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 I, 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 an<l 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 tbe course of the assessment proceedings of A for the year 1951-52, and the assessee produced a• letter dated March IO, 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 ro, 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 contempo- raneous, 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 that the amount was a taxable receipt.
