Royalty deduction cannot be disallowed on mere suspicion of benami ownership without evidence proving the claim is false

A claimed royalty deduction could not be refused merely on suspicion that the right stood in the assessee's wife's name as a benamidar. The royalty payment itself was undisputed, and the revenue's disallowance rested only on an unsupported inference. In the absence of evidence proving benami ownership, the apparent title could not be displaced simply because no proof was produced that the property came from stridhan funds. The principle applied is that the apparent state of affairs is presumed real unless the contrary is proved, and the burden lay on the revenue to establish benami ownership before denying the deduction.

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Issues: Whether the assessee was entitled to deduction of the royalty payment claimed, and whether the revenue could refuse the deduction on the basis that the assessee's wife was a benamidar without evidence.

Analysis: The payment of royalty was not disputed. The only basis for disallowance was the inference that the right standing in the wife's name in effect belonged to the assessee, but that inference was unsupported by evidence. In the absence of proof that the wife held the property as a benamidar, the apparent title in her name could not be displaced merely because no evidence was produced to show acquisition from stridhan funds. The ordinary presumption is that the apparent state of affairs is real unless the contrary is proved, and the burden lay on the revenue to establish benami ownership before denying the deduction.

Conclusion: The question was answered in the affirmative, and the assessee was entitled to the deduction.

Ratio Decidendi: Where a payment claimed as deductible is proved and the revenue seeks to disallow it on the ground that the apparent owner is a benamidar, the disallowance cannot rest on suspicion or absence of proof from the assessee alone; it must be supported by evidence establishing benami ownership.

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