COMMISSIONER OF INCOME TAX Vs. PONCHA M P

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the Revenue, the Income -tax Appellate Tribunal has referred the following question of law to this court for opinion : 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in accepting the claim of the assessee that his salary income could be computed only after excluding the amount paid to his ex -wife by way of alimony to her and maintenance expenses to their minor son?'

(2.) THE assessee is an individual. The reference relates to the assessment year 1969 -70, the corresponding previous year being the previous year ended on March 31, 1969. In the return for the assessment year 1969 -70, the assessee claimed deduction from his income from salary of a sum of Rs. 7,800 paid by him to his ex -wife by way of alimony to her and maintenance expenses to their minor son. The above amount was paid to her by the employers under instructions from the assessee out of the salary of the assessee. According to the assessee, it was a case of diversion of income by over -riding title and his income from salary was liable to be] reduced to that extent. The claim of the assessee was rejected by the Income -tax Officer on the ground that there was no diversion of income by overriding title. The order of the Income -tax Officer was confirmed by the Appellate Assistant Commissioner of Income -tax. On further appeal by the assessee, the Income -tax Appellate Tribunal accepted the contention of the assessee and held that the salary income of the assessee could be computed only after excluding the amount of Rs. 7,800 paid to his ex -wife by way of alimony and maintenance expenses to the minor son. The Revenue, being aggrieved by the above finding, has come to this court by way of this reference under section 256(1) of the Act for opinion on the question of law whether it was a case of diversion of income by overriding title or application of income accrued.

(3.) ACCORDING to learned counsel for the assessee the above facts clearly go to show that there was a diversion of income by overriding title. It was submitted by counsel for the assessee that by the agreement with the employers, the assessee had bound himself to the payment of Rs. 650 per month to his ex -wife. It was also contended that the intention of the assessee to pay Rs. 650 out of his salary to his ex -wife was clear and unequivocal. According to learned counsel, the agreement between the assessee and the employers itself amounted to diversion of income from salary at source. Reliance was placed on the decisions of this court in Seth Motilal Manekchand v. CIT : [1957]31ITR735(Bom) ; CIT v. C. N. Patuck : [1969]71ITR713(Bom) ; CIT v. Crawford Bayley and Co. : [1977]106ITR884(Bom) and CIT v. Mulla and Mulla and Craigie, Blunt and Caroe : [1991]190ITR198(Bom) .