The term “Income” is defined in section 2(24). The said definition is an inclusive one. Therefore, the term “income” not only includes those receipts which are stated in section 2(24) but also includes such things / receipts which the term embraces according to its natural and general meaning. Income is embedded in receipts which a person receives or is entitled to. Receipts are of two types – capital receipt and revenue receipt. A revenue receipt is taxable as income unless it is expressly exempt under the Act. A capital receipt is generally exempt from tax, unless it is expressly taxable under any provision of the Act. [Cadell Wvg. Mill Co (P) Ltd v CIT [2001] 249 ITR 265 (Bom) affirmed by the Supreme Court in CIT Vs. D.P. Sandu Bros. Chembur P. Ltd 273 ITR 1]
The issue that arises for consideration is whether alimony received spouse is revenue receipt or capital receipt. Further issue arises is whether alimony can be taxed under section 56(2)(x).
In the case of Princess Maheshwari Devi of Pratapgarh v CIT [1983] 12 Taxman 220 (Bom.), the Assessee was awarded lumpsum alimony of Rs. 25,000 together with monthly alimony of Rs. 750 in terms of court decree on nullity of her marriage under section 25 of the Hindu Marriage Act. The HC observed that what can be gleaned from various judicial pronouncements is that income connotes a periodical monetary return coming in with some sort of regularity or expected regularity from a definite source.
The HC held that the contention that the decree was not the source of the alimony could not be accepted. The monthly alimony being a regular and periodical return from a definite source, being the decree, must be held to be ‘income’ within the meaning of the said term in the Income-tax Act. Moreover, it could not be regarded as a series of windfalls or casual receipts. Consequently, it constituted taxable income of the assessee. However, with respect to lumpsum payment of Rs.25,000, the HC observed that it could not be looked upon as a commutation of any future monthly or annual payments because there was no pre-existing right in the assessee to obtain any monthly payment at all. Nor was there anything in the decree to indicate that the said amount of Rs. 25,000 were paid in commutation of any right to any periodic payment. In these circumstances, the receipt of that amount must be looked upon as a capital receipt. Therefore, Rs.25,0000 was held to be not taxable.
In the case of CIT v v. Smt. Shanti Meattle [1973] 90 ITR 385 (ALL.), a deed of separation was executed between assessee and her husband and also which permitted wife to live apart free from marital control and authority of husband and also prevented him from filing a suit for restitution of conjugal rights. The Agreement provided for payment of monthly maintenance to assessee and her two children. The income realised from illegal business is taxable as any other income and, hence, allowance received by assessee under said agreement, though not enforceable, constituted income. However, the HC observed that, since amount received by assessee was impressed with an obligation to defray maintenance charges of her minor children, mere act of receiving money on behalf of her two children could not make entire amount taxable in her hands.
In the case of Prema G Sanghvi ITA No 2109/Mum/2011, the assessee received payment of alimony amount by the ex-husband. The AO held that it is taxable as income from other sources. The ITAT held that same is nothing but gift from relative and is not taxable u/s 56(2)(vi). The ITAT observed that for the purpose of 56(2), spouse includes ex-spouse.
In the case of Meenakshi Khanna 34 taxmann.com 297 (Delhi-Trib) [TS-278-ITAT-2013(DEL)], the Tribunal held that accumulated monthly instalments of alimony, received as a consideration for relinquishment of past and future claims, is not a revenue receipt. The Tribunal further held that such receipt are to be considered as ‘capital’ in nature and cannot be taxed as ‘Income from Other Sources’ u/s 56(2)(vi).
In the case of Shrimati Roma Sengupta v. CIT [2016] 68 taxmann.com 177 (Calcutta), the HC held that amount realised by assessee from sale of a property received as alimony from her husband in terms of decree of divorce, was to be regarded as capital receipt not liable to tax.