1986 (6) TMI 27 - HC - Income Tax

Summary

Issues:
- Whether the expenditure of Rs. 10,000 as marriage expenses is a capital charge on bequeathed properties and can be allowed as a deduction under the Income-tax Act, 1961?
- Under what provision of the Income-tax Act, 1961, can such an amount be allowed as a deduction?

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the deduction of Rs. 10,000 as marriage expenses incurred by the assessee. The assessee inherited a property under a will that obligated him to pay Rs. 30 per month to his mother for maintenance and Rs. 10,000 to each unmarried sister at the time of their marriage. The Income-tax Officer disallowed the deduction, but the Appellate Tribunal partly allowed the Rs. 10,000 expenditure for the sister's marriage, considering it an overriding charge on the property as per the terms of the will.

The court analyzed whether the Rs. 10,000 expenditure could be allowed as a deduction under the Income-tax Act, 1961. It was noted that although the amount was a capital charge, it could not be allowed as a deduction under section 24(1)(iv) of the Act. The court considered if any other provision could permit such a deduction, but the counsel for the assessee failed to identify one. The court referred to the principle of overriding charge, citing the Supreme Court's decision in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367, which emphasized that the nature of the obligation determines if an amount can be deducted.

The court held that the Tribunal had misapplied the principle of overriding charge. It clarified that for an amount to be considered an overriding charge, the income should be diverted before reaching the assessee, which was not the case here. As the income had been applied in the relevant year and not diverted before reaching the assessee, the expenditure for the sister's marriage could not be treated as an overriding charge. Consequently, the court answered the question in the negative, favoring the Revenue, and made no order as to costs.