Overriding title versus application of income: maintenance paid after receipt remains taxable and no deduction is allowed.

Income diverted at source by an overriding title is not assessable in the assessee's hands, because the amount never becomes his own income. Where the assessee first receives the income and then applies it to discharge a personal or legal obligation, the payment is a mere application of income and no deduction is available, even if the obligation arises under a consent decree. On the stated facts, maintenance paid to the assessee's wife and children was made after the income had reached him and no overriding charge existed on the property or income, so the claim for deduction failed.

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Issues: Whether maintenance payments made under a consent decree to the assessee's wife and children were deductible from his taxable income, or whether they were merely an application of income after it had reached the assessee.

Analysis: The decisive test is whether the amount sought to be deducted never reached the assessee as income, or whether it reached him and was thereafter applied in discharge of an obligation. Where income is diverted before it becomes the assessee's own income by an overriding title or charge, it is not assessable in his hands. Where, however, the assessee receives the income as his own and then applies part of it to satisfy a personal or legal obligation, the amount remains taxable income and no deduction is available merely because the payment is obligatory. On the facts, the wife and children received maintenance after the income had reached the assessee, and no overriding charge existed on the property or income.

Conclusion: The maintenance payments were not deductible. The answer to the referred question was correctly required to be in the negative, and the assessee's claim failed.

Final Conclusion: The ruling affirms that only income diverted at source by an overriding title escapes assessment, whereas income first received by the assessee and then applied to personal obligations remains taxable.

Ratio Decidendi: A payment is deductible only when, by reason of an overriding obligation or charge, the amount never reaches the assessee as his income; if the income is received by the assessee and is merely applied thereafter to discharge an obligation, it remains assessable.

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