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1986 DIGILAW 259 (KAR)

Commissioner of Income Tax v. P. Satish Pai

1986-06-23

MOHAMMAD SHARIF, N.D.VENKATESH

body1986
JUDGMENT K. Jagannatha Shetty, Actg. C.J.—This is a reference under section 256(1) of the Income Tax Act, 1961. The Tribunal has referred the following question : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the expenditure Rs. 10.000 as marriage expenses is a capital charge on bequeathed properties and can be allowed as a deduction if the same has been incurred in the relevant previous year irrespective of deduction provided under section 24(1)(iv) of the Income Tax Act, 1961 ?" 2. The assessment year is 1972-73. The assessee inherited a house property subject to certain conditions under a will dated December 30, 1966, left by his father. Thereunder, the assessee was liable to pay Rs. 30 per month to his mother towards maintenance. He was also liable to pay Rs. 10,000 to each of his unmarried sisters at the time of their marriage. He performed the marriage of his sister during the relevant year and claimed deduction of the expenditure incurred thereon besides the maintenance paid. In all, he claimed deduction to the tune of Rs. 50,000. 3. The Income Tax Officer did not allow any deduction. Upon appeal, the Appellate Assistant Commissioner allowed deduction to the extent of Rs. 30 per month given to the mother towards her maintenance and disallowed the other claim. The assessee preferred further appeal before the Appellate Tribunal. The Tribunal, while wholly agreeing with the view of the Assistant Commissioner, in regard to the maintenance paid to the mother, has partly allowed an expenditure of Rs. 10,000 incurred in connection with the marriage of the assessee's sister. The Tribunal was of the opinion that that amount should be allowed as an overriding charge on the property since, according to the terms of the will, it was obligatory for the assessee to pay for the marriage expenditure of his sisters. 4. It is not disputed and indeed cannot be disputed that the amount of Rs. 10,000, although it was liable to be paid by the assessee at the time of the marriage of his sisters, cannot be allowed as deduction under section 24 of the Act. It is no doubt a charge and indeed a capital charge, but the capital charge of that nature cannot be allowed as deduction under section 24(1)(iv) of the Income Tax Act, 1961. 5. It is no doubt a charge and indeed a capital charge, but the capital charge of that nature cannot be allowed as deduction under section 24(1)(iv) of the Income Tax Act, 1961. 5. The next question is under what other provision of the Income Tax Act, 1961, such an amount could be allowed as deduction. Counsel for the assessee has not been able to refer to any other provision in the Income Tax Act. He, however, submitted that in computing the income from a property of the assessee, the amount which was liable to be paid to third parties out of the income thereof should be allowed as deduction as an overriding charge on the property. 6. It is too difficult to accept this contention. On the principle of overriding charge, there remains little scope for discussion. That has been explained by the Supreme court in The Commissioner of Income Tax, Bombay City II Vs. Shri Sitaldas Tirathdas, AIR 1961 SC 728 . There, it was observed(at pages 374 and 375) : "In our opinion, the true test is whether the amount sought to be deducted, in truth never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of 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." 7. The Tribunal has misapplied the above observation. There may be obligations and obligations to apply the income derived by the assessee. The assessee might have been obliged to meet the expenditure of his sister's marriage out of the income from the property given to him. But such as obligation cannot be equated with the overriding charge on the property. For an overriding charge, the obligation should be of such a nature as to divert the income before it reaches the assessee. The assessee might have been obliged to meet the expenditure of his sister's marriage out of the income from the property given to him. But such as obligation cannot be equated with the overriding charge on the property. For an overriding charge, the obligation should be of such a nature as to divert the income before it reaches the assessee. In the present case, it is not in dispute that the income before it reaches the assessee. In the present case, it is not in dispute that the income from the property was not required to be diverted before it reached the assessee and the income had been applied in one particular year. Such an expenditure incurred for the marriage of the assessee's sister cannot be regarded as an overriding charge. 8. In the result, we answer the question in the negative and in favour of the Revenue. In the circumstances, we make no order as to costs.