JUDGMENT Srinivasan, J.- The question that was directed to be referred under section 66 (2) ‘of the Act for the determination of this Court is: “Whether on the facts and circumstances of the case, the war damage receipts in whole or fn part of 4,918 dollars constituted income of the assessee firm liable to tax e” One Somasundaram Chettiar was doing business at Taiping in the Federated Malay States. He died in 1949. Long afterwards, during the calendar year 1953, a sum of 4,918 dollars was received by the firm consisting of his two sons, which carried on business after the death of Somasundaram Chettiar. Though this amount was included in the profits and loss account of the calendar year 1953, it was not returned for purposes of the tax. The Income-tax Officer brought this amount to tax in the view that it represented a recovery of a revenue loss sustained during the war period. An appeal to the Appellate Assistant Commissioner against this assessment on the ground that the receipt was of a capital nature, or, in the alternative, was a casual and non-recurring receipt, failed. The Appellate Assistant Commissioner observed that the appellants’ firm had not explained the nature of the damages, in recoupment of which the sum was received by it from the Malayan Government, and that, therefore, it was not possible to accept the contention that this receipt represented a capital receipt. The further appeal to the Tribunal was also dismissed, as, in the opinion of the Tribunal, the amount represented only a reimbursement of items of expenditure that the assessee has to lay out on account of war conditions. Thereafter, an application was made by the assessee for making a Reference to this Court under section 66 (1) of the Act. It was pointed out to the Tribunal at this stage that the war damage claimed was made in respect of the estate of the deceased Somasundaram Chettiar and that any receipt proceeding therefrom had no connection with the aseessee firm which started functioning only from 1949 onwards, on and after the death of Somasundaram Chettiar. It was accordingly the contention that this receipt could not be regarded as income of the firm at all. It was accordingly the contention that this receipt could not be regarded as income of the firm at all. But the Tribunal was not prepared to go into this contention which was certainly a new one, but held that in so far as the finding of the Tribunal in the appeal before it was concerned, it did not give rise to any question of law. As has been stated, on the direction of this Court, the question set out above has been referred. Before the question can be adequately dealt with, a few other facts have to be referred to. It is not in dispute that this amount represented some measure of compensation granted by the Malayan Government to persons whose properties suffered damage during the war and the occupation by the Japanese. It was a claim which arose out of the incidents which took place, long before the death of Somasundaram Chettiar, though the actual settlement of the claim was made only in the calendar year 1953. Now, the question which the Tribunal had to consider and which is now before this Court being shortly whether this receipt is in the nature of capital or revenue, the nature of the claim and the conditions under which the Malayan Government paid the claim, are all matters relevant to the determination of this question. The order of the Appellate Assistant Commissioner shows that no material was placed before him in this regard. Before us, the orders of the appropriate authorities of the Malayan Government which dealt with the claims have been produced, and it was stated at the Bar by Mr. Meenakshisundaram the learned counsel for the assessee, that these papers were also placed before the Appellate Tribunal during the hearing of the appeal before it. Though there is no pointed reference to these papers in the appellate order of the Tribunal, a close examination of the order shows that these papers were in fact before the Tribunal. In fact, the statement of the case also shows that in the appeal grounds before the Tribunal, the contents of the orders of the Malayan Authorities granting compensation were extracted and made part of the grounds of appeal. We shall therefore proceed upon the basis that this material was in fact before the Tribunal. In fact, the statement of the case also shows that in the appeal grounds before the Tribunal, the contents of the orders of the Malayan Authorities granting compensation were extracted and made part of the grounds of appeal. We shall therefore proceed upon the basis that this material was in fact before the Tribunal. In order to come to a conclusion whether a receipt is of a capital or of a revenue nature, the source of that receipt and the circumstances under which it was received ate very relevant. That this was a receipt from the War Damage Commission of the Malayan Government is undisputed. In the order making the grant, the War Damage Commission stated that “the Assessment Board of the Commission had made a final outright award in respect of your war damage claim”. The total award so made was 6,053 dollars, which was categorised as “Rubber Estate Claims Category 5,313 dollars and Private Chattels Category 740 dollars”. The amount specified was to be paid in instalments from time to time and the sum received during the year relevant to the assessment year was the disputed amount of 4,919 dollars. The learned counsel has produced before us the War Damage Ordinance of the Government of Malaya. Broadly speaking, the Ordinance provided for two categories of payments. The War Damage Commission was authorised to make what was called a “restoration award” or an “outright award”. A restoration award was made to enable the claimant to restore his property or business to productive capacity or for the purpose of reimbursing to a like extent in respect of the expenses of such restoration already effected. These restoration awards could be made in the case of claims relating to rubber planting industry, and in fact, clause 6 of the War Damage Ordinance provided that no award other than a restoration award shall be made in respect of any claim relating to the rubber planting industry. Sub-clause (3) of Clause 6 however stated that if the Commission was of opinion that in the particular circumstances of any case it is impracticable, unreasonable, inequitable or not economically justifiable to require the restoration of any property damaged, the Commission may make an outright award. An outright award is required to be calculated in accordance with Clause 11 of the Ordinance. An outright award is required to be calculated in accordance with Clause 11 of the Ordinance. This clause states that an outright award shall be computed at the ordinary reasonable cost on the 30th June, 1951 of replacing the property lost, destroyed, or damaged, but only to such extent as the Commission may deem reasonably necessary for the purpose of the economic rehabilitation of the claimant to the degree which, in the opinion of the Commission, is economically justifiable. It is accordingly clear that where an outright award is made by the Commission, it was not intended for the purpose of reimbursing any expenses which the claimant may have incurred or even for the restoration of the property. Taking note only of the fact that the claimant had suffered damage or incurred expenses, the Commission proceeded to make what is called the rehabilitation grant to render assistance in improving the economic condition of the claimant. On the admitted position therefore that it was an outright award that was made by the Commission, the question for consideration is whether that is receipt of a capital or of a revenue nature. The Tribunal seems to have placed great reliance upon the fact that the details of the compensation furnished referred to certain items. The sum of 740 dollars was the claim in respect of personal property damaged or lost. The amount of 5,313 dollars was covered by claims under the following heads: Trees lost 182 dollars ; Tapping equipment 621 dollars ; Austerity Clearing 4,510 dollars. For the reason that “Austerity Clearing” appears as one of the headings in respect of which a claim was made, the Tribunal reached the conclusion that since clearing is a revenue expenditure, the payment must be regarded as a reimbursement to that extent, and therefore, would be a revenue receipt. We would normally be inclined to accept this view. But the Tribunal has wholly failed to take note of the nature of the grant as it was made by the appropriate governmental authority. Any person who had sustained a loss of any description during the war period was asked to submit his claims. Obviously, the claim should be supported by details of the loss under the various heads. But the Tribunal has wholly failed to take note of the nature of the grant as it was made by the appropriate governmental authority. Any person who had sustained a loss of any description during the war period was asked to submit his claims. Obviously, the claim should be supported by details of the loss under the various heads. It was open to the War Damage Commission to make what is under the relevant law a restoration grant, that is to say, a grant to reimburse the expenses incurred by the claimant, expenses which would normally be of a revenue nature. These details furnished by the claimant only afforded a basis for the computation to be made by the War Damage Commission. But it was open to the War Damage Commission not to make a restoration grant, that is to say, not to take note of the individual items of loss or expenses which a claimant had to incur, but to make an outright grant, which though its computation was made on the basis of the loss or expenses claimed, was nevertheless not in reimbursement of that loss or expense. Had it been a restoration grant, the Malayan Government had the power to direct the application of the sum. Under the law, therefore, the final outright grant was one that was made for the economic rehabilitation of the claimant. The mere circumstance that the computation of this quantum of award for economic rehabilitation was based upon the quantum of loss or expenditure cannot in our opinion make the grant itself a receipt of revenue nature. Clause 11 of the Ordinance leaves it entirely to the discretion of the War Damage Commission to award any amount as an outright award not exceeding the quantum of the property lost, destroyed or damaged. The legal character of the grant to our minds has been completely lost sight of by the Tribunal. We are accordingly of the view that the receipt is undoubtedly of a capital nature. The question referred to us is answered in the negative and in favour of the assessee which will be entitled to its costs Counsel's fee Rs. 250. V.S.-----Answered in favour of assessee.