TMI Blog1962 (10) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 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 ₹ 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 ₹ 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 certain persons as executors thereof. Since the estate of the father Mahara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 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 for each of the four years 1950-51, 1951-52, 1952-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 ₹ 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 ₹ 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 Lukhdhirji Bahadur on January 21, 1948, His Highness was being paid at Morvi ₹ 10,000 per month by way of Jiwai. It will be observed that while at one place the monthly sum of ₹ 10,000 has been described as Jiwai, i.e., by way of maintenance allowance, in another place it has been described as person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 such as jiwai or annuity to describe the said sum of ₹ 1,20,000 though he added that the description would not hurt him. The two contentions before it were: (i) That the said sum of ₹ 1,20,000 did not represent any income at all; and (ii) that if at all it was income received and falling within the ambit of the Income-tax Act, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um. 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 ₹ 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. Doshi Co., in their letter of August 27, 1947 (annexure C ), by pointing out that the said accountants had no authority to represent the assessee because H.H. Maharaja Sir Lukhdhirji died on January 4, 1957 . Hence, without accepting Mr. Palkhivala's contention that the department was trying to make out a new case altogether before the Tribunal in its own appeal, a suggestion wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment 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 surviving administrators. N. A. Palkhivala with B. A. Palkhivala, for the assessee G. N. Joshi with R. J. Joshi, for the Commissioner JUDGMENT The judgment of the court was delivered by V.S. DESAI J.--The following three questions have been referred to us by the Income-tax Appellate Tribunal in the present reference: (1) Whether the sum of ₹ 500 can be deducted in arriving at the total income of the 'previous year' ended March 31, 1950, when it was neither paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ₹ 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 ₹ 10,000 per month by way of jiwai. It was contended before the Income- tax Officer that the amount was exempted from tax being in the nature of jiwai or maintenance allowance. This contention, however, was not accepted by the Income-tax Officer, who took the view that the payment was in the nature of an annuity, which was taxable under the Act. In the appeal before the Appellate Assistant Commissioner, it was contended on behalf of the assessee that the jiwai allowance received by the assessee was an ex gratia payment made to him by his son without there being any legal oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to the Income-tax Officer in reply to his enquiries to which we have already made reference earlier. In one of them, they referred to the payment as the personal allowance given by the son Maharaja to the father Maharaja and in the other they referred to it as a jiwai allowance. The third piece of evidence was a note appearing in the son Maharaja's return for the assessment year 1948-49, in which in referring to a similar allowance of ₹ 10,000 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from the Maharaja and because it appeared that the son Maharaja was in receipt of a jiwai allowance from his father, while the father was the ruler. Now, neither of these facts can, in our opinion, be sufficient to warrant a legal inference that there was a custom or usage having the force of law requiring such payments to be made. The mere circumstance that an allowance was paid by the father to his son without anything more would not suffice to dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, cannot fall in the category of income . What we have to see, therefore, in the present case, is whether the payment made by the son Maharaja to the father Maharaja, though voluntary, could be regarded as having an origin in what might be called the real source of income. On the facts found in the present case, we cannot say that the payments would be referable to any such source. The department has not been able to show any material on record, from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding 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 obligation under which the payments were made and there was also no evidence in the case to show that the payments were attributable to any custom, usage or traditional obligation. It was held on these facts that there was no origin for the payments, which could amount in its nature to a definite source so as to render each payment income and not merely a casual or annual income and hence the payments were not income and were not assessable to income- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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