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AKAS Jamal

1) The respondent sought to deduct maintenance payments made to his wife and children from his taxable income for certain assessment years. 2) The Income Tax Department disallowed the deduction. On appeal, the Bombay High Court had to determine whether maintenance payments can be deducted. 3) The High Court held that the maintenance payments were not deductible as the income reached the assessee first before being applied to fulfill his obligation, rather than the obligation diverting the income source initially. Deduction is only allowed if an overriding obligation diverts the income before reaching the assessee.

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37 views2 pages

AKAS Jamal

1) The respondent sought to deduct maintenance payments made to his wife and children from his taxable income for certain assessment years. 2) The Income Tax Department disallowed the deduction. On appeal, the Bombay High Court had to determine whether maintenance payments can be deducted. 3) The High Court held that the maintenance payments were not deductible as the income reached the assessee first before being applied to fulfill his obligation, rather than the obligation diverting the income source initially. Deduction is only allowed if an overriding obligation diverts the income before reaching the assessee.

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Sakshi, Banaras Hindu University.

THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY II

Vs.

SHRI SITALDAS TIRATHDAS

Equivalent citations 1961 AIR  728,1961 SCR  (2) 634.

Bombay High Court


Bench: Justice M Hidayattullah, Justice J.L. Kapur, Justice J. C SHAH.

PETITIONER

THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY II

       Vs.

RESPONDENT

SHRI SITALDAS TIRATHDAS

DATE OF JUDGMENT: 24/11/1960

FACTS OF THE CASE.


The respondent is here was decreed to provide maintenance to his wife and children. For the
assessment years under consideration, the assessee sought to deduct therefrom a sum 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 for maintenance
allowance, separate residence and marriage expenses for the daughters for arrears of
maintenance, etc. The Income Tax Department disallowed the deduction.

ISSUES OF THE CASE


Whether the sum paid towards maintenance can be claimed as a deduction on the ground that
the same is the diversion of at source by overriding title or application of income.

HOLDING
The Hon’ble court held that the assessee was not entitled to the deduction. The Question
referred to the High Court ought to have been answered in the negative. The appeal was
allowed with the costs.

RATIONALE
When the Act by Section 3 subjects to charge ’all income’ of an individual, it is what reaches
the individual as income which it is intended to charge. Judicial Committee has laid down the
principle that if there is an overriding obligation that creates a charge and diverts the income
to someone else,  a deduction can be made of the amounts so paid.
The true test is whether the amount sought to be deducted, in truth, never reaches the assessee
as his income. It is the nature of the obligation which is the decisive fact.   There is a
difference between an amount that a person is obliged to apply out of his income and an
amount that 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.
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 another’s 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.  It was opined that the case falls outside  the rule in Bejoy Singh-
Dudhuria’s case and  rather falls within the rule stated by the Judicial Committee in P. C.
Mullick’s case.

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