Raja Shiva Prasad Singh vs Commissioner of Income Tax

Manohar Lall, J.—This is a case stated by the Commissioner of Income Tax, Bihar and Orissa, u/s 66(3), Income Tax Act, upon the following questions: (1) Whether the amount of Rs. 19,587 paid as maintenance allowance to the two widows is in the circumstances of this case, assessable income under the Inoome-tax Act and (2) if the answer to question (1) be in the affirmative, could such sum be assessed in this case by proceedings taken u/s 34, Income Tax Act?

The assessee is the Raja of Jharia, the owner of an impartible estate, and was assessed for the year 1937-38 upon a sum of Rs. 4,42,142 on account of his income from various assessable sources after allowing a deduction for Rs. 19,587 which he paid in that year as maintenance allowance to the Banis of Jharia, but as the result of an order passed by the Commissioner of Income Tax on 12 September 1938, by which he set aside the assessment of one of the Banis with regard to the maintenance which i she had received from the Baja, the Income Tax Officer started proceedings u/s 34, Income Tax Act against the Baja, the income escaped being said to be Rs. 19,587 for which he had been allowed a deduction in the original assessment. The Income Tax Officer following the decision of this Court reported in Commissioner of Income Tax B. & O. v. Visheswar Singh AIR 1935 Pat. 342 held:

It is immaterial whether the payment made by the assessee is in accordance with the obligation of the head of an undivided family or in pursuance of a Court decree. Whatever be the impelling force for making the payment neither character of the allowances nor the capacity in which they are paid is altered.

He accordingly added the sum of Rs. 19,587 to the sum of Rs. 4,42,112,on which the assessee had been assessed previously and made a fresh assessment u/s 34, Income Tax Act on a total income of Rs. 4,61,929 by an order dated 31st July 1939. An appeal against this decision was dismissed by the Appellate Assistant Commissioner on 11th December 1939. The Commissioner also refused to grant any relief to the assessee u/s 33, Income Tax Act. The assessee''s application to the Commissioner for referring the case to the High Court u/s 66(2), Income Tax Act, was also rejected by the Commissioner on 28th March 1940. Against that order he moved this Court who directed the Commissioner by an order dated 3rd October 1940, to state a case upon the questions already stated in the beginning of the judgment. The Commissioner has sent up a statement of the case for our decision.

The facts found are that the assessee succeeded to the Jhaiia estate on the death of his predecessor, the late Raja Durga Prasad Singh, as a result of a protracted civil Court litigation between the assessee on the one hand and the widows of Raja Durga Prasah Singh, called the Banis, on the other hand. The Banis claimed the entire properties of the late Raja Durga Prasad Singh on the ground that the assessee was not a member of the joint family with their deceased husband and there was no male member in the joint family. The assessee on the other hand contended that he was a member of the Hindu undivided family of the deceased Raja Durga Prasad Singh and that he was, therefore, entitled to the properties by the rule of survivorship and by the custom of lineal primogeniture, which governed succession to the ancestral estate of the family. The contention of the assessee was allowed by the trial i Court and confirmed by the High Court and the Privy Council, In that litigation it was decided:

The two Banis, being members of a Hindu undivided family with the assessee, were entitled to maintenance, the amount of which was subsequently determined, after getting enquiries made through the High Court, at Rs. 750 per month to each of the two Banis. It was also ordered that the maintenance allowance together with the arrears of such allowance, should constitute a charge upon the estate. It was also decreed by the Court that the assessee was to pay to the Banis, in addition to the above sums, certain other amounts, being certain proportion of value of jewellery and of other moveable properties left by the deceased Raja Durga Prasad Singh. A portion of the dues of the Banis so determined was satisfied by adjustment and the balance, is being paid by the assessee by instalments.

On these facts the assessee contended that a sum of Rs. 19,887 which he paid to the Banis in the year of assessment was not a part of his income but was the amount received by him for and on account of the Banis, and, therefore, was an admissible deduction and no tax was payable by him on that amount.

In my opinion the contention of the assessee is correct and ought to have been accepted. Their Lordships of the Judicial Committee in Bijoy Singh Dudhuria v. Commr. of Income Tax, Calcutta., AIR 1933 PC 145 , had to consider a similar situation. In that [case under a decree of the Court the entire estate ''comprising all assessable and non-assessable source of income of the assessee was charged with payment of maintenance annuity to his step-mother. Lord Macmillan in delivering the judgment of their Lordships in the appeal preferred by the assessee against '' the decision of the Calcutta High Court, which had refused the contention of the assessee, observed as follows:

When the Act by Section 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 had to that extent diverted his income from him and has directed it to his step-mother; to that extent what he received for her is not his income. It is not the case of the application by the appellant of part of his income in a particular way, it is rather an allocation of a sum out of his revenue before it becomes income in his hands.

This is exactly the situation in the present case. The Income Tax authorities had been following this view in the case of this assessee. In the original assessment which was made in the year in question this sum was allowed as an admissible deduction, but they proceeded to take action u/s 34 upon the assumption that Rs. 19,587 has escaped assessment because the Commissioner took the view that the allowance paid to the Banis was not taxable by reason of Section 14(1), Income Tax Act. It is convenient to quote here the reasonings of Mr. Wall the then Commissioner of Income Tax, Patna:

As regards maintenance allowance, however, there is some force in the assessee''s objection. As already stated, the final result of the litigation was that the family was held to be an undivided family. It follows that the assessee is a member of such family and the maintenance allowance is received by her in that capacity. The allowance is therefore exempt u/s 14(1). It has of course been held by the Patna and Madras High Courts in Raja Shiva Prasad Singh of Jharia Vs. King-Emperor, and Commissioner of Income Tax Vs. The Hon''ble Sri Ravu Swetachalapati Ramakrishna Ranga Rao, Rajah of Bobbili, , respectively, that the income of an impartible estate is the income of the individual who for the time being holds the estate and not the income of the Hindu undivided family of which he is the head; and as the Raj in this case is an impartible Raj it may be argued from this that the maintenance allowance is not received by the assessee as a member of a Hindu undivided family. This argument however is completely disposed of by the decision of the Patna High Court in Commissioner of Income Tax B. & O. v. Visheswar Singh AIR 1935 Pat. 342. There also the Raj was an impartible Raj and an allowance paid to the younger brother of the holder of the Raj was held to be exempt in his hands u/s 14(1). The two cases are indistinguishable in any essential respect and the present case must be held to be governed by the decision in that oase. The maintenance allowance received by the assessee cannot, therefore, be assessed in her hands and must be excluded from the assessments.

It is argued that this view taken by the Commissioner is wrong in view of the recent decision of their Lordships in Commr. of Income Tax, Punjab v. Krishna Kishore, AIR 1941 PC 120, which has been approved of in a still later decision of their Lordships in 198 I.C. 166. The judgment of their Lordships was delivered by Sir George Bankin. But, in my opinion it is unnecessary to consider the correctness of the decision as to whether the Bani is liable under the Income Tax Act to assessment in respect of the payment received by her. That question was left open by their Lordships of the Judicial Committee in Bijoy Singh Dudhuria v. Commr. of Income Tax, Calcutta., AIR 1933 PC 145 and that question does not fall to be determined in the present case. All that is necessary to determine in the present case is whether the assessee is liable to pay Income Tax on this sum which he receives for the Ranis and which never becomes income in his hands. For these reasons, in my opinion, the answer to the first question should be in the negative.

Learned Counsel for the assessee withdrew the second question and desired us not to give any decision on that question. Accordingly I refrain from giving my decision on that question. The assessee is entitled to his costs of this reference. Hearing fee is fixed at Rs. 250. The assessee will also be entitled to withdraw the sum of Rs. 100 which was deposited by him before the Commissioner as the fee for making a reference to the High Court.

Miscellaneous Judicial Case No. 78 of 1940.

In this case also the assessee is the Raja of Jharia and the question which the Commissioner of Income Tax has been called upon to state u/s 66(3), Income Tax Act, is whether the amount of Rs. 21,000 and a portion of Rs. 2,00,000 paid as maintenance allowance to the two widows is in the circumstances of this case assessable income under the Income Tax Act.

The facts of this case are the same as the facts which govern the decision of Miscellaneous Judicial Case No. 69 of 1940 in which judgment has just been delivered and which was heard along with this case. It was agreed at the bar that the answer to the question in this case must be the same as the answer to the question which we may ultimately decide to give in Miscellaneous Judicial Case No. 69 of 1940. The reasonings which I gave at length in that case need not be repeated here. For these reasons the answer to the question is in the negative. The assessee is entitled to his costs in this case, but not to any hearing fee in the circumstances. The assessee, however, will be entitled to withdraw the sum of Rs. 100 which he has deposited with the Commissioner as the fee prescribed by the Act.

Harries C.J.

I agree.