1. Introduction

    Though more girls are educated now a days, the reality seems that girls are married off early and bear children long before they should. There is also the possibility of a marriage not working out for varied reasons, leaving the girl or young woman in extreme distress because often she is not financially independent. People would also like to know the treatment in Income Tax with regard to amount received as maintenance or Alimony in case of Separation/ Divorce matters.

  2. Right to claim alimony

    The most important right under divorce and matrimonial laws is the right to claim and receive alimony (maintenance). Generally speaking alimony means an allowance or amount which a court orders the husband to pay to the wife for her sustenance. The Courts have ruled that an abandoned wife and children will be entitled to ‘maintenance’ from the date she applies for it in a court of law.

  3. “Reasonable needs” of a wife and dependent children

    In the case of Rajnesh v. Neha & Anr. the Supreme Court Bench of Hon’ble Justices Indu Malhotra and R. Subhash Reddy, in decision dated 4th Nov. 2020 outlined specifics guidelines in alimony cases, including “reasonable needs” of a wife and dependent children, her educational qualification etc., and whether she has an independent source of income. The Court laid down that while women can make a claim for alimony under different laws, including the Protection of Women from Domestic Violence Act, 2005 and Section 125 of the CrPC, or under the Hindu Marriage Act, 1955, it would be inequitable to direct the husband to pay maintenance under each of the proceedings, urging civil and family courts to take note of previous settlements.

    Section 22 of Hindu Adoptions & Maintenance Act, 1956 (“HAMA”) provides for maintenance of dependants. Section 23 provides that while awarding maintenance, the Court in determining the amount of maintenance, to be awarded to a wife, children or aged or infirm parents, shall consider: (a) the position and status of the parties; (b) the reasonable wants of the claimant; (c) if the claimant is living separately, whether the claimant is justified in doing so; (d) the value of the claimant’s property and any income derived from such property, or from the claimant’s own earning or from any other source; (e) the number of persons entitled to maintenance.

  4. Concept of permanent alimony and maintenance

    The grounds on which a Hindu woman can seek divorce and alimony may not be the same for every community. Similarly, the law on alimony and maintenance also varies from personal law to personal law. For example, under the Hindu Marriage Act, 1955, both the husband and wife are legally entitled to claim permanent alimony and maintenance. However, if the couple marries under the Special Marriage Act, 1954, only the wife is entitled to claim permanent alimony and maintenance.

  5. Divorce by mutual consent

    When a couple gets divorced by mutual consent, alimony/maintenance could be paid by either the husband to the wife or by the wife to the husband subject to the mutual understanding between the couple. The court passes the decree of divorce on terms agreed between the couple. The decree binds the couple and is capable of being enforced by the court.

  6. Where the matter is contested

    In such cases, court intervenes and decides the issue of alimony/maintenance on the merits of case. Courts have powers to grant alimony to the wife even where the husband is granted a decree. Assessment of the amount of permanent alimony is entirely the court’s discretion.

  7. If the wife remarries

    If the wife remarries, the husband is absolved of his responsibility and can petition the court for orders to stop the alimony. Similarly, if there is a change in circumstances, that is, the husband is unable to maintain the wife due to a financial crisis or any other adverse situation and the wife is financially independent earning a decent salary, then the husband may petition to the court to address the changed circumstances. The court may, taking into account the facts, evidences and circumstances prevailing at that point of time, modify, vary or rescind the order.

  8. Lump-sum alimony

    The discretion to award lump-sum alimony or a periodical amount vests with the court. If the spouse paying alimony/maintenance earns more income after the award for permanent alimony/maintenance has been passed in the case then the wife receiving alimony/maintenance may make a petition addressing the court about the increase in the husband’s income but she will have to prove her inability to maintain herself with the alimony already awarded by the court. The court may take into account facts, evidences and circumstances prevailing at that point of time increase the alimony payable. However, just because his income goes up does not necessarily mean she will get more alimony.

  9. Taxability of Alimony and Maintenance

    1. Whether the alimony and maintenance payments received from a spouse are taxable: A question generally arises as to whether, as a result of a divorce, the alimony and maintenance payments received from a spouse are taxable. The Income Tax Act does not contain specific provisions relating to Alimony, therefore analogous
      provisions along with relevant case laws must be studied. In case of a divorce,
      the relationship between the husband and the wife ceases to exist and they will
      no longer be spouses. In India, the law of the land places an obligation on the
      husband to maintain his wife which arises out of the status of a marriage. Right
      to maintenance forms a part of the personal law. Under the Code of Criminal
      Procedure, 1973, right of maintenance extends not only to the wife and dependent
      children, but also to indigent parents and divorced wives. Therefore, in a
      divorce the wife relinquishes her personal right of claiming monthly maintenance
      as provided under law. This relinquishment will be consideration of the wife for
      the receipt of alimony/maintenance and hence will not be a gift for inadequate
      consideration. In CIT v. Shaw Wallace and Co, the Privy Council held
      that the object of the Indian Act is to tax ‘income’. And ‘Income’
      connotes a periodical monetary return coming in with some sort of regularity or
      expected regularity, from definite sources.
      The source is not
      necessarily one which is expected to be continuously productive, but it must be
      one whose object is the production of a definite return, excluding anything in
      the nature of a mere windfall. Thus income has been likened pictorially to the
      fruit of a tree, of the crop of field. In the landmark case of Princess
      Maheshwari Devi of Pratapgarh v. CIT (1983) 33 CTR Bom 117,
      the Appellant
      was married to Maharaja of Kotah and had later obtained a decree of nullity of
      the marriage from a Court of Law. She had claimed monthly alimony and gross sum
      as permanent alimony and the same was directed by the court.

    2. Monthly alimony payments will be treated as income in the hands of
      the recipient:
      Bombay High Court held that Alimony is an
      extension of the husband’s obligation under Hindu Law to maintain his wife.
      Hon’ble Bombay High Court further stated that to constitute a revenue receipt, a
      source for the receipts must be established and it is established in the form of
      the decree. Therefore, 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 said Act. The person
      paying the alimony, there is no provision under the tax laws enabling him to
      claim a deduction towards such payment from his income.

    3. Lump-sum receipt of alimony: With regard to the lump-sum
      receipt of alimony
      the Hon’ble Bombay High decided as follows: “the
      point of view of taxability the decree must be regarded as a transaction in
      which the right of the assessee to get maintenance from her ex-husband was
      recognized and given effect to. That right was undoubtedly a capital
      Lump sum payment cannot 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. Therefore, it is clear that a lump-sum
      receipt in the form of Alimony will not be taxable in the hands of the
       Whereas, monthly alimony payments will be treated as income
      in the hands of the recipient. The same ratio was upheld in the case of ACIT
      v. Meenakshi Khanna (2013) TIOL 880 ITAT DEL
      ) wherein the agreement for
      custody, separation and divorce was entered into on 01.12.1989 with the divorce
      finally taking place on 20.04.1990. The Tribunal held this one-time
      payment, though delayed, as a lumpsum payment relating to the divorce agreement,
      is not taxable in the hands of the recipient (wife).
       Some other case

      1. Shrimati Roma Sengupta v. CIT (Cal)– Lump sum alimony is a
        capital receipt and therefore not taxable.

      2. ACIT v. Meenakshi Khanna (ITAT Delhi)– Lump sum amount received
        from ex-husband as alimony is not taxable

      3. Prema G. Sanghvi v. ITO (ITAT Mumbai) – Receipt of alimony from
        ex-husband is nothing but Gift and is exempt.

    4. Where there is NO divorce:It may be noted that where there
      is NO divorce; and an asset is transferred by one spouse to another, for
      inadequate consideration, the same shall be a gift exempt from taxation under section 56(2) of the Income Tax Act. Any income from the same will be ‘clubbed’ (i.e. included) in the hands of the transferring spouse as if the asset had not been transferred at all.

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