By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi Chartered Accountants
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Section 56(2)(vi): Lump sum alimony received by a divorcee as a consideration for relinquishing all her past and future claims is not chargeable u/s 56(2) (vi).
Facts:
During A.Y. 2008-09, the assessee received lump sum alimony from her ex-husband. The divorce agreement between the assessee and her exhusband was made in the F.Y. 1989-90. Pursuant to this agreement, the ex-husband of the assessee was required to make monthly payments to his wife over a period of time. However the ex-husband did not pay the same and hence the assessee threatened to take legal action against him. The exhusband, therefore, paid a lump sum amount as full and final settlement in lieu of assessee’s past and future claims. The Assessing Officer held that exhusband was not covered under the definition of relative as provided in exceptions to section 56(2) (vi). He, therefore, treated the amount received by the assessee as income from other sources taxable under the provisions of section 56(2)(vi) and added the same to the income of the assessee. The assessee however contended that she had received the amount against consideration of extinguishing her right of living with her husband. It was further argued that the amount was a capital receipt.
Held:
Though the assessee was to receive monthly alimony which was to be taxable in each year from conclusion of divorce agreement, but the monthly payments were not received and, therefore, were not offered to tax. The receipt by the assessee represents accumulated monthly installments of alimony, which has been received by the assessee as a consideration for relinquishing all her past and future claims. Therefore, there was sufficient consideration in getting this amount. Therefore, section 56(2)(vi) is not applicable. Secondly, amount was paid by way of alimony only because they were husband and wife and the assessee was spouse of the person who has paid the amount and, therefore, payment received from spouse did fall within the definition of relative. Moreover even if it is accepted that the monthly payments of alimony are liable to tax then also in the present case the amount received represents past monthly payments and hence cannot be taxed in the year under consideration. Therefore, it was held that amount received was a capital receipt and not liable to tax.
