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TMI Blog1956 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... pay to his wife a sum of ₹ 800 as her alimony "in the manner specified in the terms." The first of the terms of settlement referred to the payment of this alimony and was to the following effect: "Permanent alimony to be paid at the rate of ₹ 800 per month, payments to be made on the 7th day of every month, the first of such payments to be made on the 7th day of March, 1941." About three years later, on the 20th December, 1943, the husband executed a deed of charge whereby he made the payment of the alimony, payable by him under the consent decree, a charge on two house properties owned by him. The preamble of the deed recited that the husband had come to know that the wife was intending to make an application to the Court to compel him to secure the payment of the alimony by charging the same on his properties and that the husband was anticipating the threatened move on the part of the wife by executing the deed so as to prevent the intended application and also avoid the liability as to costs which would necessarily be incurred. A desire to safeguard the wife against the future uncertainty as to recovering the alimony was stated to be an additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner, the assessee seems to have first thought of section 9(1)(iv) of the Act and he claimed that he was entitled to the deduction under the provisions of that section. The Department resisted his claim on the ground that it had not been made in the return and also on the ground that the charge, being a voluntary charge depending entirely on the assessee himself for payment, could not be treated as an "annual charge" within the meaning of section 9(1)(iv) of the Act. It seems also to have been contended that what the assessee was doing was that he was putting a part of his income from the property to a private use and applying it to the discharge of his liability for the alimony. This last contention appears to have been intended to meet the argument that the effect of the decree, read with the charge, was that an amount of money, equivalent to the alimony payable, was diverted from the assessee's hands before it could become his income. The Department's contention was that payment of the alimony by the assessee was merely an application of his income. The Appellate Assistant Commissioner naturally paid no attention to the argument of diversion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible to say on which points it was accepting their authority and on what grounds arising out of the facts before it, it was doing so. All that one can, therefore, say is that the Tribunal rejected the Department's contention that the charge was not an "annual charge", as contemplated by section 9(1)(iv) and also that it agreed with the view taken by the Appellate Assistant Commissioner on the matters mentioned by him. The acceptance of the views of the Appellate Assistant Commissioner would mean that, like him, the Tribunal also thought that whether or not a charge was a voluntary charge was not relevant for the purposes of section 9(1)(iv) and that, provided there was a charge, an assessee would be entitled to the benefit of the section, even if it was a voluntary charge. The Commissioner of Income-tax thought that the case had not been rightly decided and asked for a reference to this Court. The Tribunal acceded to the requisition and referred the following question of law: "Whether in the facts and circumstances of the case and upon proper construction of the deed dated 20th December, 1943, the sum of ₹ 9,600 was an admissible deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of case for the opinion of this Court. Mr. Meyer did not suggest that we should depart from the principle which we had always followed, but he contended that the question as to the charge in the present case being a "capital charge" had, in fact, been raised before the Tribunal although no reference to the contention had been made in the Tribunal's order. He pointed out that in the enclosure or appendix submitted to the Tribunal along with the application for a reference, the Commissioner of Income-tax had specifically stated that this question had been raised before the Tribunal. That appears to be true, because the statement of "facts which are admitted and found by the Tribunal and which are necessary for drawing up a statement of the case" ends with the following sentence: "But the question whether it was a 'capital charge' was not gone into, although this question was specifically raised by the Departmental Representative and the Tribunal dismissed the appeal." I think, however, that in spite of that statement in the enclosure to the Commissioner's application, we cannot treat the question as included in the refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge, the amount of such charge;...............and where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital." The proviso to the sub-section is not material for our present purpose. The second of Mr. Meyer's points was that the charge on the basis of which the assessee claimed the deduction in the present case was not an "annual charge" as contemplated by section 9(1)(iv). It was contended that under the consent decree, the alimony was payable at the rate of ₹ 800 per month and the assessee could not, by merely multiplying that monthly sum by twelve, claim the multiple to be an annual payment or charge. Cases where the levy or payment was in fact an annual levy but only the payment of it by instalments was allowed were said to be different, because in those cases the charge itself was basically and in its own nature an "annual charge." Where, however, a payment was to be made month by month under a contract or a consent decree, the charge, if any, was really a monthly and not an annual charge and, consequently, the provisions of section 9(1)(iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in two short paragraphs to which I shall refer later. The term "annual charge" is a term expressed in the English language. The successive English Income Tax Acts contained the expression "yearly interest" and "annual payment" and brought such interest or payment to tax. Judges of the English Courts had consequently to construe the expression "annual payment" and I think that what they held to be meant by the word "annual," as used in such context, can safely be regarded as authoritative. I may point out, however, that while section 9(1)(iv) of the Indian Act makes the amount of an "annual charge" exempt from taxation by permitting a deduction thereof in the computation of the assessee's income, the English Acts use the expressions "yearly interest" and "annual payment" in the opposite context, because they use them in charging sections so as to make the amounts concerned not exempt but chargeable to tax. That distinction, however, makes no difference. Some of the possible different meanings of the expression "annual" were stated by Rowlatt, J., in the cases of Ryall v. Hoare, Ryall v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stator had contemplated were payments extending over a year and he had adopted as a unit of payment the one twelth of a year into which the calendar year was divided. The decision in Cooper's case [1917] 119 L.T. Rep. 303 was followed in the case of In re Janes' Settlement: Wasmuth v. Janes [1918] 2 Ch. 54, decided in 1918, a case which is more frequently cited. That case is somewhat near to the facts of the case before us, inasmuch as the payment concerned was to be made under the provisions of a separation deed. The deed provided for the payment to the wife of a weekly sum of £ 8 every Wednesday and the question again was whether in making the payment, the husband or the trustee appointed by him would be entitled to deduct the appropriate income tax. The relevant provision of the Income Tax Act was again section 40 of the Act of 1853 and it would appear also section 102 of the Act of 1842. The first spoke of "any rent, or any yearly interest of money, or other annual payment," while the second spoke of "all annuities, yearly interest of money, or other annual payments." The argument advanced was that while a sum payable every calendar month must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re annual payments within the meaning of rule 19. The last case with which I shall conclude the citations was the case of Cunard's Trustees v. Inland Revenue Commissioners ([1946] 1 All E.R. 159). The facts of that case were that the trustees under a will were required by the testatrix to pay certain expenses of a sister of hers in respect of a house and also to pay her the remainder of the income from the residuary estate during her life. The will then proceeded to provide that if in any year the income of the residuary estate was found insufficient to enable the sister to live at the particular house in her customary degree of comfort, the trustees would be entitled to apply such portion of the capital of the residuary estate by way of addition to the income therefrom as they might in their discretion think fit. Certain payments out of the capital were made under the last mentioned provision of the will and the Crown claimed to recover tax from the trustees in regard to those payments under Schedule D, Case III, rule 1(a), to the Income Tax Act of 1918. The Court was composed of Lord Greene, M.R., who delivered the judgment of the Court, and Mackinnon and Morton, L.JJ. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case III, rule 1(1) even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial." It would, therefore, seem that the fact that the alimony was made payable by the consent decree in the-present case month by month does not prevent it from being "an annual payment" or "annual charge" as contemplated by section 9(1)(iv). It is not that the assessee was making it an annual payment by the simple device of multiplying the monthly sum by twelve, but the quality of being annual was inherent in the nature of the payment itself. The word "annual", as used in taxing statutes, must be taken to mean payments, in whatever kind of instalments paid, made every year in discharge of a liability incident to that year, if it has to be made during more than one year, whether consecutively or otherwise. A payment is annual if, as was pointed out in the last of the cases I mentioned a few moments ago, it has the quality of recurrence in different years, although it might not be in every one of a succession of years. It is also not necessary that its quantum should be fixed by reference to a whole year. The illustr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whom he owed the liabilities. Taking the facts of the present case, it was contended that if the assessee did not execute the deed of charge but had simply made the payment under the terms of the consent decree, he could not possibly have claimed a deduction of the amount in computing his taxable income. Could the section have intended, it was asked, that a mere creation of a charge by the assessee himself would so alter the grounds of his liability for tax under the Act that it was thought proper and correct to make a deduction of the payment available to him? Considered on principle and against the background of the general scheme of the Act, the argument of Mr. Meyer would seem to deserve careful consideration. But in a taxing statute, there is no room for any intendment or presumption or balancing of equities. One has merely to look at the terms employed, look fairly at the language used and ascertain what the statute says. If it speaks clearly to a certain effect, then it is wholly immaterial that what it says does not appear to accord with the principles upon which other parts of the Act appear to have proceeded or that the assessee gets what seems to be an undeserved adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke a look at the background. Before the Amendment Act of 1939, the clause read as follows: Clause (iv): "where the property is subject to a mortgage, or other capital charge, the amount of any interest on such mortgage or charge; where the property is subject to a ground rent the amount of such ground rent and where the property has been acquired with borrowed capital, the amount of any interest payable on such capital and not specifically charged upon the property itself." The Income-tax Enquiry Committee of 1936 had to consider the provision in Chapter V of their report and they made the following observations: "Although, we understand, the Second Income-tax Amendment Act of 1933 was intended to provide for the allowance to the same extent as interest, of annual payments charged on the property, the wording of section 9(1) of the Act does not provide for any charges other than interest and ground rent, and we suggest that the clause in question should be amended accordingly. We recommend also that the restriction which we suggest in Chapter VIII, section 2, as regards interest paid, should be extended to the allowance of other charges." In section 2 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to allow only interest on a charge to which the property was subject at the time of acquisition by the assessee and interest on capital borrowed for the purpose of acquiring, repairing, renewing or reconstructing the property. It further allows-what is not now allowed-an annual charge not being a capital charge to which the property was subject at the time of its acquisition by the assessee." The Bill went to a Select Committee and the Committee's comment on the proposed clause (iv) of section 9(1) was as follows: "In clause (iv) of sub-section (1) of section 9, as redrafted by the Bill, we have removed the words 'was at the time of its acquisition by the assessee' in both places where they occur, and substituted the word 'is'. The effect is to secure, as the Act does at present, that the allowance is claimable, no matter when and for what purpose the mortgage or charge arises." The rest of the comment is not material. It would appear that the change made by the Select Committee was accepted by the sponsors of the Amendment Bill, because the second Amendment Bill of 1938 presented on the 10th of November, 1938, set out the proposed clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty. Clause (v) provides for a deduction of the land revenue payable. Clause (vi) again provides for a deduction charges. The section, it is true, is not a charging section, but a section concerned with the computation of the assessable income derived from a particular source. It is intelligible that such a section should aim at the ascertainment of the real income of the assessee which comes into his hands from the source concerned and, therefore, amounts which the assessee has to pay in discharge of liabilities which, so to say, run with the property and which must be discharged in order to its enjoyment, can easily be seen to be reasonable deductions. The same cannot obviously be said as to charges created by the assessee voluntarily for the payment of his personal liabilities to other persons or interests on mortgages created by him. But the section says and in my view says in unmistakable terms, that such charges and amounts of interest are also deductible and so must we hold. The third contention of Mr. Meyer must also be accordingly overruled. On this question there is a decision of the Bombay High Court in the case of Prince Khanderao, Gaekwar of Baroda v. Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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