1968 (11) TMI 39 - HC - Income Tax

Exclusion of Foreign Education Expenses from Taxable Income Upheld

The court concluded that the expenditure on foreign education was rightly excluded from the taxable expenditure of the family as it was not incurred out ... Expenditure-tax Act, 1957 - amount spent on the foreign education of son - share of the compensation is the separate property of the son, Mallikarjuna Prasad, and he is entitled to spend from that amount the expenses towards his education, which cannot be said to have been incurred by the joint family- therefore it is excludible from the taxable expenditure of the family Issues Involved:1. Whether the amount spent on the foreign education of Sri Mallikarjuna Prasad was rightly excluded from the taxable expenditure of the family for the respective assessment years under section 4(ii) and section 19 of the Expenditure-tax Act, 1957.Issue-wise Detailed Analysis:1. Nature of the Impartible Estate and Rights of Family Members:The court delved into the nature of an impartible zamindari and the rights of the holder and other family members. It was established that impartibility is a creature of custom and that junior members of a joint family have no right in the property by birth and cannot demand partition. The income of the impartible estate is the individual income of the holder, not the joint family. The estate is considered joint family property only for devolution purposes, but no member acquires any right by birth, except the right of survivorship.2. Compensation under the Estates Abolition Act:The court examined the provisions of the Estates (Abolition and Conversion into Ryotwari) Act, 1948, particularly section 45. This section outlines that compensation for an impartible estate is to be divided among sharers (the holder and his legitimate sons, grandsons, etc.) as if it were joint family property and partitioned on the notified date. The compensation amount is treated as joint family property for division purposes, but each sharer gets an absolute interest in their share.3. Application of Section 4(ii) of the Expenditure-tax Act:The court analyzed whether the expenditure on Mallikarjuna Prasad's foreign education could be included in the taxable expenditure of the family under section 4(ii). The section includes any expenditure incurred by a dependant from income or property transferred by the assessee. The court found that the compensation amount received by Mallikarjuna Prasad was his separate property, not transferred by the assessee. Therefore, section 4(ii) did not apply.4. Application of Section 4(i) of the Expenditure-tax Act:The court examined the applicability of section 4(i), which includes expenditure incurred by any person other than the assessee in respect of any obligation or personal requirement of the assessee or any of his dependants. The court noted that for this section to apply, the expenditure must be incurred for the collective obligation of the family or the personal requirements of the coparceners as family members. The court found no evidence that the foreign education expenditure was an obligation of the joint family.5. Conclusion:The court concluded that the expenditure on Mallikarjuna Prasad's foreign education was not incurred out of joint family property or due to any obligation of the joint family. Therefore, it was rightly excluded from the taxable expenditure of the family. The court answered the reference question in the affirmative, favoring the assessee, and awarded costs with an advocate's fee of Rs. 250.Judgment:The question was answered in the affirmative, favoring the assessee.