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TMI Blog1956 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... as her alimony in the manner specified in the terms. The first of the terms of settlement referred to the payment of this alimony and was to the following effect: Permanent alimony to be paid at the rate of ₹ 800 per month, payments to be made on the 7th day of every month, the first of such payments to be made on the 7th day of March, 1941. About three years later, on the 20th December, 1943, the husband executed a deed of charge whereby he made the payment of the alimony, payable by him under the consent decree, a charge on two house properties owned by him. The preamble of the deed recited that the husband had come to know that the wife was intending to make an application to the Court to compel him to secure the payment of the alimony by charging the same on his properties and that the husband was anticipating the threatened move on the part of the wife by executing the deed so as to prevent the intended application and also avoid the liability as to costs which would necessarily be incurred. A desire to safeguard the wife against the future uncertainty as to recovering the alimony was stated to be an additional reason for executing the deed. The operative par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of section 9(1)(iv) of the Act and he claimed that he was entitled to the deduction under the provisions of that section. The Department resisted his claim on the ground that it had not been made in the return and also on the ground that the charge, being a voluntary charge depending entirely on the assessee himself for payment, could not be treated as an annual charge within the meaning of section 9(1)(iv) of the Act. It seems also to have been contended that what the assessee was doing was that he was putting a part of his income from the property to a private use and applying it to the discharge of his liability for the alimony. This last contention appears to have been intended to meet the argument that the effect of the decree, read with the charge, was that an amount of money, equivalent to the alimony payable, was diverted from the assessee's hands before it could become his income. The Department's contention was that payment of the alimony by the assessee was merely an application of his income. The Appellate Assistant Commissioner naturally paid no attention to the argument of diversion, because the assessee was relying upon section 9(1) (iv) of the Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds arising out of the facts before it, it was doing so. All that one can, therefore, say is that the Tribunal rejected the Department's contention that the charge was not an annual charge , as contemplated by section 9(1)(iv) and also that it agreed with the view taken by the Appellate Assistant Commissioner on the matters mentioned by him. The acceptance of the views of the Appellate Assistant Commissioner would mean that, like him, the Tribunal also thought that whether or not a charge was a voluntary charge was not relevant for the purposes of section 9(1)(iv) and that, provided there was a charge, an assessee would be entitled to the benefit of the section, even if it was a voluntary charge. The Commissioner of Income-tax thought that the case had not been rightly decided and asked for a reference to this Court. The Tribunal acceded to the requisition and referred the following question of law: Whether in the facts and circumstances of the case and upon proper construction of the deed dated 20th December, 1943, the sum of ₹ 9,600 was an admissible deduction under section 9(1)(iv) in computing the assessee's income from properties situated in 1, Lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays followed, but he contended that the question as to the charge in the present case being a capital charge had, in fact, been raised before the Tribunal although no reference to the contention had been made in the Tribunal's order. He pointed out that in the enclosure or appendix submitted to the Tribunal along with the application for a reference, the Commissioner of Income-tax had specifically stated that this question had been raised before the Tribunal. That appears to be true, because the statement of facts which are admitted and found by the Tribunal and which are necessary for drawing up a statement of the case ends with the following sentence: But the question whether it was a 'capital charge' was not gone into, although this question was specifically raised by the Departmental Representative and the Tribunal dismissed the appeal. I think, however, that in spite of that statement in the enclosure to the Commissioner's application, we cannot treat the question as included in the reference and open to the Commissioner, since even after the Commissioner had made that statement in his application for a reference, the Tribunal did not include any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such capital. The proviso to the sub-section is not material for our present purpose. The second of Mr. Meyer's points was that the charge on the basis of which the assessee claimed the deduction in the present case was not an annual charge as contemplated by section 9(1)(iv). It was contended that under the consent decree, the alimony was payable at the rate of ₹ 800 per month and the assessee could not, by merely multiplying that monthly sum by twelve, claim the multiple to be an annual payment or charge. Cases where the levy or payment was in fact an annual levy but only the payment of it by instalments was allowed were said to be different, because in those cases the charge itself was basically and in its own nature an annual charge. Where, however, a payment was to be made month by month under a contract or a consent decree, the charge, if any, was really a monthly and not an annual charge and, consequently, the provisions of section 9(1)(iv) would not be attracted. I do not think that this contention is sound and indeed at the end of his argument Mr. Meyer himself conceded that the weight of authority was against him. Before referring to other aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to construe the expression annual payment and I think that what they held to be meant by the word annual, as used in such context, can safely be regarded as authoritative. I may point out, however, that while section 9(1)(iv) of the Indian Act makes the amount of an annual charge exempt from taxation by permitting a deduction thereof in the computation of the assessee's income, the English Acts use the expressions yearly interest and annual payment in the opposite context, because they use them in charging sections so as to make the amounts concerned not exempt but chargeable to tax. That distinction, however, makes no difference. Some of the possible different meanings of the expression annual were stated by Rowlatt, J., in the cases of Ryall v. Hoare, Ryall v. Honeywill [1923] 2 K.B. 447; 8 Tax Cas. 521. The word 'annual' may mean, said the learned Judge, 'annually recurring,' as applied to the seasons of the year or 'recurring over a long period of years': or it may mean 'lasting only for one year,' as we speak of certain flowers as annuals which must be sown afresh every year: or, as in the case of interest on a sum of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separation deed. The deed provided for the payment to the wife of a weekly sum of 8 every Wednesday and the question again was whether in making the payment, the husband or the trustee appointed by him would be entitled to deduct the appropriate income tax. The relevant provision of the Income Tax Act was again section 40 of the Act of 1853 and it would appear also section 102 of the Act of 1842. The first spoke of any rent, or any yearly interest of money, or other annual payment, while the second spoke of all annuities, yearly interest of money, or other annual payments. The argument advanced was that while a sum payable every calendar month must be a definite sum per annum, because it would be twelve times the monthly sum and could therefore be an annual sum, the same could not be said of a sum payable weekly, because there were fifty-two weeks and one day in an ordinary year and fifty-two weeks and two days in a leap year, so that there could never be a fixed annual sum and, therefore, no annual payment or annuity. Astbury, J., who decided the case, repelled the contention. He held that the covenant was in substance a covenant to pay so much a year by weekly payments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the sister to live at the particular house in her customary degree of comfort, the trustees would be entitled to apply such portion of the capital of the residuary estate by way of addition to the income therefrom as they might in their discretion think fit. Certain payments out of the capital were made under the last mentioned provision of the will and the Crown claimed to recover tax from the trustees in regard to those payments under Schedule D, Case III, rule 1(a), to the Income Tax Act of 1918. The Court was composed of Lord Greene, M.R., who delivered the judgment of the Court, and Mackinnon and Morton, L.JJ. It was held that since the payments directed to be made under the special provision of the will were capable of recurrence, they were annual payments and the fact that they varied in amount did not remove their quality of being capable of recurrence and being, as such annual payments . The payments might not require to be made every year, because the will directed them to be made only if the income available did not suffice to keep the sister in her customary comfort. Nevertheless, the Court held that inasmuch as the payments contemplated were of such a nature that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al , as used in taxing statutes, must be taken to mean payments, in whatever kind of instalments paid, made every year in discharge of a liability incident to that year, if it has to be made during more than one year, whether consecutively or otherwise. A payment is annual if, as was pointed out in the last of the cases I mentioned a few moments ago, it has the quality of recurrence in different years, although it might not be in every one of a succession of years. It is also not necessary that its quantum should be fixed by reference to a whole year. The illustration given by Allsop, J., in the case of Gappumal Kanhaiyalal v. Commissioner of Income-tax, C.P. U.P. [1945] 13 I.T.R. 210 at 220, appears to me to be as happy as apposite. He said, what Rowlatt, J., had said inter alia in the case of Ryall v. Hoare, Ryall v. Honeywill [1923] 2 K.B. 447 that the word annual was used in connection with statutes in the same sense as that in which the Christmas festival was called annual or the Dasehra festival was called annual. It appears to me that both on principle and on authorities, it must be held that the payment in the present case was an annual charge within the meaning of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. But in a taxing statute, there is no room for any intendment or presumption or balancing of equities. One has merely to look at the terms employed, look fairly at the language used and ascertain what the statute says. If it speaks clearly to a certain effect, then it is wholly immaterial that what it says does not appear to accord with the principles upon which other parts of the Act appear to have proceeded or that the assessee gets what seems to be an undeserved advantage. It is to be borne in mind that what section 9(1)(iv) provides for is a deduction of certain sums out of the assessee's income, after the income has become his. The broad ground that where there is only an application of the income, there can be no claim to exemption from tax or deduction in the computation of the income is, therefore, not available as an argument against a literal construction of section 9. It is also to be noticed, as I pointed out to Mr. Meyer quite early in the course of the argument, that clause (iv) of section 9(1) provides not merely for the deduction of an annual charge but also for the deduction of any interest payable on mortgages to which the property is subject. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide for the allowance to the same extent as interest, of annual payments charged on the property, the wording of section 9(1) of the Act does not provide for any charges other than interest and ground rent, and we suggest that the clause in question should be amended accordingly. We recommend also that the restriction which we suggest in Chapter VIII, section 2, as regards interest paid, should be extended to the allowance of other charges. In section 2 of Chapter VIII, the Committee observed as follows: An anomaly arises from the fact that the interest paid on money borrowed for private purposes may be allowable if the loan is secured on real property but not otherwise, and we recommend that interest should be allowable in arriving at the income from property only when it is paid in respect of a mortgage or other charge to which the property was subject when it was acquired by the assessee, or in respect of money borrowed specifically for the acquisition of the property or for its repair, renewal or reconstruction. It will thus be seen that the Committee noticed the anomaly of making interest paid on money deductible, merely because the loan was secured on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted the word 'is'. The effect is to secure, as the Act does at present, that the allowance is claimable, no matter when and for what purpose the mortgage or charge arises. The rest of the comment is not material. It would appear that the change made by the Select Committee was accepted by the sponsors of the Amendment Bill, because the second Amendment Bill of 1938 presented on the 10th of November, 1938, set out the proposed clause exactly in the form into which it had been altered by the Select Committee. Subsequently, the Legislature when passing the Amendment Act of 1939, passed the clause in the same form and it is in that form that it still appears in the Act. I have referred to this background only for the purpose of showing that the anomaly, which Mr. Meyer made the basis of his argument, was noticed by those who had to consider the clause with a view to its amendment. I am not referring to what the Income-tax Enquiry Committee or the Select Committee said for the purpose of construing the clause as we find it, because what is relevant is the intention of the Legislature and not the intention of any Committee or even of the sponsors of the Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily for the payment of his personal liabilities to other persons or interests on mortgages created by him. But the section says and in my view says in unmistakable terms, that such charges and amounts of interest are also deductible and so must we hold. The third contention of Mr. Meyer must also be accordingly overruled. On this question there is a decision of the Bombay High Court in the case of Prince Khanderao, Gaekwar of Baroda v. Commissioner of Income-tax, Bombay City [1948] 16 I.T.R. 294, on which Mr. Chakravarti for the assessee strongly relied, but to which I have not referred so far. I have not done so because it seems to me that although the Department contended in that case that a voluntary charge was not within the meaning of section 9(1)(iv) of the Act and although the Court ruled in general terms that all that the section required was that there should be a valid and legally enforceable charge and not also that it should be a compulsory charge, the decision is not really useful as a solution of the problem before us. What the learned Chief Justice and his brother Judge said in that case in repelling the actual argument of the Department was that, after the crea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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