  under  the head  ’Salaries’  in  respect of any salary  or  wages,  any annuity,  pension  or gratuity and  any  fees,  commissions, perquisites  or profits in lieu of, or in addition  to,  any salary  or wages, which are allowed to him by or are due  to him, whether paid or not, from, or are paid by or on  behalf of any private employer;.......................... Explanation  2.-A payment due to or received by an  assessee from  an employer or former employer or from a provident  or other fund, is to the extent to which it does not consist of contributions   by   the  assessee  or  interest   on   such

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contributions  a profit received in lieu of salary  for  the purpose  of  this  subsection, unless the  payment  is  made solely as compensation for loss of employment and not by way of remuneration for past services;.............". To determine whether the second Explanation applies 756 to  the facts in this case, it has to be found if this  pay- ment was received by the assessee from a former employer  by way of remuneration for past services.  The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10-3-1953 addressed by the Maharaja to the assessee, vide para 2 above.  We have already  indicated the  circumstances in which that letter came to  be  written and would merely observe that we find it difficult to  bring ourselves  to believe in (sic) the contents of  that  letter and would leave the matter at that." This,    in   my   opinion,   is   a   finding   upon    the evidentiary .value of the letter of the Maharaja, and though the  order  of  the Tribunal is  worded  mellifluously,  the Tribunal’s  decision is quite clearly that it was  not  per- suaded to accept it.  Indeed, of the two documents,  greater worth has to be attached to one which was issued before  the controversy started and was written not to the assessee  but to  the Maharaja’s accountant who enquired how  the  account was  to be adjusted.  The use of the word  ’contemporaneous’ to  describe the order to the accountant meant no more  than this  that  it was earlier in time and very soon  after  the amount  was given.  The Tribunal did not rely on any  extra- neous evidence in reaching its conclusion, but on  something which  had proceeded from the Maharaja himself.  The  motive of  the Maharaja may be irrelevant, because what has  to  be seen  is  not  why the payment was made  but  for  what  the assessee  had received it.  The Maharaja no doubt  had  been generous in fixing the pension at Rs. 2,000 per month.   But the  payment of such a large sum was not just bounty but  to reward the past services, which judged from the scale of the pension  had not adequately been paid for in the -past.   In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the  Ex-Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". 757 The  word  gift’ does not alter the nature of  the  payment. The  Maharaja  indeed  made a gift, as he  had  stated  over again;  but this order quite clearly disclosees that it  was by  way  of  remuneration  for  past  services.   The  case, therefore,  falls within the ruling of the a  Supreme  Court reported in P. Krishna Menon v. The Commissioner of  Income- tax, Mysore, Travancore-Cochin and Coorg, Bangalore (1), and is  indistinguishable from it.  In the earlier case of  this Court,  the person who gave the money did not  even  mention any  past  services; but this Court found that  because  the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The  facts  in  P. Krishna Menon’s case (1)  were  that  the assessee  was  teaching  his  disciples  Vedanta  philosophy without  any motive or intention of making a profit  out  of such activity.  One J. H. Levy who used to go to  Travancore from England at intervals attended his teachings.  Levy  had an account with Lloyd’s Bank at Bombay, and on December  31, 1944, Levy transferred the entire amount of Rs. 2,41,103-11- 3 to the credit of an account which Levy got the assessee to open in his’ own name.  Levy made further remittances and by

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August  19, 1951, had paid about Rs. 4,50,000.  It was  held by this Court that the assessee was carrying on a  vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows:- "...it  seems  to us that the present case is too  plain  to require  any  authority.   The only point  is,  whether  the moneys  were  received  by the appellant by  virtue  of  his vocation.   Mr. Sastri contended that the facts showed  that the  payments  were  purely personal  gifts.   He  drew  our attention  to the affidavit of Levy where it is stated  ’all sums of money paid into his account by me have been gifts to mark  my  esteem  and affection for him  and  for  no  other reason’.  But Levy also there said, ’I have had the  benefit of  his teachings on Vedanta’.  It is important to  remember however that the point is not what the donor (1)  [1959] Supp.  1 S.C.R. 133. 96 758 thought he was doing but why the donee received  it". Sarkar,  J., then referred to the dictum of Collins, M.  R., in Herbert v. Mc-Quade (1), which may be quoted here: "Now  that  judgment, whether or not  the  particular  facts justified it, is certainly an -affirmation of a principle of law  that a payment may be liable to income-tax although  it is  voluntary  on the part of the persons who made  it,  and that the test is whether, from the standpoint of the  person who receives it, it accrues to him in virtue of his  office; if  it does, it does not matter whether it was voluntary  or whether  it  was compulsory on the part of the  persons  who paid it. That seems to me to be the test; and if we once get to  this-that the money has come to or accrued to, a  person by virtue of his office-it seems to me that the liability to income-tax  is  not negatived merely by reason of  the  fact that  there  was  no legal obligation on  the  part  of  the persons who contributed the money to pay it." The  learned  Judge  also referred to  the  observations  of Rowlatt, J., in Reed v. Seymour (2) and of Viscount Cave, L. C.,  in  Seymour  v. Reed (3), and observed  that  the  real question  was,  is the payment in the nature of  a  personal gift  or is it a remuneration?, and quoted as the reply  the words  of the Lord Chancellor-"If the latter, it is  subject to  the  tax; if the former, it is not."  Sarkar,  J.,  also referred to the observations of Lord Ashbourne in  Blakiston v. Cooper (4), which were: "It  was suggested that the offerings were made as  personal gifts  to  the Vicar as marks of esteem and  respect.   Such reasons  no  doubt  played  their  part  in  obtaining   and increasing  the amount of the offerings, but I cannot  doubt that  they  were given to the vicar as vicar and  that  they formed  part  of  the  profits accruing  by  reason  of  his office.", and concluded as follows: "We have no doubt in this case that the imparting (1)  [1902] 2 K.B. 631. (3)  [1927] A.C. 554. (2)  [1926] 1 K.B. 588. (4)  [1909] A.C. 104. 759 of  the teaching was the causa causans of the making of  the gift; it was not merely a causa sine qua non.  The  payments were  repeated and came with the same regularity  as  Levy’s visits  to  the  appellant  for  receiving  instructions  in Vedanta.    We  do  not  feel  impressed  by  Mr.   Sastri’s contention  that the first payment of Rs. 2,41,103-11-3  was too  large a sum to be paid as consideration.  In any  case, we are not concerned in this case with that payment.  We are

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concerned  with payments which are of much  smaller  amounts and  as  to which it has not been said that  they  were  too large to be a consideration for the teaching.  And one  must not  forget that these are cases of voluntary  payments  and the  question  of  the  appraisement of  the  value  of  the teaching  received in terms of money is not  very  material. If  the first payment was too big to have been paid for  the teaching received, it was too big to have been given  purely by way of gift." In my opinion, the case of this Court concludes the  matter, and  the  Tribunal was within its rights  in  accepting  one piece of evidence in preference to another, and the  finding on the evidentiary value of the letter of the Maharaja was a matter  essentially for the Tribunal to decide  finally.   I thus agree with the High Court in the answer which it  gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with costs. BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout.                                      Appeal allowed. 760