Case Law Details

Case Name : Prema G. Sanghvi Vs. ITO (ITAT Mumbai)
Appeal Number : ITA No. 2109/M/2011
Date of Judgement/Order : 13/02/2015
Related Assessment Year : 2007-08
Courts : All ITAT (5167) ITAT Mumbai (1632)

Prema G. Sanghvi Vs. ITO (ITAT Mumbai)

It is not disputed that the assessee was the legally wedded wife of Mr. Zaun. It is also not disputed that the said marriage was performed as per the Hindu customary rights. It is also not disputed that the said marriage was dissolved on 20-6-1978 as per the provisions of Hindu Marriage Act.

Under the Hindu Law, a wife has a preexisting right of maintenance and alimony. The said right exists even after divorce from the husband. So far the granting of divorce under the German Law is concerned, the learned Commissioner (Appeals) has discussed at length about the German Law relating to marriage and divorces and thereafter has concluded that even under the German Law, the maintenance can be claimed, if any of the spouse is unable to maintain himself/herself.

He has further held that under the German Law spouses are free to arrange for the financial consequences only in case of an eventual divorce possibly by way of prenatal agreement. However, the learned Commissioner (Appeals) has not discussed, if there is any bar in paying alimony by the husband to her divorced wife.

In our view, no law prevents such a lump sum payment by a husband to his wife in lieu of her maintenance for the whole life. In the proviso to section 56(2)(vi) any sum received from a relative is exempt from tax. In the definition of relative, the receipt from whom is exempt under the Act, inter alia not only the spouse but the brother and sister of the spouse have also been included.

As we have observed above that the maintenance or alimony is paid by the husband to his wife in recognition of her pre- existing right, whether marriage relationship is still continuing or has been dissolved, does not bar the payment of alimony by the ex-husband to the divorced wife.

Under such type of circumstances, in our view, in the definition of spouse, ex-spouse is also included except where there is an evidence that the payment is not made as a gift or an alimony but for some other consideration or by virtue of some other transaction.

In the absence of any such evidence, the payment of alimony amount by the ex-husband to his wife is nothing more than a gift and is exempt under the proviso to section 56(2)(vi) of the Act.

Full Text of the ITAT Order is as follows:-

The present appeal has been preferred by the assessee against the order dated 20-12-2010 of the Commissioner (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2007-08.

2. The sole ground taken by the assessee in this appeal is relating to the treatment of alimony received by the assessee from her ex-husband whether taxable under the head “Income from other sources” or non taxable capital receipt.

3. The brief facts of the case are that the assessee during the year under consideration had received an amount of Rs. 73,60,787 from her ex-husband Mr. Siguar Erich Zaun, a German citizen. The said amount was claimed to have been received as alimony on divorce with her husband and the same was claimed as exempt. The assessing officer (hereinafter referred to as the AO), however, held that the said amount was taxable as income from other sources.

4. In appeal, the learned Commissioner (Appeals) observed that there was no evidence that the assessee had made a claim before the German court regarding the alimony at the time of recognition of her divorce with her husband. The assessee’s marriage was performed in the year 1969 and the marriage was dissolved by granting of divorce by way of decree of City Civil Court order under section 13(1)(ii) of Hindu Marriage Act. At that time, the assessee had not made any claim of alimony. However, the German Law did not recognize the divorce decree passed in India. Therefore Mr. Zaun made an application before the German Court for approval of the divorce already granted by Civil Court, Mumbai. Based on the said application, the German Court granted the divorce on 17-7-2001. However, the alimony was paid after a gap of five years. Moreover, the assessee had her own sources of income and she had been filing the returns of income since long. He further observed that on the date of receiving the amount there was no relationship between the assessee and Mr. Zaun and therefore the amount received from Mr. Zaun by the assessee in the normal course was chargeable under the provisions of section 56(2)(vi). Even in the order of the German Court there was no reference of payments of any alimony to the assessee. He further observed that a mere letter signed by Mr. Zaun, ex-husband of the assessee, that the payment was made towards alimony had no recognition in the eyes of law. He further observed that even the purpose of remittance as stated by the remitter or beneficiary in the certificate of foreign inward remittance cannot be conclusive evidence to decide the legal origin of the payment. He therefore held that the impugned payment received by the assessee had no contractual, legal, statutory origin/ application and it had no definite source viz., a court decree either in India or Germany by which a legal right is created in favour of the assessee to receive such amount so that it can be considered as payment towards alimony. He therefore held that the said payment credited to the assessee’s bank account by her ex-husband was taxable as assessee’s income under section 56(2)(vi) of the Income Tax Act. Aggrieved by the order of the learned Commissioner (Appeals), the assessee has come in appeal before us.

5. We have heard the rival contentions of the learned Representatives of both the parties and have also gone through the records. It is not disputed that the assessee was the legally wedded wife of Mr. Zaun. It is also not disputed that the said marriage was performed as per the Hindu customary rights. It is also not disputed that the said marriage was dissolved on 20-6-1978 as per the provisions of Hindu Marriage Act. Under the Hindu Law, a wife has a preexisting right of maintenance and alimony. The said right exists even after divorce from the husband. So far the granting of divorce under the German Law is concerned, the learned Commissioner (Appeals) has discussed at length about the German Law relating to marriage and divorces and thereafter has concluded that even under the German Law, the maintenance can be claimed, if any of the spouse is unable to maintain himself/herself. He has further held that under the German Law spouses are free to arrange for the financial consequences only in case of an eventual divorce possibly by way of prenatal agreement. However, the learned Commissioner (Appeals) has not discussed, if there is any bar in paying alimony by the husband to her divorced wife. In our view, no law prevents such a lump sum payment by a husband to his wife in lieu of her maintenance for the whole life. In the proviso to section 56(2)(vi) any sum received from a relative is exempt from tax. In the definition of relative, the receipt from whom is exempt under the Act, inter alia not only the spouse but the brother and sister of the spouse have also been included. As we have observed above that the maintenance or alimony is paid by the husband to his wife in recognition of her pre- existing right, whether marriage relationship is still continuing or has been dissolved, does not bar the payment of alimony by the ex-husband to the divorced wife. Under such type of circumstances, in our view, in the definition of spouse, ex-spouse is also included except where there is an evidence that the payment is not made as a gift or an alimony but for some other consideration or by virtue of some other transaction. In the absence of any such evidence, the payment of alimony amount by the ex-husband to his wife is nothing more than a gift and is exempt under the proviso to section 56(2)(vi) of the Act. We accordingly do not find any justification on the part of Income Tax Authorities to tax the said amount received by the assessee from her ex-husband as alimony and the additions made in this respect are accordingly ordered to be deleted.

6. In the result, the appeal of the assessee is hereby allowed.

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