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TMI Blog1971 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... 09. The net income so computed was Rs. 2,32,957, and a tax of Rs. 1,30,672.35 was imposed. In appeal, the appellate authority excluded from the taxable income the income of the properties allotted to the " Rani group " but sus tai ned the addition of the income of the properties allotted for the enjoyment of the male members. Aggrieved by the order of the appellate authority, the assessee took up the matter in second appeal to the Appellate Tribunal of Agricultural Income-tax. The Tribunal rejected the contention of the assessee and dismissed the appeal. Thereafter, at the instance of the assessee, it stated a case under section 60(1) of the Act and submitted to the High Court, for its opinion, three questions of law, namely : " (1) Whether the finding of the Tribunal that the family karar of 1909 does not constitute a diversion of family income to the various allottees thereunder is correct ? (2) Whether the finding of the Tribunal that the provisions of sub. section (1) of section 9 of the Act are applicable only to cases of diversion of income and not otherwise is correct ? (3) Whether the finding of the Tribunal that the provisions of sub. section (4) of section 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly over the agricultural income or assets : Provided further that the expression ' settlement or disposition ' shall, for the purposes of the sub-section of the sub-section, include any disposition, trust, covenant, agreement or arrangement and the expression 'settlor or disponer' in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made: Provided also that this sub-section shall not apply to any agricultural income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the lifetime of the person and from which agricultural income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said agricultural income as and when the power to revoke arises to him." A Hindu undivided family is a person within the meaning of. section 2(m) of the Act. We shall now proceed to examine the nature of the karar entered into in 1909. The family of the assessee appears to have been one of the premier land-holding families in Malabar. It appears to have had agricultural properties in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Clause 18 of the karar prohibited the parties in possession of the properties from cutting and selling the kuzhikoors or dismantling the buildings in the properties in their possession. Clause 19 of the karar prohibited the patties from enhancing the munpattam amounts due to the tenant. Clause 6 of the karar provided that all the male members living in the Kalari, on completing the age of 21, should leave the Kalari and thereafter the karnavan should make arrangement for their maintenance. Karar does not stipulate what arrangements ha should make for their maintenance. Therefore, it follows that he may maintain them either in the tarwad house or give them maintenance allowance either in the shape of paddy or cash. It may also be noted that the karar does not provide as to what would happen if the number of members in the tarwad substantially increases. One other thing that has got to be noted is that the karar is silent as to what would happen to the properties shown in schedules B, C and D after parties Nos. 2, 3 and 4 die, all of whom, we were told, have died. Hence, the karnavan can take possession of them on behalf of the family after their death. On an examination of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test that if the income in dispute is considered as having been applied to discharge an obligation of the assessee, the same is liable to be included in the assessable income of the assessee but if on the other hand the same had been diverted by an overriding charge, then it is not liable to be included in the assessable income of the assessee as it ceased to be his income. If we apply this test to the facts of the present case, it is clear that the income in dispute continued to be the income of the family. It was merely applied to discharge an obligation of the family, namely, the obligation to maintain the junior members of the family. At first sight some of the decided cases on the subject appear to speak in conflicting voices. But, on a careful examination, it is possible to find out the dividing line. The earliest decision on the subject is that of the Judicial Committee in Raja Bejoy Singh Dudhuria v. Commissioner of Income-tax. The assessee therein succeeded to the family ancestral estate on the death of his father. Subsequently, his step-mother brought a suit for maintenance against him in which a consent decree was made directing the assesseeto make a monthly payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year of account the executors had Rs. 5,537 for expenses in connection with the addya sradh and a sum of Rs. 1,25,000 for probate duty, The question arose whether those payments were deductible in computing the chargeable income. The judicial Committee held, affirming the judgment of the Calcutta High Court, that the payments made for the sradh expenses and the costs of probate could not be excluded in computing the chargeable income. Those were payments made out of the income of the estate coming to the hands of the appellants as executors and in pursuance of obligation imposed by the testator. Their Lordships were of opinion that it was not a case in which a portion of the income was by an overriding title diverted from the person who would otherwise have received it as in Bejoy Singh Dudhuria's case, but a case in which the executors having received the whole income apply a portion of it in a particular way. From this judgment of the Judicial Committee, it is clear that the true test is that if the income in question is an income of the assessee, the application of the same being not relevant for determining its assessability, it is assessable in his hands but if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eached the hands of the assessee. We are unable to accept this contention as correct. The income is the income of the family. It reached the hands of the family as soon as it reached the hands of any of the members of the family who were entitled to receive it on behalf of the family. The members of the family received that income on behalf of the family, and applied the same in discharge of an obligation of the family. When this court spoke of the income reaching the hands of the assessee, it did not refer to any physical act. It was dealing with a legal concept a receipt in law. Viewed that way, it is quite clear that the income with which we are concerned in this case was received by the family. One other decision on the point in issue to which we would like to refer is the decision of the Bombay High Court in Commissioner of Income-tax v. Makani Lalji wherein Beaumont C.J. speaking for the court, held that in computing the income of the Hindu undivided family for purposes of income-tax, moneys paid to the widow of a deceased coparcener of the family as maintenance and residence allowance cannot be deducted, even though the amount of such allowance has been fixed by a decree o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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