THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY II vs. SHRI SITALDAS TIRATHDAS

CIVIL APPEAL No. 528/1959Supreme Court[1961] 2 S.C.R. 63424 November 1960Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH10 pages
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What did the Supreme Court hold?

The Supreme Court held that the assessee was not entitled to the deduction. The Court distinguished between income that is diverted by an overriding title before it reaches the assessee, which is deductible, and income that is applied to discharge an obligation after it has reached the assessee, which is not deductible. The true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. In this case, the consent decree did not create a charge on the income or property, and the maintenance payments were made by the assessee after he had received the income as his own. Therefore, the income was applied to discharge a personal obligation, not diverted by an overriding charge. The Court found the case distinguishable from Bejoy Singh Dudhuria's case, where a charge was created, and aligned it with P. C. Mullick's case. The High Court's answer was discharged, and the question was answered in the negative. The appeal was allowed.

What were the facts?

The assessee, Shri Sitaldas Tirathdas, sought to deduct maintenance payments of Rs. 1,350 for the assessment year 1953-54 and Rs. 18,000 for the assessment year 1954-55 from his total income. These payments were made under a consent decree passed by the Bombay High Court, which awarded maintenance to his wife and children. The decree did not create any charge upon the assessee's income or property. The Income Tax Officer, Appellate Assistant Commissioner, and the Income Tax Appellate Tribunal disallowed the deduction. The Tribunal referred the matter to the Bombay High Court, which, following its earlier decisions, held the deduction to be allowable. The Commissioner of Income-tax appealed this decision to the Supreme Court.

What were the issues?

1. Whether the assessee is entitled to a deduction of Rs. 1,350 from his total income for the assessment year 1953-54 and Rs. 18,000 for the assessment year 1954-55, as maintenance payments made under a consent decree, which is a question of law and mixed fact and law, turning on the interpretation of the Income-tax Act, 1961 (implicitly, as the judgment refers to the Act generally). Assessee's contentions: The assessee claimed the deduction, arguing that the maintenance amount paid under the decree should be deducted from his total income, as it represented his 'real' total income. The assessee relied on the Privy Council decision in Bejoy Singh Dudhuria v. Commissioner of Income-tax and a Lahore High Court decision in Diwan Kishen Kishore v. Commissioner of Income-tax. Revenue's contentions: The revenue contended that the maintenance payments were not deductible. They argued that the income was received by the assessee and then applied to discharge a personal obligation, rather than being diverted by an overriding title before it reached the assessee. The revenue relied on the principle established in P. C. Mullick v. Commissioner of Income-tax, Bengal.

Which sections of the Income-tax Act were involved?

Section 9(1)(iv)

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November ~4· 634 SUPREME COURT REPORTS [1961] THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY II v. SHRI SITALDAS TIRATHDAS (J. L. KAPUR, M. HIDAYATULLAH and J. C. SHAH, JJ.)

Income-fax-Maintenance payable to wife and children under decree-Whether deductible from total income. A consent decree was passed against the assessee a warding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the am- ount paid under the decree from his total income.

Held, that the assessee was not entitled to the deduction.

Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be. applied to discharge an obligation after such income reached the assessee, it was not deductible.

The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the pre- sent case, the wife and children of the assessee received a por- tion of the income of the assessee, after the assessee had receiv- ed the income as his own.

Bejoy Singh Dud

The order continues below.

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