1929 (8) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Assessment of Income Tax on Raja Bijay Singh Dudhuria for the year 1924-25.
2. Deduction of maintenance payment to stepmother from assessable income.
3. Classification of the Raja and his stepmother as members of an undivided Hindu family.
4. Legal liability of the Raja to provide maintenance to his stepmother.
5. Applicability of Income Tax Act provisions on deductions for maintenance payments.

Issue-wise Detailed Analysis:

1. Assessment of Income Tax on Raja Bijay Singh Dudhuria for the year 1924-25:
The Raja was assessed for the year 1924-25 based on his income for the year 1923-24. Initially, the Income Tax Officer allowed a deduction of Rs. 9,900 for maintenance payments to his stepmother, Sreemati Sugankumari Bibi. However, the Commissioner of Income Tax later reviewed and disallowed this deduction, increasing the assessed income to Rs. 1,21,905.

2. Deduction of maintenance payment to stepmother from assessable income:
The Raja contended that the Rs. 9,900 deduction for maintenance payments was justified. However, the Commissioner of Income Tax disagreed, stating that the maintenance payment was a personal expense and not a charge upon the estate for tax purposes. The court ultimately held that there was no provision in the Income Tax Act allowing the Raja to deduct this sum from his taxable income.

3. Classification of the Raja and his stepmother as members of an undivided Hindu family:
Initially, the Commissioner of Income Tax classified the Raja and his stepmother as members of an undivided Hindu family, which would affect the tax assessment. However, during the hearing, the Advocate-General abandoned this contention, and it was accepted that the Raja should be assessed as an individual.

4. Legal liability of the Raja to provide maintenance to his stepmother:
The court acknowledged that the maintenance payment was a legal liability of the Raja, arising because he was in possession of his ancestral estate. This maintenance was declared a charge on the estate by a consent decree from a previous suit. The court noted that the charge extended to all types of income, including agricultural income, securities, and business income.

5. Applicability of Income Tax Act provisions on deductions for maintenance payments:
The court examined various sections of the Income Tax Act to determine if any provided for the deduction of maintenance payments:
- Section 8 (Interest on Securities): No provision allowed deduction for the annuity.
- Section 9 (Property Income): The charge for maintenance did not qualify as a deductible mortgage or ground rent.
- Section 10 (Business Income): The annuity could not be deducted as it was not relevant to the business's profits.
- Section 12 (Other Sources): The annuity was not considered a personal expense but did not qualify for deduction under the general provisions.

The court concluded that the Raja could not deduct the maintenance payment from his taxable income under any section of the Income Tax Act. The principle that income should be taxed at the source, as applied in English law, was not explicitly provided for in the Indian Act.

Conclusion:
The court answered in the negative to the question of whether the assessee (Raja) was entitled to the exemption claimed by him. The court emphasized that it could not adapt or rearrange the machinery of the Act based on notions of fairness. The Raja was entitled to the costs of the case stated due to the varied positions taken by the Income Tax authorities. All judges (Rankin, Charu Chander Ghose, and P.L. Buckland) agreed with this judgment.