1962 (10) TMI 61 - HC - Income Tax

Court rules monthly allowance from son not taxable under Indian Income-tax Act, 1922. Assessee awarded costs.

HH. MAHARANI SHRI VIJAYKUVERBA SAHEB OF MORVI AND ANOTHER Versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY II

HH. MAHARANI SHRI VIJAYKUVERBA SAHEB OF MORVI AND ANOTHER Versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY II - [1963] 49 ITR 594 (Bom) Issues Involved:1. Deductibility of accountant's fees.2. Assessability of monthly allowance as income.3. Exemption of monthly allowance as casual and non-recurring income.Issue-Wise Detailed Analysis:1. Deductibility of Accountant's Fees:The primary question was whether the sum of Rs. 500 paid to J.K. Doshi & Co., chartered accountants, could be deducted in arriving at the total income for the previous years ending on March 31, 1950, 1951, 1952, and 1953. The assessee claimed this deduction for professional charges incurred for income-tax assessment services. The Income-tax Officer rejected the deduction on the grounds that the amount was neither paid nor any liability to pay it was incurred in the respective years. The Appellate Assistant Commissioner directed that such expenses should be allowed in the year when the relevant bills were presented. The Tribunal found this direction reasonable and fair, especially since the assessee did not maintain any accounts. The High Court noted that the assessee did not want to press this question, and thus it was not answered.2. Assessability of Monthly Allowance as Income:The second issue was whether the monthly sum of Rs. 10,000 received by H.H. Maharaja Sir Lukhdhirji Bahadur from his son, H.H. Maharaja Mahendrasinhji, during the year ended March 31, 1953, constituted 'income' under the Indian Income-tax Act, 1922. The payments were described variably as 'personal allowance' and 'jiwai' (maintenance allowance). The Income-tax Officer treated the payments as taxable income, while the Appellate Assistant Commissioner held that the payments were ex gratia and not taxable. The Tribunal accepted the department's contention that the payments were customary and periodic, thus constituting income.The High Court, however, found no evidence of any binding custom or legal obligation requiring such payments. The payments were voluntary and not connected to any office, profession, or vocation of the payee. The court held that the payments did not proceed from any definite source and were, therefore, not 'income' under the Indian Income-tax Act. The court supported its view by referencing the Full Bench decision of the Allahabad High Court in Rani Amrit Kunwar v. Commissioner of Income-tax, which held similar payments as non-taxable.3. Exemption of Monthly Allowance as Casual and Non-Recurring Income:Given the High Court's decision that the payments were not 'income,' it did not need to consider whether the payments were exempt under section 4(3)(vii) as being of a casual and non-recurring nature. However, the court noted that even if the payments were considered income, they would likely be exempt under section 4(3)(vii) because they were voluntary and depended on the donor's whim, making them casual and non-recurring.Judgment Summary:The High Court addressed three questions referred by the Income-tax Appellate Tribunal:1. The question regarding the deductibility of Rs. 500 for accountant's fees was not pressed by the assessee and thus was not answered.2. The court answered in the negative, holding that the monthly sum of Rs. 10,000 received by H.H. Maharaja Sir Lukhdhirji Bahadur from his son did not constitute 'income' under the Indian Income-tax Act, 1922.3. Consequently, the court did not need to address whether the payments were exempt under section 4(3)(vii) as casual and non-recurring income.The court awarded three-fourths of the costs to the assessee from the department.