Law:

Section:

section 9(1)(iv) of the indian income-tax act, 1922 [corresponding to section 24(1)(iv) of the income-tax act, 1961]-income from house property-deduction from-assessee agreed to pay his wife a monthly allowance for her maintenance and residence and secured the payment by executing a mortgage deed in respect of a house property-whether the monthly allowance could be treated as an annual charge on the property and could be deducted from income from house property-held, yes Facts The assessee agreed to pay his wife an allowance of Rs. 500 per month from 1-3-1959 for her life for maintenance and residence and, to secure this payment, executed a mortgage deed in respect of a house property. In the course of assessments for the years 1960-61 to 1963-64, the assessee claimed exemption of the income from house property, which was computed by the ITO between Rs. 2,073 and Rs. 3,000 in these years, on the ground that the net income was less than the allowance of Rs. 6,000 payable under the agreement and that the payment of maintenance amounted to diversion of income at the source. The ITO rejected the assessee's claim holding that since the payment of maintenance was merely an application of income or, alternatively, provisions of section 16(1)(c) or 16(3)(iii) were attracted, the income from house property was liable to tax. The AAC confirmed the ITO's order. Although the Tribunal held that the payment of maintenance was not a diversion of income at the source, it took the view that the maintenance in this case was an annual charge and as such deductible in computing income from house property under section 9(1)(iv). It further held that the provisions of section 16(1)(c) or 16(3)(iii) were not applicable in this case as the property was neither settled nor disposed of. On reference, it was contended by the Revenue that the payment was not an annual charge because it was to be paid not annually but monthly and that section 9(1)(iv) under which an annual charge was deductible, had no application. Held If an amount was payable monthly and such payment was to recur year after year, the liability must be treated as one for making an annual payment and the property which was…

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