Facts: For the assessment years under consideration, the assessee sought to deduct therefrom a sum on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben, and his children. The suit was filed in the Bombay High Court for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance, etc. The Income tax Department disallowed the deduction.

Issue: whether the sum paid towards maintenance can be claimed as a deduction on the ground that the same is diversion of at source by overriding title or application of income.

Views: 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 one’s own income, which has been received and is since applied. The first is 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.

Held: The present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another’s income.  ( AY. 1953-54 ,  1954-55 ) ( CA. No. 528 of 1969 dt.24 -11- 1960  )  

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