Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: COMMISSIONER OF INCOME-TAX, WEST BENGAL VS Respondent: STATE BANK OF INDIAHonorable Justice CHAKRAVARTTI
1968 P T D 1
1968 P T D 1
[Calcutta (India)]
Before Chakravartti, C. J. and Sarkar, J
COMMISSIONER OF INCOME‑TAX, WEST BENGAL
Versus
STATE BANK OF INDIA
Income‑tax Reference No. 21 of 1949, decided on 29th March 1956.
Income‑tax Act (XI of 1922), Ss. 9(1)(iv) & 66-‑Income from property‑Deductions‑‑"Annual charge" ‑ Charge created by assessee for alimony payable to wife under consent decree --Whether deductible as "annual charge" ‑ Stipulation for payment every month‑Whether "annual" payment ‑ Charge created voluntarily-‑Rules in Bijay Singh Dudhuria's case-- Whether applicable to deductions under. S. 9(1)(iv)‑Meaning of "annual charge" ‑ "Charge" and "security" distinguished ‑Reference‑New grounds‑Construction of Act‑Consideration of equity.
In a suit instituted against the assessee by his wife a consent decree was passed by which an order for judicial separation was made and the assessee was directed to pay "Rs. 800 per month" to his wife as alimony. Three years later, the assessee executed a deed of charge whereby he made the payment of this alimony "amounting to Rs. 800 per month or Rs. 9,600 per year" a charge on two properties owned by him, and the question was whether the sum of Rs. 9,600 payable annually under the deed of charge was an admissible deduction under section 9(1) (iv) of the Indian Income‑tax Act in computing the assessee's income from property:
Held, (i) that the fact that the alimony was made payable by the consent decree at the rate of Rs. 800 per month and not at the rate of Rs. 9,600 per year did not prevent the payment from being an "annual payment" or "annual charge" as contemplated by section 9 (1)(iv);
(ii) that in view of the express language used in section 9(1)(iv), the sum of Rs. 9,600 was an admissible deduction under section 9 (1) (iv), even though the charge was created by the assessee voluntarily and was not an overriding charge diverting the amount from the assessee before it could become his income.
"Annual payments" 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 it has the quality of recur rence 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 word "charge" in section 9(1)(iv) means payment and not mere security. What section 9(1)(iv) provides for is a deduction of certain sums out of the assessee's income, after the income has become his. The broad ground that where there is only an application of the income, there can be no claim to exemption from tax or deduction in the computation of the income is, therefore, not available as an argument against a literal construction of section 9.
In a taxing statute, there is no room for any intendment or presumption or balancing of equities. One has merely to look employed, look fairly at the language used, and ascertain what the statute says. If it speaks clearly to 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 advantage.
The practice of the Calcutta High Court has always been to limit the party at whose instance a reference has been made to the points raised and canvassed before the Tribunal. New grounds not taken before the Tribunal will not be allowed to be urged even though the question is framed in a general form which might comprise all possible contentions to which the terms of the relevant section might give rise.
[Case‑law referred].
STATEMENT OF CASE
By this application the Commissioner of Income‑tax requests that certain questions of law said to arise from the order of the Tribunal be referred to the Hon'ble High Court.
2. The respondent, H. M. Thaddeus, had to pay alimony to his wife at Rs. 800 a month or Rs. 9,600 a year in consequence of a consent decree passed by the Calcutta High Court on the 28th February 1940. On the 20th day of December 1943 he created a charge for the payment of the alimony on two of his louse properties situated in 1 Lower Rawdon Street and No. 10/1‑A, Radha Bazar Lane. In that deed it was stated as follows:
"Whereas the husband has come to know that the wife is intending to make an application to Court to compel the husband to secure payment of the said alimony by charging same on his properties in accordance with the Laws and Rules of Divorce and whereas the husband in order to prevent the said intended application and avoid liability as to costs thereof and as a safe guard against future uncertainty is desirous of charging his houses and premises being No. 1 Lower Rawdon Street and No. 10/1‑A, Radha Bazar Lane, of which he is the absolute owner the said husband doth hereby charge al: and singular the messuage, lands, hereditaments and premises being his said properties here inafter described for the said alimony amounting to Rs. 800 per month or Rs. 9,600 per year and payable to his wife in terms of the said decree, for and during the remainder of her life and he also declares that his said properties and the rents, issues and incomes thereof shall remain charged with the due payment of the said alimony .."
2. It was claimed by the assessee before the Department that a deduction should be allowed from the income of the house properties mentioned above under section 9 (1)(iv) as the annual charge was not a capital charge. The Income‑tax Officer rejected the contention but the Appellate Assistant Commissioner allowed it. An appeal was filed by the Income‑tax Officer against that decision of the Appellate Assistant Commissioner to the Tribunal. The Tribunal, on a consideration of all the facts and the cases that were mentioned by the parties, held "we had gone through those cases and on a consideration of those cases it is difficult for us to say that the view taken by the Appellate Assistant Commissioner is wrong. We therefore dismiss the appeal."
3. We think a point of law does arise out of the order of the Tribunal, and we refer the following question to the Hon'ble High Court:
"Whether in the facts and circumstances of the case and upon proper construction of the deed dated 20th December 1943, the sum of Rs. 9,600 was an admissible deduction under section 9(1)(iv) in computing the assessee's income from pro parties situated in 1, Lower Rawdon Street and No. 10/1‑A Radha Bazar Lane?"
E. Meyer for the Commissioner.
B. N. Chakrabartti for the Assessee.
JUDGMENT
CHAKRAVARTTI, C. J.‑This is a reference under section 66 (1) of the Income‑tax Act made at the instance of the Commissioner of Income‑tax and involves a single question of law. The matter was argued before us of some considerable length.
The relevant facts are few in number. One H. M. Thaddeus, an inhabitant of Calcutta, appears to have got into trouble with his wife in regard to their married life and the lady sought the assistance of this Court by instituting a suit for Judicial separation. That suit which was Suit No. 20 of 1940, was ultimately disposed of on the 28th February 1940, by consent. The terms of the consent decree, so far as they are material for the present purpose, were that an order for judicial separation was to be made in favour of the plaintiff wife and the defendant husband was to be directed to pay to his wife a sum of Rs. 800 as her alimony "in the manner specified in the terms". The first of the terms of settle ment referred to the payment of this alimony and. was to the following effect:
"Permanent alimony to be paid at the rate of Rs. 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 additional reason for executing the deed. The operative part of the document read as follows:
"Now these presents witness that in consideration of the premises the said husband doth hereby charge all and singular the messuage, lands hereditaments and premises being his said properties hereinafter described for the said alimony amounting to Rs. 800 per month or Rs. 9,600 per year and payable to his wife in terms of the said decree, for and during the remainder of her life and he also declares that his said pro perties and the rents, issues and incomes thereof shall remain charged with the due payment of the said alimony or such sum as may be‑ordered by Court from time to time in favour of his said wife for her life."
The properties mentioned in the Schedule to the deed and charged thereby were premises No. 1, Lower Rawdon Street and premises No. 10/1A, Radha Bazar Lane, both situated in the town of Calcutta.
It will be noticed that whereas the compromise decree directed the alimony to be paid at the rate of Rs. 800 per month, the deed of charge, in addition to describing the payment in the same language, contained the alternative description "or Rs. 9,600 per year".
It appears that thereafter in course of the assessment for the year 1945‑46, the assessee claimed a deduction of the payment of the amount of Rs. 9,600 which he had paid to his wife as her alimony during the relevant accounting year. No reference appears to have been made before the Income‑tax Officer to section 9(1)(iv) of the Indian Income‑tax Act. The claim was put forward on the basis that an amount, equivalent to the amount payable to the wife as her alimony, had been diverted from the hands of the assessee to those of his wife before it could become the assessee's income. Quite obviously, the assessee was then shaping his case on the decision of the judicial Committee in the case of Bijay Singh Dudhuria v. Commissioner of Income‑tax Calcutta ((1933) 1 I T R 135). The assessee's contention did not find favour with the Income‑tax Officer who held that there could be no question in the facts of the case of any overriding charge diverting the money from the hands of the assessee before it could become his income, because the charge was a voluntary imposition and there was nothing in it to bind the assessee absolutely.
In his appeal to the Appellate 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 volun tary charge depending entirely on the assessee himself for pay ment, 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 bands 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 Commis sioner naturally paid no attention to the argument of diversion, because the assessee was relying upon section 9(1) (iv) of the Act which provides for deductions of certain sums out of the taxpayer's income and does not require that the sums concerned should not become his income at all. As to the remaining two grounds upon which the assessee's claim was resisted by the Department, the Appellate Assistant Commissioner pointed out that a claim of deduction had in fact been made in the return, although not so clearly or directly as it might have been made and, secondly, that provided there was a charge whether the same had come into being voluntarily or by virtue of an obligation superimposed on the owner of the property was immaterial for the purposes of section 9(1)(iv). On those grounds the Appellate Assistant Commissioner held that the assessee was entitled to the deduction claimed.
The Income‑tax Officer was not prepared to accept the decision and appealed to the Appellate Tribunal. His appeal was disposed of by one of the most unsatisfactory judgments that I have seen. After reciting the fact of the consent decree and the relevant terms of the deed of charge, as also the pro ceedings before the authorities below in the barest of terms the Tribunal proceeded to state the contention advanced before it. The only contention which it recorded was that the alimony could not be treated as an "annual charge", inasmuch as the liability for it arose from day to day and was due to last only during the life of the wife. The Tribunal understood the Departmental Representative to contend that while the mode of payment might be annual in the present case, the nature of the payment was not so, whatever that might mean. Having stated the contention of the Department, the Tribunal proceeded to mention four reported decisions and then concluded the judgment in the following words:
"We have gone through these cases and on a consideration of these cases it is difficult for us to say that the view taken by, the Appellate Assistant Commissioner is wrong. We therefore, dismiss this appeal."
It is impossible to make out what view the Tribunal actually took of the contentions of the parties and what the points were which it intended to decide by the cryptic sentence which I have quoted. The four decisions mentioned cover a wide variety of ques tions and since the Tribunal did not go beyond naming the decis ions, it 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 the benefit o 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 Rs. 9,600 was an admissible deduction under section 9(1)(iv) in computing the assessee's income from pro parties situated in 1, Lower Rawdon Street and No. 10/1A, Radha Bazar Lane?"
Mr. Meyer, who appeared on behalf of the Commissioner of Income‑tax, proposed to raise before us three points as bearing upon the question referred. He said he would argue first that the charge in the present case was a "capital charge"; secondly, that assuming it was not a "capital charge", it was still not an "annual charge"; and, thirdly, assuming that it was an "annual charge' and not a charge of a capital nature, it was still not a charge within the contemplation of the section, inasmuch as it was a charge voluntarily created.
We intimated to Mr. Meyer as soon as he formulated his points that he could not be allowed to take the first of them, since it did not appear to have been taken on behalf of the Department at any stage of the proceedings and certainly not before the Tribunal. It could not, therefore, be said to 'arise out of the Tribunal's order. The practice followed in this Court in references under section 66(1) of the Act has always been to limit the party, at whose instance a reference has been made, to the points raised and canvassed before the Tribunal. Questions are often framed in a general form, such as whether the assess ment for a particular year made in a certain manner was valid in view of the provisions of a certain section of the Act. A question framed in that form might be said to comprise all possible contentions to which the terms of the relevant section might give rise, but this Court has always refused to treat matters arising out of questions so framed as entirely at large. It has adopted and acted on that view for the reason that this Court is only an advisory body and the advice which it can be properly asked to give is only advice on matters which had been in conten tion before the Tribunal and which had been decided in one way or another such advice being might in order that the parties interested might know whether the decision on those contentions had been in accordance with law. In hearing a reference under section 66 (1), this Court does not sit in appal from the assess ment and it is not called upon to give its advice on matters which the Tribunal was not asked to decide and which the Tribunal neither decided, nor included in 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 reference and open to the Commis sioner, since even after the Commissioner had made that statement in his application for a reference, the Tribunal did not include any question as to the charge not being a "capital charge" in the statement of the case drawn up by it, As far as I am aware, according to the rules of the Tribunal, draft statements are allowed to be seen by the parties and suggestions are invited from them. In any event, the Commissioner must have come to know of the statement of the case, as drawn up and submitted to this Court and he took no steps either to have the statement of case amended or supplemented or to have a question regarding the charge being or not being a "capital charge" referred to this; Court. Mr. Meyer asked by what procedure he could either get the statement of case amplified or cause a reference of his point about the charge not being a "capital charge" to be referred. It appears to me that, for the first, he could come to this Court for a writ of mandamus and for the second, he could make an application under section 66(2) if his client was so advised, because on the facts stated by him, the statement of case, as drawn up by the Tribunal, amounted to a refusal to state a question which the Commissioner thought ought to have been referred. No such step was taken. I am accordingly of opinion that on the statement of case, as drawn up and submitted by the Tribunal, which is the only statement before us, it is not possible to allow Mr. Meyer to contend that one of the reasons for which the assessee's claim would not be admissible was that the charge concerned was a "capital charge".
The remaining two points raised by Mr. Meyer, however, require consideration.
Before I proceed further, it will be convenient to set out the terms of section 9 (1) (iv) which, so far as is relevant, are as follows:
"9. Property.‑(1) The tax shall be payable by an assessee under the head `Income from Property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner . . . . subject to the following allowances, namely:
(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 an annual charge not being a capital charge, 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 subsection 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 Rs. 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) would not be attracted. I do not think that this contention is sound and indeed at the end of his argument Mr. Meyer himself conceded that the weight of authority was against him.
Before referring to other authorities of which there is a con siderable number, I might with advantage mention the decision of the Supreme Court in the case of New Fiecegoods Bazar Co. Ltd., Bombay v. Commissioner of Income‑tax, Bombay ((1950) 18 I T R 516). Inci dentally that decision was given in an appeal from one of the four decisions named by the Tribunal in its appellate order. The case related to the charge created in respect of municipal property tax by section 212 of the City of Bombay Municipal Act, 1888, and the question being whether or not the charge was an "annual charge not being a capital charge" within the meaning of section 9 (1) (iv) of the Income‑tax Act, their Lordships had occasion to decide what a "capital charge" meant and also, to a certain extent, what was meant by an "annual charge." "Capital charge," they held, meant a charge created to secure the discharge of a liability of a capital nature; and an "annual charge;" they said, meant a charge to secure an annual liability. We are not concerned, in view of what I have already said, with the true meaning of the expression "capital charge" in the present case. With regard to the expression "annual charge" all that the Supreme Court actually decided appears to have been that a charge, in order to be an "annual charge," had to be a charge, in respect of a pay ment to be made annually or to secure the discharge of an annual liability and that provided a charge was of that nature, it was, although of a variable or contingent character, nonetheless an "annual charge." The direct decision in the case does not appear to go beyond excluding the view that if a charge was of a variable character, that is to say, liable to be increased or reduced or of the nature of a contingent charge, it would not be an annual charge, as contemplated by section 9 (1) (iv). What, how ever, "a payment to be made annually" or "an annual liability" really meant, namely,…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.