TMI Blog1979 (11) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... d having regard to the documents mentioned in question No. (1) above, the Tribunal was legally correct in holding that the maintenance allowance to Raj Kumari Laxmi Devi and Raj Kumari Inder Mohini were by virtue of a family custom and they also partake of the nature of an overriding allowance ? 3. Whether, on the facts and in the circumstances of the case, the maintenance allowance of Rs. 15,737 to various relations were permissible deductions from the total income of the assessee for the assessment year 1960-61 ? " Briefly stated the facts are that one Raja Raj Kumar was the owner of Sahaspur Bilari Estate in the district of Moradabad. He died on November 3, 1915, leaving behind him two widows: Smt. Amrit Kunwar and Smt. Panna Kunwar, one son, Raja Jagat Kumar, and one daughter, Rajkumari Laxmi Devi. There were also two illegitimate sons, known as Sarin Brothers, left by him. Since Raja Jagat Kumar was a minor, the management of the estate was taken over by the Court of Wards, Uttar Pradesh. Raja Jagat Kumar became major in January, 1933, and the estate was released in his favour. Shortly after, on March 7, 1934, he died in a motor accident leaving behind two widows, Smt. Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its original side. That suit was filed against the assessee and Rani jai Devi for recovery of two months' maintenance allowance, viz., January and February, 1962, and for declaration. That suit was decided by this court on August 24, 1967, and the aforesaid agreement was held binding on the assessee though not on Rani jai Devi. According to this court, the action of the Court of Wards to enter into an agreement to uphold the rights of the assessee and to set at rest the possibility of assessee (sic). The increase in the maintenance allowance which was made by means of that agreement was upheld and a charge was created on the three house properties for the payment of the maintenance allowance to Rajkumari Laxmi Devi. In the meantime, the assessment for the year 1960-61, the previous year ended September 30, 1969, was taken up against the assessee. For that year, the total income disclosed by the assessee was Rs. 13,722 inclusive of her half share in the income from the unsettled estate of Rs. 3,417. The assessee had taken into account the payment of maintenance allowance amounting to Rs. 21,937 out of the settled estate, the details being Rs. 1. 1,500 to Rani Amrit Kunwar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had its roots elsewhere and unless there was a finding about the origin and source of those payments, it was found that that question could not be answered. On receipt of the record, in conformity with the answers given by this court, the Appellate Tribunal made an order under s. 66(5) of the Act and in doing so gave a hearing to the parties and came to the conclusion that the allowances paid to Rani Amrit Kunwar and Rani jai Devi were in pursuance of obligations arising from custom and usage as also from provisions of Hindu law and the U.P. Estates Act. The payment to Rajkumari Laxmi Devi also partook of the nature of an overriding title and had to be deducted before the income reached the hands of the assessee. The payment made to Rajkumari Indra Mohini was held to be of the same nature. At the same time, the payments made to the sons of Raj Kumari Indramohini and Raj Kumari Laxmi Devi and to Sarin Brothers were held not justified either with reference to the provisions of the Hindu law or with reference to the U.P. Estates Act. There was no indication of any family custom or usage either to support those payments. Thus, out of the claim of Rs. 21,937, a sum of Rs. 15,737 was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the general custom these relations would be entitled to get maintenance from the head of the family. Sri Gulati, as well, placed reliance on numerous decisions to which we would advert little later. It would be seen that in the present reference we are concerned with the widow's obligation to pay maintenance out of the estate inherited by her from her husband to her husband's mother, sister and daughter and to her own co-widow. We have first to be clear about the nature of maintenance and in this behalf we may refer to certain passages from the Principles of Hindu Law by D. F. Mulla, 14th Edn. According to the learned author, a Hindu is under a legal obligation to maintain his wife, his minor sons, his unmarried daughters and his old parents whether he possesses any property or not. This obligation is personal in character and arises from the existence of the relationship between the parties (para. 542). The manager of a joint Mitakshara family is under an obligation to maintain all male members of the family, their wives and their children. This obligation arises from the fact that the manager is in possession of the family property (para. 543). As for the liability of heirs i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his self-acquired property having come by inheritance into the hands of his surviving son, a legal obligation enforceable by suit against that son and against the property in question and for that, reliance was placed in Sir Barnes Peacock's judgment in Khetramani Dasi v. Kashinath Das [1868] 2 BLR 15 (AJ) at p. 34 [FB]. It was also opined that the son in such a situation takes the estate not for his own benefit but for the spiritual benefit of the late proprietor. The general rule thus laid down regarding a person's liability to provide maintenance for others was that the heir of a person taking his estate is legally bound to maintain all those to whom the late proprietor was either legally or morally bound to maintain, for the heir takes the estate of the ancestor for his spiritual benefit. Thus what was a moral obligation in the ancestor becomes transformed into a legal obligation in his heir. The application of this principle in respect of the Hindu law of the Bengal school was recognised in the case of Kamini Dassee v. Chandra Pode Mondk [1889] ILR 17 Cal 373. It was emphasised in that case that this legal obligation was on an heir succeeding to property irrespective of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain and reasonable and being in derogation of general rules of law must be construed strictly. It must not be opposed to morality or public policy nor should it be expressly forbidden by the Legislature. It should not be in derogation of the fundamental rights of citizen to hold and dispose of property by absolutely prohibiting alienation of the property even after actual division. For the proof of custom what is required is that it should be shown that the custom has been acted upon in practice for such a long period and with such invariability as to show that it has, by common consent, been submitted to as the established governing rule of a particular class, community or locality. In this case, this aspect would be relevant because the Appellate Tribunal found the origin of the practice of paying maintenance allowance in the custom in regard to all the four persons with whom we are concerned in this reference. The more important question for consideration is the nature of the obligation. That is the decisive factor, and would provide a true test to find out as to whether the obligation to pay maintenance, as in the present case, is diversion of income or its application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is diverted before it reaches the assessee, it is deductible, but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow it is the first kind of payment which can truly be excused and not the second. The second payment is merely aft obligation to pay another portion of one's own income, which has been received and is since applied. The first is a case in which the income never, reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable." In CIT v. Imperial Chemical Industries (India) (P.) Ltd. [1969] 74 ITR 17 (SC) the question as to whether the income was diverted by overriding title came up for consideration and, their Lordships, after considering a series of decisions, approved the above observations made in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 (SC) quoted above. In M. K. Brothers P. Ltd. v. CIT [1967] 63 ITR 28 (All), while dealing with the distinction between deductions made for ascertaining the profits and distributions made out of profits, his Lordship, M. C. Desai, Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 735 (Bom) are instances of an obligation attaching to the source of an income. In Bejoy Singh Dudhuria in a suit filed by the step-mother for maintenance against the assessee consent decree was made directing the assessee to make a monthly payment of a fixed sum to his step-mother and the maintenance was made a charge on the ancestral estate in the hands of the assessee. Lord Macmillan, dealing with the question, ruled (p. 138) : " But their Lordships do not agree with the learned Chief justice in his rejection of the view that the sums paid by the appellant to his step-mother were not 'income' of the appellant at all. This, in their Lordships' opinion, is the true view of the matter. When the Act by s. 3 subjects to charge, 'all income' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant's whole resources with a specific payment to his step-mother has to that extent diverted his income from him and has directed it to his step-mother ; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iva Prasad Singh v. CIT [1942] 10 ITR 249 (Pat) as well are cases of obligation attaching to the property. In Darab Ruttonshaw Shroff the obligation was created by an agreement while in Raja Shiva Prasad Singh it arose out of a charge created on the estate. In Ratilal B. Daftari also the obligation was created as a result of an agreement between the parties. Madan Mohan Mullick and Brothers, In re [1938] 6 ITR 315 (Cal) is case of a voluntary settlement and payment of maintenance on the basis thereof was held liable to exclusion from the computation of income. Also see CIT v. Crawford Bayley and Co. [1977] 106 ITR 884 (Bom) and CIT v. C. N. Patuck [1969] 71 ITR 713 (Bom). The true test thus is whether the amount sought to be deducted in truth never reached the assessee as his income. Thus, in P. C. Mullick v. CIT [1938] 6 ITR 206 (PC), where on the basis of the will the appellant was required to pay a certain amount out of the income of his property on the occasion of addya sradh, the view taken was that it was a Case of application of income and not diversion of income at source. Similarly in V. M. Raghavalu Naidu and Sons v. CIT [1950] 18 ITR 787 (Mad), where the assessees, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal, Inre[1945] 13 ITR 512 (Lah). These are cases of payment of maintenance allowance under the will of a Hindu and the principle laid down was that if the payment is voluntary it must be included in the income of the assessee, but if the charge is obligatory that is subject to an overriding charge, such as a decree, the sum so charged must be excluded from the income of the payer. On the basis of the case law discussed above the true test which emerges is whether the amount sought to be deducted in truth reached the assessee as his income or not. Broadly speaking, a payment voluntarily made would only amount to an application of income and not diversion at source. In order that a payment should be treated as a diversion at source, it is necessary that it should have been made under some legal obligation. Such obligation must attach to the source of income. In other words, for such a payment there should be an overriding charge, a charge which is created under any law for the time being in force or by virtue of any court's decree or by an agreement or by a voluntary settlement or the obligation must be such, though not made a specific charge on the property, can be enforced in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Zamindari Abolition and Land Reforms Act, the relevant provisions are contained in ss. 71 and 11 thereof. Section 71 provides that where any person claiming to be the guzaredar wants any portion of the compensation awarded to an intermediary, the Compensation Officer may, with the consent of the intermediary, direct the payment of an agreed amount to the guzaredar. However, in case the consent of the intermediary is not forthcoming, the Compensation Officer may direct the claimant to institute a suit within the next three months. Till then the amount shall not be paid to anybody and if the suit is filed the amount shall be placed at the disposal of the court before which such suit is instituted. If, however, such a suit is not instituted within the period of three months aforesaid, the compensation shall be paid to the intermediary forthwith. The Explanation to this section is rather important since it defines the expression guzaredar. It says that a guzaredar means a person entitled to receive guzara under a registered deed, decree or order of court or any enactment. This section thus recognises the right of a guzaredar in regard to his maintenance. Similarly, s. 11 which pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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