R.R. Rastogi, J. - (1.) THIS is a reference under Section 66(1) of the Indian I.T. Act, 1922 (hereinafter referred to as "the Act"). The Income-tax Appellate Tribunal, Delhi Bench-A, has stated a case and referred the following three questions to this court for its opinion : "1. Whether, on the facts and in the circumstances of the case, and having regard to the agreement dated March 22, 1943, the Hon'ble High Court's order in Suit No. 2 of 1962, dated August 24, 1967, and the judgment dated January 22, 1962, in Suit No. 95 of 1953 of the civil judge, Moradabad, the Tribunal was legally correct in holding that the allowance paid to Rani Amrit Kunwar and Rani Jai Devi were dependent on obligation arising from family custom and usage, from the provisions of Hindu law and from the provisions of the U.P. Zamindari Estate Act ? 2. Whether, on the facts and in the circumstances of the case, and having regard to the documents mentioned in question No. (1) above, the Tribunal was legally correct in holding that the maintenance allowance to Raj Kumari Laxmi Devi and Raj Kumari Inder Mohini were by virtue of a family custom and they also partake of the nature of an overriding allowance ? 3. Whether, on the facts and in the circumstances of the case, the maintenance allowance of Rs. 15,737 to various relations were permissible deductions from the total income of the assessee for the assessment year 1960-61 ? "
(2.) BRIEFLY stated the facts are that one Raja Raj Kumar was the owner of Sahaspur Bilari Estate in the district of Moradabad. He died on November 3, 1915, leaving behind him two widows: Smt. Amrit Kunwar and Smt. Panna Kunwar, one son. Raja Jagat Kumar, and one daughter, Rajkumari Laxmi Devi. There were also two illegitimate sons, known as Sarin Brothers, left by him. Since Raja Jagat Kumar was a minor, the management of the estate was taken over by the Court of Wards, Uttar Pradesh, Raja Jagat Kumar became major in January, 1933, and the estate was released in his favour. Shortly after, on March 7, 1934, he died in a motor accident leaving behind two widows, Smt. Pritam Kunwar, who is the assessee before us, and Smt. Jai Devi, and one daughter, Rajkumari Indramohini. Again the management of the estate was taken over by the Court of Wards. It appears that certain members of the family used to receive some maintenance allowance from the estate. However, on March 22, 1943, an agreement was executed between the court of wards representing the assessee on the one hand and Smt. Laxmi Devi for self and as guardian of her minor son and Rani Amrit Kunwar on the other. By that agreement the allowance of Rani Amrit Kunwar was increased from Rs. 500 to Rs. 650 and that of Rajkumari Laxmi Devi from Rs. 150 to Rs. 500. Apart from that Rani Amrit Kunwar was given the right of residence in Warwich House, Moradabad, and it was agreed that after her death it would devolve upon Rajkumari Laxmi Devi during her lifetime. The other terms of that agreement are not necessary for the present purpose. It may be noted that the late Raja had extensive zamindari properties in the districts of Moradabad, Bareilly and Budaun and the whole of that property was a settled estate under the U. P. Estates Act, 1920. After the enforcement of the U. P. Zamindari Abolition and Land Reforms Act, U. P. Act No. 1 of 1951, the entire settled estate was taken over by the Government. In 1953, Rani Jai Devi filed a suit for partition claiming the relief that she was entitled to the compensation money equally with the assessee. She further claimed a declaration of her half share in movable and other properties which were not settled. During the pendency of that suit, the civil judge, Moradabad, made an order" on February 16, 1954, directing the continuance of the maintenance allowance to various persons according to the aforesaid agreement. Later on, the Collector, Moradabad, was appointed receiver for taking over possession of the settled and unsettled properties of this estate. That suit was decided on January 27, 1962, and Rani Jai Devi's claim for the partition of half share in the unsettled estate was decreed while in respect of the settled estate it was dismissed. The assessee was held to be the absolute owner of the compensation bonds. Further, Rani Jai Devi was held not bound by the agreement dated March 22, 1943. Soon after the decision in the aforesaid suit, Rajkumari Laxmi Devi filed a suit, being Suit No. 2 of 1962, which was transferred to this court on its original side. That suit was filed against the assessee and Rani Jai Devi for recovery of two months' maintenance allowance, viz., January and February, 1962, and for declaration. That suit was decided by this court on August 24, 1967, and the aforesaid agreement was held binding on the assessee though not on Rani Jai Devi. According to this court, the action of the Court of Wards to enter into an agreement to uphold the rights of the assessee and to set at rest the possibility of assessee (sic). The increase in the maintenance allowance which was made by means of that agreement was upheld and a charge was created on the three house properties for the payment of the maintenance allowance to Rajkumari Laxmi Devi. In the meantime, the assessment for the106 year 1960-61, the previous year ended September 30, 1969, was taken up against the assessee. For that year, the total income disclosed by the assessee was Rs. 13,722 inclusive of her half share in the income from the unsettled estate of Rs. 3,417. The assessee had taken into account the payment of maintenance allowance amounting to Rs. 21,937 out of the settled estate, the details being: JUDGEMENT_102_ITR125_1980Html1.htm
(3.) THE ITO did not allow the deduction of these payments and computed the total income at Rs. 44,314. On appeal, the AAC confirmed this assessment. On further appeal the Income-tax Appellate Tribunal agreed with the revenue authorities, but allowed the assessee a deduction of the expenses to the extent of 25 per cent. of the income in place of 10 per cent. allowed by the revenue authorities. The Appellate Tribunal stated a case and referred three questions of law to this court which are : "1. Whether, on the facts and in the circumstances of the case, the assessment order for the year 1960-61 against the assessee. Rani Pritam Kunwar, is void at law as it adopted the total income determined in the assessment order passed against the receiver ? 2. Whether, on the facts and in the circumstances of the case, the maintenance allowance paid out of the income of the estate to certain relations of the assessee were permissible deductions ? 3. Whether, on the facts and in the circumstances of the case, the income was properly assessable in the year under reference though the income was not actually paid by the receiver to the assessee during the previous year ? " ;