1983 (9) TMI 37 - HC - Income Tax

Summary

Issues:
1. Whether the amount received by the assessee out of the privy purse from the Raja of Miraj is to be considered as income for the assessment year 1969-70?

Detailed Analysis:
The case involved a reference under section 256(1) of the Income Tax Act, 1961, where the question was whether the Tribunal was justified in holding the amount of Rs. 12,000 received by the assessee out of the privy purse from the Raja of Miraj as her income for the assessment year 1969-70. The assessee, who was the wife of the Rajasaheb of Miraj, received an annual privy purse of Rs. 85,800. The Income Tax Officer (ITO) assessed the amount of Rs. 12,000 received by the assessee as income, considering it an actionable claim for maintenance. The Appellate Authority upheld this decision, stating that the amount was enforceable under a covenant entered into by the Rajasaheb with the Government. The assessee appealed to the Income-tax Appellate Tribunal, Poona, which referred to relevant judgments and the agreement between the Governor-General of India and the Rajasaheb regarding the privy purse. The Tribunal concluded that the payment of Rs. 12,000 to the assessee was based on custom and commitment, rejecting the argument that the privy purse should be considered the income of the Rajasaheb's Hindu Undivided Family (HUF).

The High Court, in its judgment, disagreed with the Tribunal's finding, emphasizing that the Tribunal's conclusion was not supported by the agreement's terms. The relevant part of the agreement stated that the privy purse amount was intended to cover all expenses of the Rajasaheb and his family, and it was not to be increased or reduced for any reason. The Court found no basis to consider the payment of Rs. 12,000 to the assessee as directed by the Government or based on any commitment. Therefore, the Court held that the Tribunal was erroneous in treating the amount as income of the assessee liable to income tax. Consequently, the Court answered the question in favor of the assessee, directing the Revenue to pay the costs of the reference to the assessee.