1938 (1) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 6,498 paid to the assessee as a maintenance allowance is taxable as income.
2. Whether the assessee can claim exemption under Section 14(1) of the Income Tax Act, 1922.
3. Whether the sum received by the assessee is agricultural income and thus exempt.
4. Whether the sum received by the assessee is covered under the provisions of Section 25 of the Court of Wards Act and Section 41 of the Income Tax Act.

Detailed Analysis:

1. Taxability of the Maintenance Allowance:
The primary issue was whether the sum of Rs. 6,498 paid to the assessee as a maintenance allowance under Section 25 of the Court of Wards Act constitutes taxable income. The court noted that the term "income" is of elastic ambit and is not limited by the words "profits and gains." The court referred to the Privy Council's observation that "anything which can properly be described as income is taxable under the Act unless expressly exempted." The court concluded that the sum of Rs. 6,498, being within the absolute control of the assessee and not subject to any accounting to the Court of Wards or the Rani, was rightly treated as income by the revenue authorities.

2. Exemption under Section 14(1) of the Income Tax Act, 1922:
The assessee contended that the sum received was exempt under Section 14(1) of the Income Tax Act, which exempts sums received by a member of a Hindu undivided family. The court examined whether the assessee could be considered a member of a Hindu undivided family. It noted that the assessee, being the daughter's son of the Rani and a prospective heir, did not fall within the categories of males, collaterals, relations by adoption, or poor dependants as defined under Hindu law. The court concluded that the assessee could not be regarded as a member of a Hindu undivided family and thus was not entitled to the exemption under Section 14(1).

3. Agricultural Income:
The assessee initially contended that the sum received was agricultural income and thus exempt. However, this contention was not advanced before the court. The court noted that the assessee, being only a reversioner and not the owner of the estate during the Rani's lifetime, could not claim the sum as agricultural income. The court further observed that the character of the income changed when it passed from the owner of the estate to the assessee, making it taxable in the assessee's hands.

4. Provisions of Section 25 of the Court of Wards Act and Section 41 of the Income Tax Act:
The court examined Section 25 of the Court of Wards Act, which allows the Court of Wards to determine sums for the expenses of the ward and his dependants. The court noted that the sum paid to the assessee was intended for his personal expenses as a dependant of the ward. However, the court concluded that this sum, once paid to the assessee, became his income and was taxable. Section 41 of the Income Tax Act, which deals with the liability of the Court of Wards in respect of the income of the ward, was found to have no bearing on the issue at hand.

Conclusion:
The court answered the question formulated by the Commissioner of Income Tax in the affirmative, holding that the sum of Rs. 6,498 paid to the assessee as a maintenance allowance was taxable as income. The court directed that a copy of its judgment be sent to the Commissioner of Income Tax and ordered the assessee to pay the costs of the reference, fixing the fee for the Department's counsel at Rs. 200.