9911796707
TMI Blog1982 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... nt DOTH FURTHER ORDER that the respondent do pay to the petitioner a sum of rupees twenty-five thousand as permanent lump sum alimony and pay to her a further sum of rupees seven hundred and fifty per month as and by way of permanent alimony with effect from first day of August one thousand nine hundred and sixty-three till her re-marriage.... " In the previous year relevant to the assessment year 1964-65, the assessee received a sum of Rs. 25,000 on account of permanent lump sum of alimony from the said Maharaja and further received a sum of Rs. 6,000 on account of the monthly alimony of Rs. 750 per month. In each of the previous years relevant to the assessment years 1965-66, 1966-67 and 1967-68, the assessee received Rs. 9,000 as aggregate monthly alimony paid by the said Maharaja under the said decree. In the assessment proceedings, the assessee claimed exemption from tax in respect of the aforesaid amounts. The said claim was rejected by the ITO. The Appeals preferred by the assessee to the AAC were dismissed and so also the appeals preferred by the assessee to the Income-tax Appellate Tribunal. From this decision of the Tribunal, the following two questions have been referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is different, and, normally, the question in such a case before an English court was whether the payments in question amounted to annual payments. In support of this contention, Mr. Dastur drew our attention to Sch. D of the English I.T. Act, 1952, where the charge of tax was levied in respect of what is referred to as " an annual payment ". (See Simon's Income-tax, 2nd Edn., Vol. IV, p. 114). It was pointed out by him that in the United Kingdom where a husband pays alimony to the wife, generally either the husband gets a deduction in respect of the, said amount in the computation of his taxable income and the wife is taxed in respect of it, or the husband is not given any deduction, but the wife is not taxed in respect of the amount received. It was thus pointed out by him that either the deduction was granted to the husband or no tax was levied on the wife in respect of such payments. In support of this, he drew our attention to Simon's Income-tax, 2nd edn., vol. III, p. 239 para. 402. It was submitted that in the United Kingdom the wife was taxed in respect of the receipt of alimony only where the amount of alimony was diverted at source from the income of the husband, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out therein, the court is entitled to rescind the order for alimony. Section 12 of that Act provides for the annulment by a decree of nullity of voidable marriages. We may at this stage point out that, as far as the general right of a wife to maintenance is concerned, no rule of Hindu law has been shown to us that during the subsistence of the marriage a wife is entitled to stay separately from the husband and claim maintenance, except under certain special circumstances which would justify her staying separately from her husband. Clause (24) of s. 2, being the definition section under the said Act, gives an inclusive or extensive definition of the term " income and provides that it includes, inter alia, profits and gains. At the relevant time, sub-s. (3) of s. 10 of the said Act, read with the opening portion thereof, ran thus: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- . ...... (3) any receipts which are of a casual and non-recurring nature, unless they are (i) capital gains, chargeable under the provisions of section 45 ; or (ii) receipts arising from business or the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, of the crop of a field." In Maharajkumar Gopal Saran Narain Singh v. CIT [1935] 3 ITR 237 (PC), the assessee, who owned a nine-annas share in an estate, with the object of discharging his debts and of obtaining for himself an adequate income for his life, conveyed the greater portion of his estate to his son-in-law's mother who owned the remaining seven-annas share in the estate. The consideration for the transfer was: (i) the payment of the assessee's debts amounting to Rs. 10,26,937 ; (ii) a cash payment of Rs. 4,73,063 ; and (iii) an annual payment of Rs. 2,40,000 to the assessee for his life. It was held by the Privy Council, inter alia, that this was clearly a case where the owner of an estate (the assessee) had exchanged a capital asset for (inter alia) a life annuity which was income in his hands and not a case in which he had exchanged his estate for capital sum payable in insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was a payment on capital account. But that, as for the annual royalty, including the minimum royalty, it was income flowing from the covenants in the lease and was in no sense a payment on capital account. We come next to the case of Rani Amrit Kunwar v. CIT [1946] 14 ITR 561, which was decided by a Full Bench of the Allahabad High Court. The assessee was the wife of the Ruler of the Kalsia State and the sister of the Maharaja of Nabha State. She was residing in Dehra Dun in British India for some years with her sons and daughters. She received annual payments from the Kalsia State for the purpose of meeting her household and living expenses and the education of her children and also received an annual allowance from the Nabha State as " wardrobe allowance ", which was presented on certain festival days each year. She was not bound to account for the moneys. It was held that the allowances received by the assessee from the Kalsia State were remittances from her husband and were taxable as income which must be deemed to have accrued to the assessee in British India under s. 4(2) of the Indian I.T. Act, 1922, and the question whether the remittances received by her were casual a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present no difficulty. A regular payment or a payment expected to be regular may, I think, in principle be as much `income' when it is received from a giver who makes it systematically and for a known and rational reason (and a fortiori when it is received in accordance with custom) as it is if it is made in pursuance of some binding obligation whether arising out of business dealings out of an investment or out of some other enforceable obligation. And if the word return had been used by Sir George Lowndes in the strict sense that nothing could be income in India which was not the result of some outlay, it would be difficult to see how anything could be taxable which was not the produce of some valuable consideration given by the recipient, however binding might be the actual obligation under which it was paid. For these reasons, in my view, it cannot be taken that Sir George Lowndes intended to lay down a general test in every case that every payment must be the result of some outlay on the part of the assessee before it is taxable." In Raghuvanshi Mills Ltd. v. CIT [1952] 22 ITR 484 at p. 489; 23 Comp Cas (Ins.) 1, the Supreme Court has pointed out that the remarks of the judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof cannot be insisted upon. These payments constitute 'income ' because they are referable to a definite source, which is the office, profession, vocation or occupation. It could, therefore, be said that such a voluntary payment is taxable as having an origin in the office, profession or vocation of the payee, which constitutes a definite source for the income. What is taxed under the Indian Income-tax Act is income from every source (barring the exceptions provided in the Act itself) and even a voluntary payment, which can be regarded as having an origin, which a practical man can regard as a real source of income, will fall in the category of " income which is taxable under the Act ". In Smt. Dhirajben R. Amin 'v. CIT [1968] 70 ITR 194 (Guj), the assessee was a member of a family which had a substantial interest in Alembic Chemical Works Ltd. & allied concerns. Resolutions were passed by the board of directors of two of the companies whereby the assessee was to be paid Rs. 1,000 per month by one of the companies and 20% of the profits of an other company for services to be rendered by her. The amounts were disallowed as expenditure in the assessments of the two companies. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee could be taxed if they could be classified as income or if they could be said to arise from some " source " and were not exempt under s. 4(3)(vii) of the Indian I.T. Act, 1922. In the circumstances of the case, the allowance received by the assessee from her husband was held to be taxable as income in her hands. It is true that there is an observation in this decision that " every receipt generally may be described as income, unless it is expressly exempt " with which a Division Bench of this court has expressed respectful disagreement (see the case of Mehboob Productions (P.) Ltd. [1977] 106 ITR 758 (Bom), referred to hereafter). But the conclusions reached by the Division Bench of the Allahabad High Court have not been disagreed with or disapproved in any case brought to our notice. In CIT v. M. Ramalakshmi Reddy [1981] 131 ITR 415, it has been held by the Division Bench of the Madras High Court that a receipt cannot be treated as income where no characteristic of income can be detected in it. Where a person gets some receipt of money where he does not angle for it, or where it is not the product of an organised seeking after emoluments, or whether it is merely a chance en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial available in the case, there was nothing to show that the assessee-company had produced the picture " Mother India " with the slightest expectation that the same would be exempt from entertainment duty and that the amounts collected by the exhibitors as and by way of such duty would be directed to be paid over to it by the Govt. of Bombay. These receipts did not partake of that element of a return which is necessary for them to constitute income and further it was of the nature of a windfall. On both the counts, therefore, these receipts could not be included in the taxable income of the assessee. It was pointed out by Mr. Dastur that this decision has been arrived at after considering the case of Rani Amrit Kunwar [1946] 14 ITR 561 (All) [FB], as well as the case of Shanti Meattle [1973] 90 ITR 385 (All), the case of Maharani Shri Vijaykuverba Saheb of Morvi [1963] 49 ITR 594 (Bom), the case of Smt. Dhirajben R. Amin [1968] 70 ITR 194 (Guj), as well as the decisions of the Privy Council cited by us earlier. Mr. Dastur placed very strong reliance on the following passage in the judgment of Desai J., which occurs after the consideration of the aforesaid decisions as Well as som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income " as follows (p. 790): " Income is a monetary return expected by the assessee for the labour and/or skill bestowed, and/or capital invested by him; coming in from definite source, which need not be a legal source, in the sense that the failure to pay the same need not be enforceable in a court of law; and excluding a receipt 'in the nature of' a mere windfall which, as already stated above, must mean a windfall in regard to its very nature and not in regard to its extent or quantum". Mr. Dastur pointed out that in the present case it could never be said that the assessee entered into the marriage with a view to obtain a decree for nullity and the alimony provided thereunder. There was, therefore, no conscious effort or any return expected by the assessee for the labour or skill bestowed by the assessee and in fact there was no question of any labour or skill being expended by the assessee to obtain alimony and hence, the amount of alimony could never be regarded as the " income " of the assessee. In our view, the submission of Mr. Dastur cannot be accepted. It is significant that in this very decision, the learned judges, who decided the case, have cited with approval bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree is not the source of the payment of alimony. Whatever were the earlier rights of the assessee, her right to obtain a particular amount in lump sum and an amount of Rs. 750 per month as alimony are definitely crystallised in the decree. It cannot be said that the decree is a mere recognition or continuation of an earlier obligation. If the decree were set aside, we fail to see how the assessee could claim the sum of Rs. 750 per month from her ex-husband. If the ex-husband failed to pay the amount, it is the decree which the assessee would have to execute. In our view, it is clear that the decree is the definite source of these receipts. The amount of Rs. 750 per month is what the assessee periodically and regularly gets and is entitled to get under this decree. This amount must, therefore, be looked upon as a return from the said decree which is the definite source thereof. The word " return ", in our view, in a case like this, can never be interpreted as meaning only a return for labour or skill employed on capital invested. Such a definition of " return " would be too narrow and would exclude the case of voluntary payments, when it is the settled position in law that in some c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing but a commutation of a part of the future alimony payable to the assessee. It was, on the other hand, contended by Mr. Dastur that regular monthly payments or periodic payments can never be equated with a lump sum payment or a single payment. It was urged by him that the lump sum payment of Rs. 25,000 under the decree to a certain extent diminished, extinguished or satisfied the right of alimony created under the decree and that such a receipt should be regarded as a capital receipt. It was urged by him that where a lump sum is paid, which satisfies a right or obligation, it would normally be a capital receipt, unless the payment is in respect of a commercial, business or revenue asset or represents the commutation of an existing right to recurring income receipts in circumstances which show that the lump sum represents the present value of the future -income receipts. It was submitted by Mr. Dastur that in the present case the lump sum payment of Rs. 25,000, to a certain extent, diminishes the right of the assessee to obtain alimony which right must be regarded as of capital nature. It was urged by him that the burden was on the revenue to establish that this receipt is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, certain minutes were recorded covering, inter alia, the furnishing by the firm of the names of dealers over the past six months, the execution of local orders, certain outstanding contracts and the payment of commission on such contracts, and the disposal of the stocks of the firm. As a gesture of goodwill, Philips Electrical Co. agreed to pay in instalments Rs. 40,000 per annum for a period of three years to each of the partners of the firm. The question was whether the sum of Rs. 20,000 received in the accounting year ended December 31, 1954, by each of the assessees, who were partners of the firm, was assessable to income-tax. It was held that in the absence of any proof that the amount payable to the partners represented the likely profits of the firm that would have arisen if the agreement had not been terminated, it could not be said that it replaced those profits. Although the amount was large, there was nothing to show that it was an adequate measure of the profits that were expected to be made during the three years in which the amount was to be paid. It was also held that as the said payment was not related to any business done or to loss of profits and it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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