Maintenance payments under a separation agreement can be taxable income, but only the beneficiary's own share is assessable in her hands.

A regular maintenance payment made under a separation agreement was treated as income and not as a casual or non-recurring receipt, so the exemption under section 4(3)(vii) of the Indian Income-tax Act, 1922 was unavailable. The fact that the underlying agreement may have been void or contrary to public policy did not prevent the payment from having a taxable source where it was paid periodically under the arrangement. However, because the agreement also covered the maintenance of the assessee's two sons, the portion referable to them was received in a representative capacity and was not fully assessable as her personal income. Only the part beneficially received for her own maintenance could be taxed in her hands.

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Issues: (i) Whether maintenance allowance received by the assessee from her husband was exempt under section 4(3)(vii) of the Indian Income-tax Act, 1922. (ii) Whether the entire receipt was taxable when the maintenance arrangement also provided for the assessee's two sons.

Issue (i): Whether maintenance allowance received by the assessee from her husband was exempt under section 4(3)(vii) of the Indian Income-tax Act, 1922.

Analysis: The allowance was paid regularly under a separation agreement and was traceable to that arrangement. Even if the agreement was void as being opposed to public policy and hit by section 23 of the Indian Contract Act, 1872, the receipt could still constitute income if it arose from a source and was not within the exemption for casual and non-recurring receipts. On the facts, the payment was neither casual nor a mere windfall, and the agreement supplied the source of the receipt. The exemption under section 4(3)(vii) was therefore unavailable.

Conclusion: The maintenance allowance was not exempt under section 4(3)(vii) and the finding was against the assessee.

Issue (ii): Whether the entire receipt was taxable when the maintenance arrangement also provided for the assessee's two sons.

Analysis: The agreement itself showed that the monthly payment was not intended solely for the assessee, but also for the maintenance of her two sons. To the extent the amount was earmarked for the children, the assessee received it in a representative capacity and not as her own beneficial income. That portion could not, therefore, be assessed entirely in her individual hands.

Conclusion: The entire receipt was not taxable in the assessee's hands and this issue was decided in favour of the assessee.

Final Conclusion: The receipt was held taxable as income and not exempt, but only the portion referable to the assessee's own maintenance could be assessed in her hands.

Ratio Decidendi: A regular maintenance payment traceable to an agreement may constitute income even if the underlying agreement is void, but only the part beneficially received by the assessee is taxable in her hands.

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