2017 (2) TMI 1281 - AT - Income Tax

Treatment of alimony received by the assessee from her ex-husband - whether taxable under the head Income from other sources or non taxable capital receipt - Held that - In the proviso to section 56(2)(vi) any sum received from a relative is exempt from tax. In the definition of relative, the receipt from whom is exempt under the Act, inter alia not only the spouse but the brother and sister of the spouse have also been included. As we have observed above that the maintenance or alimony is paid by the husband to his wife in recognition of her pre-existing right, whether marriage relationship is still continuing or has been dissolved, does not bar the payment of alimony by the ex-husband to the divorced wife. Under such type of circumstances, in our view, in the definition of spouse, exspouse is also included except where there is an evidence that the payment is not made as a gift or an alimony but for some other consideration or by virtue of some other transaction. In the absence of any such evidence, the payment of alimony amount by the ex-husband to his wife is nothing more than a gift and is exempt under the proviso to section 56(2)(vi) of the Act. We accordingly do not find any justification on the part of Income Tax Authorities to tax the said amount received by the assessee from her ex-husband as alimony and the additions made in this respect are accordingly ordered to be deleted. - Decided in favour of assessee.

Summary

Issues:
1. Tax treatment of alimony received by the assessee from her ex-husband - taxable under "Income from other sources" or non-taxable capital receipt.

Analysis:
The appeal was filed by the assessee against the Commissioner of Income Tax (Appeals) order regarding the tax treatment of alimony received from her ex-husband. The Assessing Officer considered the amount taxable as income from other sources. The CIT(A) noted that the divorce decree granted in India was not recognized under German law, and the alimony was paid after a delay. The CIT(A) held that the payment had no contractual or legal origin and was taxable under section 56(2)(vi) of the Income Tax Act. The Tribunal observed that under Hindu Law, a wife has a right to maintenance and alimony even after divorce. It was noted that no law prevented a lump sum payment as maintenance by a husband to his ex-wife. The Tribunal interpreted the definition of relative under the Act to include an ex-spouse for exempting alimony payments. Unless evidence suggested otherwise, alimony from an ex-husband to his ex-wife was considered a gift and exempt under the Act. Therefore, the Tribunal allowed the appeal, ordering the deletion of the tax on the alimony amount received.

In conclusion, the Tribunal held that alimony received by the assessee from her ex-husband was not taxable and should be treated as a non-taxable capital receipt. The decision was based on the interpretation of relevant laws and definitions under the Income Tax Act, emphasizing the rights of a wife to maintenance and alimony even after divorce. The Tribunal found no justification for taxing the alimony amount and ruled in favor of the assessee, allowing the appeal and ordering the deletion of the tax on the alimony received.