Case: The Commissioner Of Income-Tax, Bombay City Ii Vs. Shri Sitaldas Tirathdas

3. The assessee, Sitaldas Tirathdas of Bombay, has many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as Messrs. Sitaladas Tirathdas. He follows the financial year as his accounting year. For the assessment years 1953-54 and 1954-55, his total income was respectively computed at Rs. 50,375/- and Rs. 55,160/- This computation was not disputed by him, but he sought to deduct therefrom a sum of Rs. 1350/- in the first assessment year and a sum of Rs. 18,000/- in the second assessment year on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben and his children. The suit was filed in the Bombay High Court (Suit No. 102 of 1951) for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance etc. A decree by consent was passed on March 11, 1953, and maintenance allowance of Rs. 1,500/- per month was decreed against him. For the account year ending March 31, 1953, only one payment was made, and deducting Rs. 150/- per month as the rent for the flat occupied by his wife and children, the amount paid as maintenance under decree came to Rs. 1,350/-. For the second year, the maintenance at Rs. 1,500 per month came to Rs. 18,000/- which was claimed as a deduction. No charge on the property was created, and the matter does not fall to be considered under S. 9(1)(iv) of the Income-tax Act. The assessee, however, claimed this deduction on the strength of a ruling of the Privy council in Bejoy Singh Dudhuria v. Commissioner of Income-tax, Bengal, 1933-1 ITR 135  : (AIR 1933 PC 145  ). This contention of the assessee was disallowed by the Income-tax Officer, whose decision was affirmed on appeal by the Appellate Assistant Commissioner. On further appeal, the Tribunal observed:"This is a case, pure and simple, where an assessee is compelled to apply a portion of his income for the maintenance of persons whom he is under a personal and legal obligation to maintain. The Income-tax Act does not permit of any deduction from the total income in such circumstances."The Tribunal mentioned in the statement of the case that counsel for the assessee put his contention in the following words:"I claim a deduction of this amount from my total income because my real total income is whatever that is computed, which I do not dispute, less the maintenance amount paid under the decree."The assessee appears to have relied also upon a decision of the Lahore High Court in Diwan Kishen Kishore v. Commissioner of Income-tax, Punjab, 1933-1 ITR 143: (AIR 1933 Lah 284). The Tribunal, however, referred the above question for the opinion the High Court.4. The High Court followed two earlier decisions of the same Court reported in Motilal Manekchand v. Commissioner of Income-tax, 1957-31 ITR 735  : (AIR 1957 Bom 291  ) and Prince Khanderao Gaekwar v. Commissioner of Income-tax Bombay, 1948-16 ITR 294: (AIR 1949 Bom 17  ), and held that, as observed in those two cases, the test was the same, even though there was no specific charge upon property so long as there was an obligation upon the assessee to pay, which could be enforced in a Court of law. In Bejoy Singh Dudhurias case,1933-1 ITR 135  : (AIR 1933 PC 145  ), there was a charge for maintenance created against the assessee, and the Privy Council had observed that the income must be deemed to have never reached that assessee, having been diverted to the maintenance holders. In the judgment under appeal, it was held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee.

Reasoning: We are of opinion that the contention raised by the Department is correct.6. Before we state the principle on which this and similar cases are to be decided, we may refer to certain rulings, which illustrate the aspects the problem takes. The leading case on the subject is the decision of the Judicial Committee in Bejoy Singh Dudhurias case, 1933-1 ITR 135  : (AIR 1933 PC 145  ). There, the stepmother of the Raja had brought a suit for maintenance and a compromise decree was passed under which the stepmother was to be paid Rs. 1,100 per month, which amount was declared a charge up on the properties in the hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at. These are the cases which have considered the problem from various angles. Some of them appear to have applied the principle correctly and some, not. But we do not propose to examine the correctness of the decisions in the light of the facts in them. In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt there, are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obligated to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of ones own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of anothers income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or upon its income, which is not the case. In our opinion, the case falls outside the rule in Bejoy Singh Dudhurias case, 1933-1 ITR 135   : (AIR 1933 PC 145  ) and rather falls within the rule stated by the Judicial Committee in P. C. Mullicks case, 1938-6 ITR 206 : (AIR 1938 PC 118  ).