1973 (3) TMI 54 - SC - Indian Laws

Whether on the facts and in the circumstances of the case the expenditure of Rs. 94, 500 incurred by the assessee in London is exempt under section 5(o) of the Expenditure-tax Act ? Held that - The trustees could not have paid them those amounts outside India. But in fact the trustees have year after year been remitting those amounts to the assessees to London and the assessees were receiving those amounts without any objection. From these circumstances the Tribunal has drawn the inference that when the trustees remitted the amounts in question to the assesees at London they were only doing so as the agents of the assessees. The Tribunal opined that the trustees must have been sending the amounts in question to London under the assessees instructions. The finding of the Tribunal in this regard is essentially a finding of fact. Therefore all that we have to see is whether that finding is either perverse or not based on any evidence. We are unable to agree with the learned counsel for the assessees that the finding in question is either perverse or the same is not based on any evidence. Appeal dismissed.

Summary

Issues:
Interpretation of the term "realization" in section 5(o)(ii) of the Expenditure-tax Act, 1957.

Analysis:
The Supreme Court addressed the common question of law regarding the meaning of "realization" in section 5(o)(ii) of the Expenditure-tax Act, 1957. The case involved two grandsons of the former Nizam of Hyderabad who were beneficiaries under a trust established by the Nizam. The trust required the trustees to pay the beneficiaries a specified amount annually in India. However, the beneficiaries resided in London, and the trustees remitted the amounts due to them in London. The issue was whether the expenditure incurred by the beneficiaries in London was exempt under section 5(o)(ii) of the Act.

The Tribunal concluded that the amounts accrued in India, as the trustees were obligated to pay the beneficiaries in India, and remitting the amounts to London was done as per the beneficiaries' instructions. The High Court upheld this decision, stating that the beneficiaries had realized the amounts in India, making them ineligible for the exemption under section 5(o).

The assessees argued that the realization occurred in London, not India, based on the language of section 5(o)(ii) of the Act. However, the Court noted that the terms of the trust deed and the tripartite agreement specified that the amounts were to be received in India. The Tribunal's finding that the trustees acted under the beneficiaries' instructions was considered a reasonable inference, leading to the conclusion that the amounts were realized in India.

Ultimately, the Court dismissed the appeals, upholding the Tribunal and High Court decisions. The beneficiaries were deemed to have realized the amounts in India, rendering them ineligible for the exemption under section 5(o).