ORDER
T.V. Rajagopala Rao, President
1. These are assessee’s appeals for asst. yrs. 1989-90 and 1991-92. Since the assessee is one and the same, and the impugned order passed by the Dy. CIT(A), Vijayawada, dt. 3rd May, 1993, is common from both the years, it is felt that these appeals can be taken up together and disposed of by a common order.
2. The claim of the assessee was an individual for both the assessment years. However, the AO determined his status as HUF, for which he followed his assessment order for the asst. yr. 1987-88. The assessee filed returns of income as individual for the asst. yrs. 1989-90 and 1991-92 on 12th July, 1989, and 18th September, 1991, returning total income of Rs. 11,260 and Rs. 48,040, respectively. In the first instance, the returns were processed under s. 143(1)(a) and they were accepted under intimations dt. 5th February,, 1990, and 24th April, 1992, respectively. For asst. yr. 1991-92, even while sending the intimation under s. 143(1)(a), the AO made the following three adjustments :
Rs.
(1) Deduction claimed towards municipal taxes in 1,190
the absence of evidence
(2) Maintenance allowance in the absence of 12,000
evidence
(3) Collection charges claimed in the absence 3,896
of evidence
Thus, after the above adjustments, the income of the assessee was determined for the asst. yr. 1991-92 at Rs. 66,130. The assessee filed rectification petition under s. 154. In the order under s. 154 dt. 31st July, 1992, for asst. yr. 1991-92, a sum of Rs. 3,896 was allowed as deduction on the ground that details of collection charges were filed by the assessee before the AO. However, with regard to the other two claims, the deductions were maintained on the ground that municipal taxes cannot be allowed as deduction, since the evidence for payment of municipal taxes was purported to have been not furnished and secondly, maintenance allowance cannot be allowed as per the stand taken by the Department in the earlier year.
3. For asst. yr. 1989-90, after sending the intimation under s. 143(1)(a), notice under s. 143(2) was issued and the claim of maintenance, etc. were discussed in detail, in the assessment order framed under s. 143(3) dt. 4th January, 1991. In that assessment, it is stated that the assessee claimed a sum of Rs. 61,000 deductible as maintenance allowance paid by him to his wife Smt. Saraswathi Bai Vyas as per the Court’s order. When asked, the assessee stated before the AO that the maintenance amount was paid in pursuance of the Court’s order for which a charge is created on the house properties held by the assessee, and the decree passed by the Court reveals this, and, therefore, the said amount is allowable as deduction while computing the house property income in his hands under s. 24(1)(iv) of the Act. In pursuance of the assessee’s claim, the judgment passed by the Fifth Additional Judge, City Civil Court, Hyderabad, in O.S. No. 857 of 1978 dt. 24th February, 1986, was filed. A reading of the said judgment would show even as per the AO that the assessee has to pay a maintenance of Rs. 1,500 per month from the date of the suit, viz., 18th October, 1978, to his wife, and it is also ordered and decreed that a charge is created over all the plaint schedule properties. Assessee’s wife brought the decree to execution in EP No. 22 of 1987. Thereupon, the assessee took up the matter in appeal before the Andhra Pradesh High Court, and it is said to be pending in CC Appeal No. 39 of 1986. Pending disposal of the appeal, assessee by his petition CMP No. 18497 of 1987 moved the High Court for stay of all further proceedings in EP No. 22 of 1987, and the Hon’ble High Court by its order dt. 22nd March, 1988, granted stay on the condition that the assessee deposits a sum of Rs. 30,000 in the lower Court within two weeks from the date of the order, and a further sum of Rs. 15,000 within two weeks thereof. In pursuance of this order, the assessee deposited the entire sum of Rs. 45,000 on 28th March, 1988. In view of the above, the assessee claimed that he is entitled to deduction of Rs. 61,000 under s. 24(1)(iv) of the Act.
4. The AO felt that the High Court stayed that operation of further proceedings in the EP and that the amounts deposited in pursuance of the High Court’s stay order, therefore, were treated as interim payments pending disposal of the assessee’s appeal before the High Court. The AO further stated that the High Court’s stay order did not create any charge on the assessee’s properties. The AO further felt that since the Hon’ble High Court stayed the lower Courts decree and its execution, it cannot be regarded that a charge on the assessee’s properties is subsisting, to expect the assessee to claim the benefit of deduction under s. 24(1)(iv) of the Act for any payments made during the relevant accounting year. Therefore, the AO concluded that the properties are not subject to any charge as envisaged under s. 24(1)(iv). The AO further stated that in any view, the assessee is not obliged to pay any further sum beyond what was required by the Hon’ble High Court, viz., Rs. 45,000 pending disposal of the appeal. Even before the AO, an alternative claim was made, namely, that if the payment of Rs. 45,000 made in pursuance of the High Court’s order is held to be not allowable, at least the balance of Rs. 16,000 should be allowed inasmuch as it was paid in pursuance of the order of the lower Court. Considering this alternative claim, the AO held that from the records produced before him, it was evident that the assessee was paying Rs. 1,000 per month as per Court’s order and it was further stated that from the judgment dt. 24th February, 1986, in O.S. No. 857/78, the wife of the assessee was originally granted monthly maintenance of Rs. 500 in MC 3/75 by the Third M.M. City Criminal Court, Hyderabad. The said order of the Criminal Court was confirmed by the High Court. As such the maintenance allowance if at all, payable would only be Rs. 500 per month. Therefore, according to the AO, the assessee was obliged to pay only Rs. 500 per month towards maintenance claim of his wife and not Rs. 1,000 per month. Thus, the deduction towards maintenance payment to the wife as per the order of the High Court or as per the order of the City Civil Court were denied, and the total income was computed at Rs. 73,190 after allowing deductions towards municipal taxes, 1/6th for repairs and collection charges.
5. Aggrieved, the assessee went in appeal before the Dy. CIT(A) questioning the legality of the order of not allowing Rs. 61,000 for asst. yr. 1989-90 and Rs. 12,000 for asst. yr. 1991-92, as deductions under s. 24(1)(iv) of the IT Act. The Dy. CIT(A) in his impugned order dt. 3rd May, 1993, felt that the decision of the Delhi High Court in the case of CIT vs. Dalmia Dairy Industries Ltd. (1991) 189 ITR 167 (Del), cited on behalf of the assessee was distinguishable, and took the view that after stay was granted by the High Court, the charge created by the lower Court on the properties of the assessee towards maintenance claim of assessee’s wife is no longer subsisting and, therefore, provisions of s. 24(1)(iv) is not operative. Aggrieved against this order of the Dy. CIT(A) assessee preferred the present appeals before this Tribunal.
6. I have heard Shri V. S. Sivaram, the learned counsel for the assessee, and Shri Peri Setty, the learned Departmental Representative for the Department. The learned counsel for the assessee has filed a paper book comprising of 12 pages before this Tribunal, and he relied upon the following case law :
(a) CIT vs. Dalhousie Properties Ltd. (1984) 149 ITR 708 (SC);
(b) Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC); and
(c) CIT vs. Dalmia Dairy Industries Ltd. (supra).
Further, the order passed by the Hon’ble High Court in CMP No. 18497 of 1987 in CCA No. 39/86 was also filed. The text of that order is nearly as under :
“In the peculiar circumstances of this case, there shall be stay of condition that the petitioner deposits a sum of Rs. 30,000 in the lower Court within two weeks from today and a further sum of Rs. 15,000 within two weeks thereafter. In default of any of these conditions the stay stands vacated. No further extension will be granted. The respondent is entitled to withdraw the same without furnishing any security.”
There are two interim orders passed by the Andhra Pradesh High Court. The portion extracted above is from the interim order dt. 22nd March, 1988. Prior to that, on 18th July, 1986, the following interim order is passed in CMP 5725 and 6143 of 1986 on the file of the Andhra Pradesh High Court.
(1) That, on condition that the petitioner in C.M.P. No. 5725/86 deposit towards arrears of maintenance Rs. 30,000 (Rs. Thirty thousand) decreed against him to the credit of O.S. No. 857/70 on the file of the V Addl. Judge City Civil Court of Hyderabad within three months from the date of this order, the interim stay directed by the High Court dt. 18th April, 1986 and made in the said C.M.P. No. 5725/86 shall be made absolute and the execution of decree dt. 24th February, 1986, passed in the said O.S. No. 857/78 on the file of the said Court of the V. Addl. Judge, City Civil Court, Hyderabad, shall continue to be stayed, pending C.C.A. No. 39/86 on the file of the High Court.
(2) That the respondent in C.M.A. No. 5725/1986 shall be at liberty to withdraw the sum referred to cl. (1) supra as and when deposited by the petitioner therein without furnishing any security.
(3) That the petitioner shall continue to pay as per the orders of the Court the respondent, maintenance at the rate of Rs. 1,000 per month, pending disposal of the appeal.”
At the time of arguments, I have ascertained from both parties, whether any final outcome or judgment has come from the Hon’ble Andhra Pradesh High Court, about the maintenance litigation between the assessee and his wife. None of the parties was able to say anything in this regard. A reading of the order of the Andhra Pradesh High Court, in my humble opinion, would not disclose that the Hon’ble High Court vacated the charge created on the properties of the assessee, to discharge the maintenance claim of his wife. If the Hon’ble High Court wanted to grant stay, vacating the charge, it could have done so clearly in the stay orders passed. In the absence of any direction in that regard, the inference of the Dy. CIT(A) that the stay order of the Andhra Pradesh High Court does not continue the charge on the properties of the assessee, in my humble opinion, is not valid. In my understanding of law, a judgment passed by the lower Court is operative even though an appeal is filed against it, except so far as operation is stayed by the High Court. Therefore, the stay order passed by the Andhra Pradesh High Court has to be strictly construed and something which is not there in the wording of the order should not be inferred and incorporated, as having been presumably passed. I already stated that the Andhra Pradesh High Court’s order does not meddle with the creation of the charge over the properties of the assessee. Therefore, the order of the Dy. CIT(A) that since the Andhra Pradesh High Court did not pass order continuing the charge, it would mean that no charge is subsisting over the properties of the assessee, cannot be held to be a valid proposition. From the records, it appears that the only source of income of the assessee was house property income. As already admitted by the AO, the whole of the house properties held by the assessee were made charge for meeting the maintenance claim of the assessee’s wife.
7. In Kedarnath Jute Mfg. Co. (supra), the Hon’ble Supreme Court held as follows :
“Whether the assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. …….”
It was also held that the liability remained intact even after the assessee took the matter in appeal before higher authorities or Courts. Therefore, simply because the appeal is pending before the Andhra Pradesh High Court and simply because Andhra Pradesh High Court did not specifically mention about the subsistence or the charge over the properties of the assessee, it cannot be said that the charge created by the lower Court over the properties of the assessee came to an end, but according to the Supreme Court decision cited supra, it should be deemed to have been subsisting or remaining intact.
8. In the case of CIT vs. Dalhousie Properties Ltd. (supra), the ratio laid down by the Hon’ble Supreme Court is as follows :
“It is true that the expression “borne” may refer to either the liability which a person is liable to discharge or the actual sum paid by him in discharge of that liability …….. in the present context it should be construed as referring to the former, namely, the amount of tax which the owner is liable to discharge as stated in the proviso to s. 23(1) of the Act and not the latter one. The reason for taking this view flows from the scheme of the Act itself ……. the expression “annual value” is a notional figure and it does not refer to any actual receipt ……. It is reasonable to treat the annual value of a house property as remaining more or less constant during the entire period covered by any given previous year except perhaps where the tax liability itself is modified by the local authority concerned. It cannot keep on changing as and when some payment towards the tax liability imposed by the local authority is made by the assessee during the year. In order to ensure that there is no unwarranted fluctuation in the annual value during the year in question, such actual payment should be eliminated from consideration but only the tax liability imposed by the local authority which the assessee is liable to pay as contemplated by the proviso to s. 23(1) of the Act should be allowed to be deducted under the said proviso. It is not, therefore, necessary that the assessee should have actually paid the amount of tax in question before such deduction is claimed. The position is not also different even where the assessee has disputed the correctness of the levy before the local authorities concerned. A mere expectation of success in the proceedings in which the assessee has disputed such levy does not disentitle him to the statutory deduction on the basis of the levy which is in force.
9. Therefore, on the strength of the above ratio, it is contended that unless and until the lower Court’s decision is reversed, the maintenance charged against the properties of the assessee should be deemed to be existing and such a claim also entitles itself to be an allowable deduction. The maintenance claimed charged becomes the property of the wife by overriding title and to the extent of the maintenance claim, the property income itself cannot be said to have been received by the assessee and spent by him towards payment of the maintenance claim. It should be treated as an income which did not reach him at all by means of overriding title of the wife. In the circumstances, I have no hesitation to hold that the proposition relied upon by the lower authorities, both factually and legally, is defective and cannot be upheld.
10. Even in CIT vs. Dalmia Industries Ltd. (supra), the Delhi High Court followed the Supreme Court decision in (1971) 83 ITR 363 (SC) (supra), wherefrom I had already quoted in the above paras. Therefore, neither the facts of that case nor the ratio laid down therein need any special mention in this case.
11. In the circumstances, I have no hesitation to come to the conclusion that the deduction claimed by the assessee towards maintenance claim of the wife is allowable and should have been allowed. I accordingly direct the AO to allow the same.
12. In the result, both these appeals of the assessee are allowed.