INCOME-TAX COMMISSIONER Vs. REV J C MANRY

JUDGEMENT

(1.) This is a reference under Section 66 (2) of the Indian Income-tax Act. The assessee is the , and the year of assessment is 1936-37. The assessee belongs to the Board of Foreign Missions of the Presbyterian Church of the United States of American; and so too does his wife. They had at the material time four children, two boys and two girls. The assessee and his wife each receive a separate salary and the house allowance from the Board, and the Board also pays an allowance in respect to each of the four children. Up to and including the year 1935-36 the salaries of the assessee and his wife and the allowances on account of the children were lumped together by income-tax authorities and were assessed jointly to tax. This was done, as stated by the Commissioner of Income-tax in the statement of the case, on the assumption that the wifes salary and the allowances for the children were "additional emoluments paid to the assessee to meet the additional cost of married life and education of his children.For the year 1936-37 the assessee returned an income of Rs. 2,318 only, which represented his own salary and house allowance; he claimed that his wife should be separately assessed on her salary and that the allowances for the children were exempt from taxation on the ground that they were personal allowances to the children and were not perquisites within the meaning of Section 7 of the Act either of the assessee or of his wife. The Income-tax Officer repelled the claim and assessed upon a total income of Rs. 7,712, which included the salary and the house allowance of the assessees wife and the allowances for the children.

(2.) Against this assessment an appeal was preferred and the Assistant Commissioner allowed the assessees claim for the exclusion of his wifes salary on the ground that it was the latters own income; but he rejected theclaim for exemption in respect to the allowances for the children on the ground that they were paid by the Board to meet the additional cost of maintenance and education of the children and were in the nature of perquisites taxable in the hands of the assessee.

(3.) Thereafter the assessee preferred an application to the Commissioner of Income-tax for the exercise of his revisionary powers under Section 33 or alternatively for a reference to this Court under Section 66 (2) of the Act. The Commissioner declined to exercise his powers of revision under Section33 of the Act, but he has referred the following question of law to this Court :- "Whether on the facts of the case the sum of Rs. 3,078 paid by the Board for the maintenance and education of the assessees children is the income, profits and gains of the assessee within the meaning of Section 3 of the Act and taxable in his hands? "