1978 (2) TMI 24 - HC - Income Tax

High Court allows reference on hath kharch allowance exemption under Income Tax Act, 1961

The High Court allowed the reference application under s. 256(2) regarding the exemption of hath kharch allowance under the Income Tax Act, 1961. The ... Application For Reference Issues:- Interpretation of income tax laws regarding exemption of hath kharch allowance under s. 10(19) and s. 10(2) of the Income Tax Act, 1961.- Whether the Appellate Tribunal was justified in holding that the hath kharch allowance was exempt from income tax under s. 10(19) and s. 10(2) of the Act.Analysis:The case involved three applications under s. 256(2) of the Income Tax Act, 1961, where the CIT sought a reference to the High Court regarding the exemption of a hath kharch allowance received by the assessee. The assessee, a senior Rajmata, claimed the amount as exempt under s. 10(19) of the Act, but the ITO assessed it as income. The AAC upheld this decision, but the Appellate Tribunal ruled in favor of the assessee, stating the allowance was exempt under both s. 10(19) and s. 10(2) of the Act. The Tribunal considered the family structure and Hindu law provisions to support their decision, leading to the exemption of the amount in question.The Appellate Tribunal declined to make a reference based on the CIT's question of law, noting that the allowance could be exempt under s. 10(2) of the Act. However, the High Court found that the Tribunal's order did raise a question of law, as it involved the interpretation of whether the hath kharch allowance was liable to income tax or exempt under s. 10(19) and s. 10(2) of the Act. The Court criticized the Tribunal for being overly technical and not considering both aspects of the exemption in its decision-making process.Citing various legal precedents, the High Court emphasized that if a question of law encompasses multiple aspects, all aspects must be considered by the Court, even if not all were argued before the Tribunal. The Court held that both aspects of exemption under s. 10(19) and s. 10(2) were before the Tribunal, and therefore, the High Court could consider both in its opinion. The Court allowed the applications for reference under s. 256(2) and directed the Tribunal to refer the question of law to the High Court for its opinion.In conclusion, the High Court found that the Tribunal's decision raised a valid question of law regarding the exemption of the hath kharch allowance under the Income Tax Act, 1961. The Court emphasized the need to consider all aspects of a legal question and allowed the reference to proceed for the High Court's opinion on whether the allowance was liable to income tax under the Act.