1973 (12) TMI 12 - HC - Income Tax

Expenditure Tax Act, 1957 - whether the payment of Rs. 75,000 which the assessee has made to meet the marriage expenditure of his daughter is covered by the exemption clause (j) of section 5 of the Expenditure-tax Act, 1957 - We find that the whole of the disputed expenditure of Rs. 75,000 is exempted under clause (j) of section 5 of the Act. Our answer to the question referred to us is, therefore, in the affirmative

Issues Involved:
1. Applicability of exemption clause (j) of section 5 of the Expenditure-tax Act, 1957.
2. Nature of the obligation incurred by the assessee.
3. Definition and scope of "settlement on trust or otherwise for the benefit of any other person."

Detailed Analysis:

1. Applicability of Exemption Clause (j) of Section 5 of the Expenditure-tax Act, 1957:

The primary issue was whether the payment of Rs. 75,000 made by the assessee for his daughter's marriage fell under the exemption clause (j) of section 5 of the Expenditure-tax Act, 1957. The assessee argued that the amount was impressed with an obligation in the nature of a trust, thereby exempting it from expenditure-tax. The revenue contended that clause (j) did not apply to the facts of the case.

2. Nature of the Obligation Incurred by the Assessee:

The facts revealed that the assessee, an ex-Ruler, had disputes resolved through the intervention of the Government of India, leading to a settlement documented in a letter from the Raj Pramukh. This settlement required the assessee to set apart Rs. 1,75,000 from the sale proceeds of an immovable property for the marriage of his two daughters. The assessee paid Rs. 1,00,000 for his elder daughter's marriage and retained Rs. 75,000 for the second daughter's marriage, which was later spent in the relevant accounting period.

The court observed that the obligation incurred by the assessee, accepted at the behest of the Government of India, was not merely political but had legal implications once accepted and acted upon by the parties. Thus, the obligation was binding and enforceable.

3. Definition and Scope of "Settlement on Trust or Otherwise for the Benefit of Any Other Person":

The court examined whether the expenditure of Rs. 75,000 could be categorized under "settlement on trust or otherwise for the benefit of any other person" as per clause (j) of section 5. The revenue argued that the payment did not constitute a gift, donation, or settlement on trust, and hence should not be exempt.

The court clarified that clause (j) included three categories of expenditure: gift, donation, and settlement (either on trust or otherwise for the benefit of another person). The court focused on whether the arrangement amounted to a settlement for the benefit of the assessee's daughters. It was noted that the arrangement to set apart Rs. 1,75,000 for the daughters' marriages, even if not a formal trust, was a settlement for their benefit.

The court further emphasized that the obligation to spend Rs. 75,000 for the second daughter's marriage was overriding and binding, making it a settlement for her benefit. The court also dismissed the argument that the absence of interest payment on the amount negated the existence of a trust, stating that a valid trust could be created in the corpus of a fund without covering its usufruct.

Conclusion:

The court concluded that the disputed expenditure of Rs. 75,000 was exempt under clause (j) of section 5 of the Expenditure-tax Act, 1957. The answer to the referred question was in the affirmative, and the Commissioner was ordered to bear the costs of the respondents. The court held that the whole amount of Rs. 75,000 was exempt from expenditure-tax as it constituted a settlement for the benefit of the assessee's daughter, thereby falling within the ambit of clause (j).

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