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PETITIONER: Rm. Ar., Ar.  Rm.  Ar.  RAMANATHAN CHETTIAR

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, MADRAS

DATE OF JUDGMENT: 27/10/1966

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. BHARGAVA, VISHISHTHA

CITATION:  1967 AIR  657            1967 SCR  (1) 965

ACT: Income-tax  Act  (11 of 1922), s.  4(3)(vii)-Interest  under decree  Whether  capital receipt or income  of  a  recurring nature--casual  receipt What is-Jurisdiction of  High  Court hearing reference under S. 65 Limits.

HEADNOTE: On  the  death of two male members of a family  which  owned extensive  properties  in India and Ceylon,  disputes  arose between their widows and a suit 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  dismissed  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 partition 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. 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 expression "interest" in  that section should be given its natural meaning. [969 E, F;  970 B]

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Dr.   Shamlal Narula v. C.I.T., Punjab [1964] 7 S.C.R.  668, followed. (2)  The receipt was not of a casual or non-recurring nature (i)  It  is true that the assessee received the amount as  a lump-sum payment.  But that does not mean, that the  receipt is  not  of a recurring nature.  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 again.  When the action was commenced it was well within the contemplation  and anticipation of the  receivers-plaintiffs that a successful termination of the action would not merely result in a decree for the estate duty illegally  collected, but would also make the defendants liable to pay interest on that amount. [972 A-B] 966 (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 H] C.I.T., Bombay v. Scindia Steam Navigation Co. Ltd. [1962] 1 S.C.R. 788, followed

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 728 of 1965. 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. Sen, A.N. Kirpal and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Ramaswami  J.  This appeal is brought by  special  leave  on behalf   of  Ramanathan  Chettiar  (herinafter  called   the ’assessee’)  from the judgment of the High Court  of  Madras dated September 24, 1962 in T.C. No. 144 of 1960. Arunachalam Chettiar (senior) was a resident of  Devakottai, Ramanathapuram  District who owned extensive properties  in- cluding properties in Ceylon.  He married three wives  viz., Valami  Achi, Lakshimi Achi and Nachiar Achi.   Valami  Achi died  in 1913 leaving behind her a son Arunachalam  Chettiar (junior)  and  three daughters.  Lakshimi Achi  and  Nachiar Achi  did not have natural born sons.  Arunachalam  Chettiar (junior)  died July 9, 1934.  Arunachalam Chettiar  (senior) died  on  February  23, 1938.  He was survived  by  his  two widows  Lakshimi Achi and Nachiar Achi and by the  widow  of his  predeceased  son, Arunachalam Chettiar  (junior)  viz., Umayal  Achi.   After  the  death  of  Arunachalam  Chettiar (senior) disputes arose between his two widows and the widow of Arunachalam Chettiar (junior) Umayal Achi, in respect  of the  estate of Arunachalam Chettiar (senior).   Umayal  Achi filed  O.S. No. 93 of 1938 in the Subordinate Judge’s  Court of Devakottai for administration and partition of the estate of  deceased Arunachalam Chettiar (senior).  She  claimed  a half-share  in  the properties under the provisions  of  the Hindu  Women’s Rights to Property Act.  During the  pendency of the suit the Subordinate Judge appointed two Advocates as Receivers  for  the administration of the  estate.   On  the death  of  Arunachalam  Chettiar (junior)  the  Estate  Duty Authorities  of  Ceylon  levied  Estate  Duty  on  what  was

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described  as the "deceased’s half -share of the  assets  of the  business carried on by the family in  Ceylon".   Estate Duty  was also levied on the death of  Arunachalam  Chettiar (senior)  in  1938.   The two Advocate  Receivers  who  were administering   the  estate  paid  under  protest   to   the Commissioner of Estate Duty in 967 Ceylon   the   Estate   Duty   claimed   from   them.    The administrators subsequently filed a suit in the court of the District  Judge,  Colombo questioning the  validity  of  the Estate  Duties.  The District Judge upheld the  levies,  but the  Supreme  Court  of Ceylon allowed  the  appeal  of  the administrators  and  ordered the refund of the  Estate  Duty together with interest.  The Attorney-General of Ceylon took the  matter  in appeal to the Judicial Committee  in  P.C.A. Nos. 16 and 17 of 1955.  By its judgment dated July 10, 1957 the Judicial Committee affirmed the Judgment of the  Supreme Court of Ceylon  and dismissed the appeals.  In  consequence of  this decision the Estate Duty Authorities of Ceylon  bad to refund a sum of Rs. 7,97,072/- as interest payable on the amount  of Estate Duty formerly collected.   Meanwhile,  the litigation  in  O.S.  93 of 1938 filed  in  the  Subordinate Judge’s  Court of Devakottai had also reached  the  Judicial Committee  and  at that stage the parties  compromised.   In pursuance  of this compromise the two widows of  Arunachalam Chettiar  (senior) took a boy each in adoption on  June  17, 1945,  Lakshmi  Achi  taking  in  adoption  one  Arunachalam Chettiar and Nachiar Achi taking in adoption one  Ramanathan Chettiar.  The widow of Arunachalam Chettiar (junior) Umayal Achi  also  adopted  a son to her deceased  husband,  a  boy called  Veerappa Chettiar on June 17, 1945.  The estate  was divided  into  three  equal shares, Lakshimi  Achi  and  her adopted  son  taking one-third share Nachiar  Achi  and  her adopted son taking another one-third share, and Umayal  Achi and her adopted son Veerappa taking the balance of one-third share. Ramanathan, the adopted son of Arunachalam Chettiar (senior) taken in adoption by Nachiar Achi was assessed to income-tax for the assessment year 1958-59, the relevant previous  year being  the year ending March 31, 1958.  He was  assessed  in the status of a Hindu undivided family on a total income  of Rs.  2,53,828/-  and a total tax of Rs. 1,79,412-12  nP  was levied.   The  assessment included a sum of  Rs.  1,93,328/- which  was  received  by the assessee as his  share  of  the amount  of interest paid by the Estate Duty  Authorities  of Ceylon  consequent to the judgment of the Supreme  Court  of Ceylon  ordering  the refund of the  amount.   The  assessee objected to the inclusion of this amount on the ground  that it  was not a revenue receipt assessable to  income-tax  and that,  in  any event, the receipt was of a casual  and  non- recurring nature falling within the exemption under s.  4(3) (vii)  of  the  Indian  Incometax  Act,  1922   (hereinafter referred  to as the Act).  The Incometax  Officer  overruled the  objection and his order was affirmed in appeal  by  the Appellate  Assistant  Commissioner  and  by  the   appellate Tribunal.   Before  the  appellate  Tribunal  the   assessee contended  that the amount of Rs. 1,93,328/-  received  from the Estate Duty Authorities, Ceylon was not income, but  was only  damages received for the unlawful retention of  money, and even assuming that 968 it  was  a  revenue receipt, it was of  a  casual  and  non- recurring   nature  and,  therefore,  was  not   liable   to assessment.  The contentions of the assessee were over-ruled by the appellate Tribunal.  At the instance of the  assessee

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the  appellate Tribunal referred the following questions  of law to the High Court :               "1.  Whether  the aforesaid  interest  receipt               constitutes income ?               2.    If  so,  whether it is exempt  under  s.               4(3)  (vii)  ,  of the  Income-tax  Act  as  a               receipt of a casual and nonrecurring nature ?" By its judgment dated September 24, 1962 the High Court  an- swered the Reference against the assessee and held that  the receipt  in question was a revenue receipt and could not  be held to be receipt of a casual and non-recurring nature  and the amount was rightly assessed in the year of assessment. The  first  question  to be considered  in  this  appeal  is whether  the  amount  of  Rs.  1,93,328/-  received  by  the assessee  as his one-third share of the amount  of  interest paid  by the Estate Duty Authorities of Ceylon can be  taxed as  income.   It was contended on behalf of  the  appellant. that  the amount constituted damages for unlawful  retention of  money by the Estate Duty Authorities of Ceylon  and  the amount  received  by  the assessee  was  therefore,  capital receipt.   We  do not think there is any  justification  for this  argument.   The amount was paid by the  Ceylon  Estate Duty  Authorities  under  the. judgment and  decree  of  the Supreme Court of Ceylon the relevant portion of which  reads as follows :               "I would therefore, set aside the order  under               appeal  and substitute a decree (a)  declaring               that no Estate Duty was -payable under  Estate               Duty  Ordinance (Cap. 187) in respect  of  the               estate  of Arunachalam Chettiar  (Senior)  and               (b)  ordering  the  Crown  to  refund  to  the               appellants  the  sum of Rs.  7,00,402.65  with               legal interest thereon from the date on  which               these  proceedings  were  instituted  in   the               District  Court.   The  appellants  are   also               entitled to -their costs in this court and  in               the court below". Under the provisions of the Estate Duty Act of Ceylon, as it stood  at  the material time, any person  aggrieved  by  the assessment  of estate duty could appeal to  the  appropriate District   Court   naming  the   Attorney-General   as   the respondent.   After  the Attorney-General is served  in  the matter the appeal is proceeded with as an action between the assessee  as  plaintiff  and the Crown  as  defendant.   The statute  specifically  provides that the provisions  of  the Civil Procedure Code and of the Stamp Ordinance shall  apply to  the  proceedings.   The petition  of  appeal  should  be stamped as though  969 it  were a plaint filed for the purpose of  originating  the action,  and if it is not stamped with the requisite  stamps it may be dealt with in the same manner as if it is a plaint which is insufficiently stamped.  Any party aggrieved by any decree or order of the District Court may further appeal  to the  Supreme Court in accordance with the provisions of  the Civil  Procedure  Code.  The relevant  provision  under  the Ceylon  Civil Procedure Code empowering the Court  to  award interest  is  contained in s. 192 of Ordinance  11  of  1889 which is to the following effect:               "When the action is for a sum of money due  to               the  plaintiff,  the Court may in  the  decree               order interest according to the rate agreed on               between the parties by the instrument sued on,               or in the absence of any such agreement at the               rate of nine per cent per annum to be paid  on

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             the  principal sum adjudged from the  date  of               the  action  to  the date of  the  decree,  in               addition  to  any interest  adjudged  on  such               principal  sum,  for any period prior  to  the               institution   of  the  action,  with   further               interest at such rate on the aggregate sum  so               adjudged  from the date of the decree  to  the               date  of payment, or to such earlier  date  as               the Court thinks fit..........." This  provision corresponds to s. 34 of the Civil  Procedure Code  in India.  Section 192 of the Ceylon Ordinance  II  of 1889  expressly  uses  the word ’interest’  in  contrast  to ’principal  sum adjudged’ and we do not see any  reason  why the  expression should not be given the natural  meaning  it bears.  In its judgment dated October 12, 1953, the  Supreme Court  of  Ceylon acted under this section and  ordered  the Crown to refund to the appellant the sum of Rs.  7,00,402.65 with legal interest thereon from the date of the institution of the proceedings in the District Court.  We see no warrant for  accepting  the  submission of the  appellant  that  the interest awarded by the Supreme Court of Ceylon under s. 192 of  Ordinance  11 of 1889 should be taken to  be  a  capital receipt  being  in  the  nature  of  damages  for   wrongful retention of money.  In Westminster Bank, Ltd. v. Riches,(1) the  question  at issue was whether the amount  of  interest awarded by the Court in exercise of its discretionary  power under s. 3 of the Law Reform (Miscellaneous Provisions) Act, 1934 was-’interest of money’ within the meaning of Sch.  ’D’ and General Rule 21 of the Income-tax Act, 1918 and  whether incometax  was  accordingly deductible  therefrom.   It  was contended in that case on behalf of the respondent that  the amount  though awarded under a power to add interest to  the amount  of debt and though called interest in the  judgment, was not really interest such as attracts income-tax but  was damages.   This argument was rejected by the House of  Lords and  it was held that there was no  incompatibility  between the two conceptions and that the amount (1) 28 T.C. 159. 117 Sup.  C. 1.166-17 970 was  taxable  as  interest of money  within  Sch.   ’D’  and General Rule 21 of the Income-tax Act, 1918.  It was pointed out  that  the real question in cases of this type  was  not whether  the amount received was interest proper or  damages but whether it had the quality of income or it was a capital sum  estimated in terms of interest.  In the course  of  his judgment, Lord Wright observed at page 189 of the Report  as follows:               "The  contention  of  the  Appellant  may   be               summarily  stated to be that the  award  under               the  Act cannot be held to be interest in  the               true  sense  of that word because  it  is  not               interest but damages, that is, damages for the               detention  of  a  sum  of  money  due  by  the               Respondent  to  the Appellant, and  hence  the               deduction made as being required under Rule 21               is  not  justified because the money  was  not               interest.   In other words the  contention  is               that   money  awarded  as  damages   for   the               detention of money is not interest and has not               the quality of interest.  Evershed, J., in his               admirable judgment rejected that  distinction.               The  Appellant’s  contention is  in  any  case               artificial  and is, in my opinion,  erroneous,               because, the essence of interest is that it is

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             a  payment  which  becomes  due  because   the               creditor  has  not had his money  at  the  due               date.    It   may  be   regarded   either   as               representing the profit he might have made  if               he had had the use of the money, or conversely               the  loss he suffered because he had not  that               use.  The general idea is that he is  entitled               to  compensation  for the  deprivation.   From               that  point of view it would  seem  immaterial               whether  the  money  was due to  him  under  a               contract express or implied, or a statute,  or               whether the money was due for any other reason               in  law.  In either case the money was due  to               him  and was not paid or, in other words,  was               withheld from him by the debtor after the time               when payment should have been made, in  breach               of  his  legal  rights,  and  interest  was  a               compensation,  whether  the  compensation  was               liquidated  under an agreement or statute,  as               for instance under section 57 of the Bills  of               Exchange  Act, 1882, or was  unliquidated  and               claimable  under  the Act as  in  the  present               case.  The essential quality of the claim  for               compensation is the same, and the compensation               is properly described as interest." This  passage was quoted with approval by this Court in  Dr. Shamlal Narula v. Commissioner of Income-tax Punjab, Jammu & Kashmir, Himachal Pradesh and Patiala(1) in which a question arose whether the statutory interest paid under s. 34 of the Land  Acquisition Act, 1894, on the amount  of  compensation awarded for the period from the date the Collector has taken possession of land compulsorily (1) [1964] 7 S.C.R. 668 : 53 I.T.R. 151. 971 acquired  is  interest paid for the delayed payment  of  the compensation  and is therefore a revenue receipt  liable  to tax  under  the Act.  It was held that the  amount  was  not compensation for land acquired or for depriving the claimant of his right to possession but was paid to the claimant  for the use of his money by the State and the statutory interest paid was, therefore, a revenue receipt liable to  incometax. The  principle of this decision applies to the present  case also  and  we are of opinion that 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 Act. We  shall proceed to consider the next question whether  the receipt  of  interest, even if it  constituted  income,  was exempt under s. 4(3) (vii) of the Act as receipt of a casual and  non-recurring nature.  Section 4(3)(vii) of the Act  is in the following terms:               "4. (3).  Any income, profits or gains falling               within  the  following classes  shall  not  be               included  in  the total income of  the  person               receiving them:               (vii) Any  receipts  not being  capital  gains               chargeable  according  to  the  provisions  of               section  12B  and not being  receipts  arising               from business or the exercise of a  profession               vocation or occupation, which are of a  casual               and non-recurring nature, or are not by way of               addition to the remuneration of an employee." It was argued on behalf of the appellant that the amount  in question was a lump-sum payment awarded under the decree  of the  Court and there was no quality of recurrence about  it.

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We do not think that this submission is correct.  It is true that  the appellant received lump-sum payment on account  of interest.  That does not, however, necessarily mean that the amount  of interest is not a receipt of a recurring  nature. On the other hand, the interest was granted under the decree of  the  Court  from  the date of  the  institution  of  the proceedings  in the District Court and was  calculated  upon the footing that it accrued de die in diem, and hence it has the  essential quality of recurrence which is sufficient  to bring it within the scope of the Act.  It was also contended that  the receipt of interest was casual in  its  character. The expression ’casual’ has not been defined in the Act  and must therefore be construed in its plain and ordinary sense. According to the Shorter Oxford English Dictionary the  word ’casual’ is defined to mean: 972 "(i)   Subject  to  or  produced  by   chance;   accidental, fortuitous,  (ii)  Coming  at uncertain  times;  not  to  be calculated  on, unsettled".  A receipt of interest which  is forseen and anticipated cannot be regarded as casual even if it  is  not  likely to recur again.   When  the  action  was commenced  by  way of a petition in the  District  Court  of Ceylon,   it   was  well  within   the   contemplation   and anticipation  of the persons representing the estate that  a successful termination of the action would not merely result in a decree for the tax illegally collected, but would  also make  the Crown liable to pay interest on that  amount  from the date of the petition till the date of the payment.   The receipt  of  interest in the present case by virtue  of  the decree  of the Supreme Court of Ceylon bears  no  semblance, therefore,  to a receipt of a casual character.  It  is  not therefore  possible to accept the argument of the  appellant that  the receipt of interest obtained under the  decree  of the Supreme Court of Ceylon was of a casual or non-recurring nature.   We  accordingly  reject  the  submission  of   the appellant on this aspect of the case. It was lastly submitted on behalf of the appellant that  the payment of interest . under the decree of the Supreme  Court of Ceylon was made by the Ceylon Estate Duty Authorities  to the  estate  of Arunachalam Chettiar (senior) and  what  was received  by the appellant for his one-third share,  namely, Rs. 1,93,328/- was a share in the estate of the deceased and therefore  was  received  by the appellant as  part  of  the estate.  In other words, the contention of the appellant was that  the  receipt  was  a  capital  receipt  and  was   not assessable  in his hands.  It is not, however, open  to  the appellant to advance this argument at this stage because the question did not arise out of the order of the Tribunal  and no such question ;was referred by the appellate Tribunal for the  decision  of  the High Court.  Mr. A. K.  Sen  for  the appellant  also referred to the decision of the Madras  High Court  in  Commissioner  of  Revenue,  Madras  v.   Veerappa Chettiar(1)  which dealt with a share of the same income  by another branch of the family.  It was decided by the  Madras High ,Court in that case that the receipt of interest  prior to  February 17, 1947 should be regarded as capital and  the rest  should  be  regarded  :as  income  receipt.   But  the question of the disruption of the status of joint family  on February 17, 1947 and the effect of that disruption upon the character  of the interest receipt was never  raised  before the  appellate  Tribunal and was not decided by  it  in  the appeal  before us. In Commissioner of Income-tax, Bombay  v. Scindia  Steam Navigation Co. Ltd.(2) it was pointed out  by this  Court that in hearing a reference under s. 66  of  the Act the High Court acts purely in an advisory capacity,  and

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it  is of the essence of such a jurisdiction that the  court can  decide only questions which are referred to it and  not any  other questions.  In the present case, the  High  Court has rightly (1) 61 I.T.R.256.  (2) [1962] 1 S.C.R. 788  :42 I.T.R. 589. pointed  out  that the question did not arise  out  of  the, order  of  the Tribunal and was not  the  subject-matter  of reference to the High Court. For the reasons already expressed we hold that the  judgment of the High Court is right and this appeal must be dismissed with costs. V.P.S.                                  Appeal dismissed. 974