1977 (8) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Legal obligation of maintenance payments to widows under the Jagir Manual.
2. Impact of the Madhya Bharat Abolition of Jagirs Act on maintenance allowances.
3. Determination of whether maintenance payments are part of the assessee's total income.

Issue-wise Detailed Analysis:

1. Legal Obligation of Maintenance Payments to Widows under the Jagir Manual:
The primary issue was whether the maintenance payments to the widows were under a legal obligation and thus constituted an overriding title, excluding them from the assessee's total income. The court noted that the estate of the jagirdar was governed by the Manual for Jagirdars of the Holkar State (Jagir Manual). It was undisputed that the Ruler of the Holkar State had the jurisdiction to fix maintenance under Chapter IV, Section 16 of the Jagir Manual. Orders passed by His Highness Maharaja of Holkar granting maintenance to the widows were recognized as having the force of law. The court confirmed that the maintenance payments were legally mandated and thus constituted an overriding title.

2. Impact of the Madhya Bharat Abolition of Jagirs Act on Maintenance Allowances:
The court examined whether the maintenance allowances continued after the enactment of the Madhya Bharat Abolition of Jagirs Act (28 of 1951). Section 9 of the Act was pivotal, stating that any person entitled to maintenance under any law would continue to receive it out of the compensation payable to the jagirdar. The court interpreted Section 9 as maintaining the right to receive maintenance, with the quantum to be fixed by the Jagir Commissioner. The court rejected the department's contention that the maintenance allowance ceased without an order from the Jagir Commissioner, emphasizing that Section 9 preserved the right to maintenance.

3. Determination of Whether Maintenance Payments are Part of the Assessee's Total Income:
The court considered whether the maintenance payments were part of the assessee's total income. Referring to the Supreme Court's decision in Commissioner of Income-tax v. Imperial Chemical Industries [1969] 74 ITR 17, the court distinguished between income diverted by overriding title and income applied to discharge an obligation. The court concluded that the maintenance payments were diverted by an overriding title before reaching the assessee, thus not forming part of the assessee's total income. The court affirmed that the maintenance allowance of Rs. 14,400 per annum payable to the two widows was under a legal obligation or overriding title.

Conclusion:
The Tribunal was correct in holding that the maintenance allowance of Rs. 14,400 per annum payable to the two widows was under a legal obligation or overriding title and did not form part of the assessee's total income. The parties were directed to bear their own costs.