Law: Income Tax Act, 1922

Section: 45,48

(a) Income-tax---Income---Diversion of income by overriding title---Attachment of land for recovery of tax dues---Subsequent death of owner of land---Land devolving on heirs---Sale of land---Tax dues of deceased were diverted by overriding title. (b) Income-tax--- ----Capital gains---Capital asset---Cost of acquisition---Property inherited by assessee- --Amount paid towards tax dues of deceased would not form part of cost of acquisition of property---Indian Income Tax Act, 1961, Ss.45 & 48. (c) Income-tax--- ----Capital gains---Exemption---Deposit of sale consideration as specified in S.54-E---Deposit must be made within six months of transfer of capital asset---Indian Income Tax Act, 1961, S.54-E. In order to determine whether there has been a diversion of income by overriding title the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of ones own income, which has been received and is since applied. The first as a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. K, the father of the assessee, owned 4 acres and 86-3/4 cents of land situated outside the Quilon Municipality limits. On his death, the property devolved on the assessee, her brother and her sister and they came into joint possession under partition deed, dated February 14, 1964. The property was under…

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