TaxTMI 
TaxTMI 
1962 (10) TMI 61
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....e upon the assessee for the assessment years 1950-51, 1951-52, 1952-53 and 1953-54, the corresponding previous years being the financial years ended March 31, 1950, 1951, 1952 and 1953. The applicants require the Tribunal to refer to the High Court one question which is common to all the four years and one more question which is peculiar to the assessment year 1953-54 and arising out of the Tribunal's order in the department's appeal, I.T.A. No. 3968 of 1959-60. The common question is in regard to the assessee's claim to deduct professional charges of Rs. 500 paid to J.K. Doshi&Co., chartered accountants. The question peculiar to the assessment year 1953-54 is in regard to the assessability of a sum of Rs. 1,20,000. 3. At one time, H.H. Maharaja Sir Lukhdhirji Bahadur of Morvi was the ruler of the erstwhile Indian State of Morvi. He abdicated the Gadi in favour of his son, H.H. Maharaja Mahendrasinhji on 21st January, 1948. The father Maharaja died on May 4, 1957, leaving behind him a will according to which his son, H.H. Maharaja Mahendrasinhji, was the sole executor. The said sole executor also died on August 17, 1957, leaving behind him his will which appointed ce....
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....Income-tax Officer rejected the claim for deduction of Rs. 500 for each of the years in the computation of income of the account years ended March 31, 1950, 1951, 1952 and 1953. The department was prepared to allow such expenses either on "actual payment basis" or on "incurred liability basis". In appeal, the Appellate Assistant Commissioner directed that such expenses should be allowed by the Income-tax Officer in the year in which "relevant bills for the charges were presented to the appellant" by the firm of chartered accountants. Being dissatisfied with the said direction, the matter was brought in appeal to the Tribunal. Having regard to the facts mentioned above, the Tribunal found no reason to interfere with the direction given by the Appellate Assistant Commissioner which it characterised as "quite reasonable and fair particularly in a case of 'no accountants'". This contention of the assessee has been dealt with by the Tribunal in paragraph 6 of its main order, in I.T.A. No. 4149 of 1959-60, a copy of which is marked annexure "A" and forms part of the case. 5. On these facts, the assessee requires the Tribunal to refer the following question to the High Court fo....
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....ril, 1957, and they ceased thereafter as H.H. Maharaja Sir Lukhdhirji Bahadur died on May 4, 1957. Thus in the account year ended March 31, 1953, the father Maharaja received a sum of Rs. 1,20,000 from the son Maharaja. In response to certain enquiries made by the Income-tax Officer in regard to the said monthly payment of Rs. 10,000, a letter dated January 16, 1954, was addressed by J.K. Doshi & Co., chartered accountants, to him, a copy of which is marked annexure "B" and forms part of the case. It stated as follows: "Moreover, amount of personal allowance of Rs. 10,000 per month allowed by H.H. Shri Mahendrasinhji to his father was always transferred from the above referred joint account to the personal account of Sir Lukhdhirji." The said firm of chartered accountants wrote another letter on June 27, 1957, to the Income-tax Officer, copy of which is marked annexure "C" and forms part of the case. It contains the following: "It may further be observed that on the abdication of His Highness Maharaja Sir ....
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....described above and shifted the ground for exemption before the Appellate Assistant Commissioner. In support of the claim for exclusion of the said sum, Mr. Palkhivala relied upon the Allahabad High Court decision in the case of Rani Amrit Kunwar [1946] 14 I.T.R. 561. In accepting his contention, the Appellate Assistant Commissioner observed as follows: "In view of the above decision and as there is not even any customary obligation for payment of the amount to the appellant by his son on the former's abdication in favour of the latter, I agree with the learned representative that the amount cannot be taxed as income." 9. Being aggrieved by the decision of the Appellate Assistant Commissioner on the said point, the department brought the matter in appeal to the Tribunal, the contention raised before it being: "The Appellate Assistant Commissioner erred in deleting a sum of Rs. 1,20,000 which was assessed by the Income-tax Officer as jiwai in the hands of the assessee." Before the Tribunal, Mr. Palkhivala, counsel for the assessee, took strong objection to the use of the words ....
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....o dispute whatever in regard to the nature of the said sum before him and this is abundantly clear from the extract reproduced above from the Income-tax Officer's assessment order--vide paragraph 7 above. It was for the first time before the Appellate Assistant Commissioner that Mr. Palkhivala shifted the ground as he did and as described above in regard to the nature of the said sum. When the matter came before the Tribunal, he bitterly complained that in its appeal to the Tribunal, the department was putting forth a new factual case for the first time when it sought to assess the sum of Rs. 1,20,000 as customary payment made by the ruling chief to a relation of his for his maintenance. The Tribunal did not accept this submission made by Mr. Palkhivala that the department was taking a new position before the Tribunal for the first time and it was pointed out to him that there was really no dispute before the Income-tax Officer in regard to the nature of the said sum which has been described on more than one occasion by the assessee's authorised representatives, J.K. Doshi&Co. Here the assessee preferred to disown what was written by the said chartered accountants, J.K. Dos....
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.... of the question as framed by us. We see no reason to accept this suggestion. Mr. Palkhivala also urges that certain factual statements made by us and inferences drawn by us are inconsistent with the proceedings before the lower authorities. Probably what Mr. Palkhivala wanted was certain amplifications of certain statements made by us. We see no reason to make any further additions but, at his request, we are annexing the following documents, collectively marked "D" (1) Copy of the assessment order made by the Income-tax Officer on February 12, 1958, for the assessment year 1953-54. (2) Copy of the consolidated order No. KAP. 154, 571, 572&573, made by the Appellate Assistant Commissioner on May 13, 1959. (3) Copy of grounds of appeal filed by the department in its appeal, I.T.A. No. 3968 of 1959-60. (4) Copy of statement showing payments made by H.H. Maharaja Mahendrasinhji to H.H. Maharaja Sir Lukhdhirji Bahadur. 13. H.H. Sir Jiwaji Rao Scindia, Maharaja of Gwalior, one of the administrators with the will annexed of H.H. Sir Lukhdhirji died at Bombay on or about 16th July, 1961, leaving H.H. Vijaykuverba, Maharani of Morvi, and Mr. M.P. Dadachanji as such survivin....
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....sessee for the interval between November, 1953, to April, 1954, such payment was not made, but that statement of the assessee was not accepted by the Tribunal. It will thus be seen that a monthly payment of Rs. 10,000 continued to be made by the son Maharaja to the father Maharaja from April, 1949, until the father Maharaja died on the 4th of May, 1957. In the assessment year 1953-54 the Income-tax Officer brought to tax the sum of Rs. 1,20,000 in respect of the said payment which the assessee had received during that year. In reply to the inquiries, which the Income- tax Officer had made during the said assessment proceedings, the chartered accountants under instructions from the assessee had referred to the said payment as an amount of personal allowance of Rs. 10,000 allowed to H.H. Maharaja Lukhdhirji by his son, H.H. Maharaja Mahendrasinhji, and in another letter, which they had sent on the 27th of June, 1957, they had stated that on the abdication of His Highness the Maharaja Lukhdhirji Bahadur on January 21, 1948, His Highness was being paid at Morvi Rs. 10,000 per month by way of jiwai. It was contended before the Income- tax Officer that the amount was exempted from tax be....
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....e learned counsel appearing for the assessee, has urged that on the facts found in the present case, the payment made to the assessee by his son Maharaja could not be said to be the assessee's income from any source. It was found by the Appellate Assistant Commissioner that the payment was not made in pursuance of any contractual or other legally binding obligation; it was also not in consideration of the abdication of the gadi by the father Maharaja in favour of his son and the payment, therefore, was a purely ex gratia payment made by the son to his father as by way of allowance. Mr. Palkhivala complains that the Tribunal has erred in taking the view that the payment was made in accordance with the custom and usage and the custom and usage, therefore, provided the source for the said payment and thus constituted it the income of the assessee. According to him, there was no material whatsoever before the Tribunal for the said conclusion, and the three pieces of evidence on which it sought to rely in that connection do not supply any such evidence. Now, the said three pieces of evidence are: the two statements of the chartered accountants in the letters which they had written t....
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....uch a payment, Mr. Palkhivala argues, is a payment, which does not proceed from any definite source and cannot, therefore, qualify to be "income" under the Indian Income-tax Act. Mr. Palkhivala's further argument is that, at any rate, even if it is held to be "income", it would be an income of a casual and non-recurring nature. Now, there can be no doubt that the payments made by the son Maharaja to the father Maharaja in the present case were voluntary payments in the sense that if the payment were discontinued, there would have been no right in the father Maharaja to have them enforced against the son. Further, there was no contractual or other legal obligation in pursuance of which the payments were made. The Tribunal has, no doubt, taken the view that they could be regarded as having been made in accordance with a custom or usage requiring the ruling chief to make a maintenance allowance to a relation. There is, however, no evidence whatsoever of such a custom or usage, which could be said to have a binding force. The said inference is drawn by the Tribunal because the payment has been referred to as a jiwai allowance by the accountants in their letter under instructions....
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....w. It does not, however, mean that every voluntary payment will constitute "income". Thus, voluntary and gratuitous payments, which are connected with the office, profession, vocation or occupation may constitute "income" although if the payments were not made the enforcement thereof cannot be insisted upon. These payments constitute "income" because they are referable to a definite source, which is the office, profession, vocation or occupation. It could, therefore, be said that such a voluntary payment is taxable as having an origin in the office, profession or vocation of the payee, which constitutes a definite source for the income. What is taxed under the Indian Income-tax Act is income from every source (barring the exceptions provided in the Act itself) and even a voluntary payment, which can be regarded as having an origin, which a practical man can regard as a real source of income, will fall in the category of "income", which is taxable under the Act. Where, however, a voluntary payment is made entirely without consideration and is not traceable to any source, which a practical man may regard as a real source of his income, but depends entirely on the whim of the donor, c....
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....Palkhivala has pointed out that although the allowance has been referred to as jiwai, it could not be regarded as an allowance for maintenance in the sense of money required for the maintenance of the father, because the father was possessed of a large fortune himself and his yearly income, which was assessable to tax, even apart from this payment, was in the neighbourhood of Rs. 5 lakhs. The allowance, therefore, could not be said to have been proceeding from the obligation of a ruling chief to maintain his relations or dependants. In our opinion, therefore, the payments made by the son Maharaja to the father Maharaja in the present case could not be said to be payments, which constituted income under the Indian Income-tax Act. The view that we are taking is supported by the decision of the Full Bench of the Allahabad High Court in Rani Amrit Kunwar v. Commissioner of Income-tax [1946] 14 I.T.R. 561. In that case the question arose whether the annual wardrobe allowance, which the assessee was receiving from her brother, the Maharaja of Nabha State, out of the State budget, constituted her income under the Indian Income-tax Act. There was no contractual or other legal obligat....