1947 (4) TMI 14 - HC - Income Tax

Maintenance allowance deemed exempt from tax as part of Hindu undivided family

COMMISSIONER OF INCOME-TAX, C.P. AND U.P. Versus MUSAMMAT BHAGWATI

COMMISSIONER OF INCOME-TAX, C.P. AND U.P. Versus MUSAMMAT BHAGWATI - [1947] 15 ITR 409 (PC) Issues Involved:1. Whether the sum of Rs. 1,000 per month received by the respondent was received as a member of a Hindu undivided family within the meaning of Section 14(1) of the Indian Income-tax Act, 1922.2. Whether the respondent is entitled to claim exemption under Section 14(1) after the disruption of the Hindu undivided family in 1923.3. Whether the deed of agreement dated 10th October 1919, altered the nature of the maintenance allowance and made it taxable.Issue-wise Detailed Analysis:1. Whether the sum of Rs. 1,000 per month received by the respondent was received as a member of a Hindu undivided family within the meaning of Section 14(1) of the Indian Income-tax Act, 1922:The High Court had to determine if the maintenance allowance received by the respondent was exempt from tax under Section 14(1) of the Act, which states: 'The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family.' The Income-tax Officer initially answered this question in the negative, and his decision was confirmed by the Assistant Commissioner of Income-tax. However, the High Court answered the question in the affirmative, stating that the respondent continued to be a member of a Hindu undivided family even after the disruption of the family into separate entities.2. Whether the respondent is entitled to claim exemption under Section 14(1) after the disruption of the Hindu undivided family in 1923:The High Court concluded that despite the disruption of the family in 1923, the respondent continued to receive her maintenance allowance as a member of a Hindu undivided family. The argument was that the capacity in which she received the allowance was not affected by the disruption among the coparceners. The High Court held that the respondent was entitled to claim exemption under Section 14(1) of the Act, as she was receiving the allowance in her capacity as a widow of a Hindu undivided family. The appellant argued that the Hindu undivided family to which the respondent once belonged had become disrupted into five separate entities, and she no longer had any 'legal place' in any of these entities. However, the High Court did not accept this argument and maintained that the respondent's right to receive maintenance was not affected by the severance in joint status.3. Whether the deed of agreement dated 10th October 1919, altered the nature of the maintenance allowance and made it taxable:The deed of agreement executed on 10th October 1919, provided that the respondent would receive a maintenance allowance of Rs. 1,000 per month, and this payment was secured by making the male members personally responsible and creating a charge on their property. The appellant argued that the respondent had surrendered her rights to maintenance from the joint family income and that the allowance had become a money allowance taxable under the Act. However, the High Court concluded that the respondent had not surrendered her rights to maintenance from the family properties. Instead, the deed made her maintenance right more secure and definite. The maintenance allowance retained its original character of being due to her from the income of the joint family as a member of the Hindu undivided family.Conclusion:The High Court's judgment was based on the finding that the respondent continued to receive her maintenance allowance as a member of a Hindu undivided family, even after the disruption of the family in 1923. The deed of agreement did not alter the nature of the maintenance allowance, and it remained exempt from tax under Section 14(1) of the Indian Income-tax Act, 1922. The appeal was dismissed with costs, and the respondent was entitled to claim exemption from income tax on the maintenance allowance received.