Annual charge for maintenance can arise from monthly payments, and clubbing provisions do not apply to a mere mortgage security.

A mortgage deed securing recurring maintenance payments can create an annual charge for house-property deduction purposes even where the liability is paid monthly, because the test is whether the obligation is recurring year after year rather than paid once annually. On that basis, the charge was deductible. The clubbing provisions in sections 16(1)(c) and 16(3)(iii) of the Indian Income-tax Act, 1922 apply only where there is a settlement or disposition of property; a mortgage created merely as security for maintenance did not amount to such a settlement or disposition. Those provisions were therefore inapplicable.

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Issues: (i) Whether maintenance payable monthly under a mortgage deed securing the payment constituted an annual charge deductible in computing income from house property; (ii) Whether sections 16(1)(c) and 16(3)(iii) of the Indian Income-tax Act, 1922 applied to the assessee's case.

Issue (i): Whether maintenance payable monthly under a mortgage deed securing the payment constituted an annual charge deductible in computing income from house property.

Analysis: Under section 9(1)(iv) of the Indian Income-tax Act, 1922, and the corresponding provision in section 24(1)(iv) of the Income-tax Act, 1961, the relevant inquiry is whether the charge secures an annual liability. The expression "annual" is not confined to a payment made once in every year; a liability payable in monthly instalments may still be annual if, in substance, it is a recurring obligation extending over years. Since the mortgage deed created a security over the property for the maintenance liability, and the obligation recurred year after year, the charge answered that description.

Conclusion: The maintenance payment was an annual charge and was deductible; this issue was decided in favour of the assessee and against the revenue.

Issue (ii): Whether sections 16(1)(c) and 16(3)(iii) of the Indian Income-tax Act, 1922 applied to the assessee's case.

Analysis: Those provisions apply where there is a settlement or disposition of property attracting the statutory clubbing rule. On the facts found, the property was mortgaged as security for maintenance and was neither settled nor disposed of in favour of the wife in the sense required by the statutory provisions.

Conclusion: Sections 16(1)(c) and 16(3)(iii) had no application; this issue was decided in favour of the assessee and against the revenue.

Final Conclusion: The reference was answered on both questions in favour of the assessee, with the revenue bearing the costs.

Ratio Decidendi: For purposes of the house-property deduction, an annual charge means a charge securing a recurring annual liability, and the mode of instalment payment does not by itself prevent the liability from being treated as annual.

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