1960 (3) TMI 6 - SC - Income Tax

Supreme Court Rules Allowance Exempt under Tax Concessions Order

The Supreme Court held that the annual cash allowance granted to the appellant, similar to the Jiwai maintenance allowance, fell within the exemption ... Whether the annual cash allowance paid to the appellant in circumstances stated below falls within paragraph 15(1)(i) of the Part B States (Taxation Concessions) Order, 1950 (hereinafter referred to as the Order) and is therefore exempt from income-tax? Held that:- High Court was in error in holding that ₹ 35,807 was not by way of maintenance and therefore was not exempt from taxation under paragraph 15(1)(i) of the Order. We, therefore, allow this appeal, set aside the order of the High Court and answer the question in favour of the appellant Issues:Interpretation of whether the annual cash allowance granted to the appellant falls within the exemption under paragraph 15(1)(i) of the Part B States (Taxation Concessions) Order, 1950.Detailed Analysis:The judgment involved an appeal regarding the exemption of an annual cash allowance granted to the appellant from income tax. The appellant, a Raj Mata, received a maintenance allowance called Jiwai from the Morvi State. A resolution granted her a village, Mota Dahisara, to maintain her status and dignity. Disputes arose when the Government of Saurashtra decided to resume the village and provide a cash annuity in lieu of it. The Income-tax Officer deemed the entire sum of Rs. 60,000 liable to tax, considering it as an exchange for two assets. The Appellate Assistant Commissioner held Rs. 35,807 taxable, while the Income-tax Appellate Tribunal exempted the entire sum, stating it was a maintenance allowance. The High Court differentiated between Rs. 35,807 and Rs. 24,193, considering the former as a grant in lieu of the village and the latter as Jiwai or maintenance. The High Court concluded that the grant of the village was not by way of maintenance. The appellant contended that the grant of the village was maintenance, falling within the exemption under paragraph 15(1)(i) of the Order. The Tribunal's findings supported the appellant's contention, emphasizing the nature of the grant as maintenance. The High Court, however, reversed the Tribunal's findings, stating that the sum of Rs. 35,807 was not maintenance. The Supreme Court held that the grant of the village was indeed by way of maintenance, akin to the Jiwai allowance. The High Court erred in its interpretation, and the appellant was entitled to the exemption. The appeal was allowed, setting aside the High Court's order, and costs were awarded to the appellant.