1982 (7) TMI 11 - HC - Income Tax

Alimony ruling: Lump sum not taxable, monthly alimony taxable. Court divided on outcome.

The lump sum alimony of Rs. 25,000 received by the assessee was deemed a capital receipt and not taxable as income. On the other hand, the monthly alimony ... Income Issues Involved:1. Whether the lump sum alimony of Rs. 25,000 received by the assessee is income in her hands and liable to tax.2. Whether the monthly alimony of Rs. 750 received by the assessee is income in her hands and liable to tax.Detailed Analysis:Issue 1: Lump Sum Alimony of Rs. 25,000The first issue concerns whether the lump sum alimony of Rs. 25,000 received by the assessee from her ex-husband under section 25 of the Hindu Marriage Act, 1955, is considered income and thus liable to tax. The court reframed the initial question to focus specifically on whether the lump sum alimony is taxable income.The court noted that the right to receive alimony is a personal right and is not alienable, citing the case of *Watkins v. Watkins* [1896] P. 222 (CA). The court also discussed the definition of 'income' under the Indian Income-tax Act, 1961, which is inclusive but not exhaustive. The court referred to several precedents, including *CIT v. Shaw Wallace & Co.* AIR 1932 PC 138 and *Maharajkumar Gopal Saran Narain Singh v. CIT* [1935] 3 ITR 237 (PC), to elucidate the concept of income as a periodical monetary return from a definite source.The court concluded that the lump sum payment of Rs. 25,000 under the decree was a capital receipt. It was reasoned that this lump sum payment diminished the right of the assessee to obtain alimony, which is a capital asset. The lump sum payment was not a commutation of future periodic payments, as there was no pre-existing right to any monthly payment. Thus, the receipt of Rs. 25,000 was considered a capital receipt and not taxable as income.Conclusion for Issue 1: The lump sum alimony of Rs. 25,000 is not income and is not liable to tax.Issue 2: Monthly Alimony of Rs. 750The second issue pertains to whether the monthly alimony of Rs. 750 received by the assessee is considered income and thus liable to tax. The court examined the arguments presented by both sides. The assessee's counsel argued that alimony is an extension of the husband's obligation to maintain his wife and does not have a definite source, making it a personal payment rather than income. The counsel for the revenue argued that the decree created a legal obligation for periodic payments, which should be considered income.The court referred to the definition of 'income' and various precedents, including *CIT v. Shaw Wallace & Co.*, *Maharajkumar Gopal Saran Narain Singh v. CIT*, and *Rani Amrit Kunwar v. CIT* [1946] 14 ITR 561 (All). The court emphasized that income includes periodical monetary returns from a definite source and that voluntary payments can also constitute income if they come with regularity from a definite source.The court concluded that the monthly alimony of Rs. 750 is a regular and periodical return from a definite source, namely the decree, and thus constitutes income. The court also noted that the payments could not be considered casual receipts as they were regular and had a definite source.Conclusion for Issue 2: The monthly alimony of Rs. 750 is income and is liable to tax.Final Judgment:- Question 1: In the negative and in favor of the assessee (lump sum alimony of Rs. 25,000 is not taxable).- Question 2: In the affirmative and against the assessee (monthly alimony of Rs. 750 is taxable).No order as to costs was made due to the divided success of the parties in the reference.