1988 (8) TMI 55 - HC - Income Tax

Summary

Issues:
1. Interpretation of law regarding the allowance received by the assessee.
2. Determination of whether the payment of the allowance was an expenditure in the hands of the erstwhile ruler.
3. Classification of the allowance received by the assessee as income.
4. Exemption of the allowance from income tax under specific sections of the Income-tax Act.
5. Tax liability of the "Hath-Kharcha" allowance received by the assessee from her son.
6. Assessment of the allowances in question in relation to the Hindu undivided family.
7. Verification of whether the allowances were paid out of the income of the joint family or to the assessee as a member of the joint family.

Detailed Analysis:

The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, regarding questions of law raised by the assessee. The primary issue revolves around the interpretation of the allowance received by the assessee and its classification as income. The court was tasked with determining if the allowance was wrongly applied from the privy purse of the ruler, Maharana Bhagwat Singhji of Mewar.

Another crucial aspect addressed in the judgment was whether the payment of the allowance constituted expenditure in the hands of the erstwhile ruler, Sri Bhagwat Singhji, or if it should be considered an expense of Maharana Bhagwat Singhji of Mewar. This raised questions about the tax liability of the allowance under specific sections of the Income-tax Act, particularly examining if the allowance was exempt from income tax.

Furthermore, the judgment delved into the tax implications of the "Hath-Kharcha" allowance received by the assessee from her son, H. H. Maharana Bhagwat Singhji of Udaipur. The court scrutinized whether this allowance was liable to income tax in the hands of the assessee, leading to a detailed analysis of the familial and joint family aspects related to the payments.

In aligning with a previous Division Bench decision concerning a similar reference involving the Junior Rajmata, the court concluded that the amounts received by the deceased-assessee, the Senior Rajmata Smt. Birad Kanwar, were not to be treated as her income and were not liable to be taxed in her hands. Consequently, the reference was answered in favor of the assessee, refuting the Tribunal's view on the tax liability of the allowances received by the deceased-assessee.