Taxablility of alimony.

Vikram (Querist) 14 January 2009 This query is : Resolved
Is the alimony received on divorce through courts order taxable in hands of the recipient? Pls explain quoting relevant provisions & case laws, if any?

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Ashok Kumar Garg (Expert) 15 January 2009
The present position is that so far as lumpsum amount received from the ex-spouse is treated as capital receipt , whereas monthly alimony is taxable as income. There appears to be only one court decision- viz. Princess Maheshwari Devi of Pratapgarh Vs. Commissioner of Income tax, (1984) 147 ITR 258 (Bom) : (1983) 33 CTR 117 (Bom): (1983) 12 Taxmann 220 (Bom) .

Though it is quite an elaborate judgement, it is humbly suggested that the same deserves to be reconsidered in the light of Indian conditions and because of the fact that the decision is influenced by British Decisions where the definition of Income is different. ( In fact,in UK if husband claims deduction of alimony payment ( it is allowable) , then it is taxable in the hands of wife , otherwise not.).
The observation of the Hon'ble Bombay High Court in abovementioned case that- it is not correct to lay down a general test that to be 'taxble income' every payment must be the result of some outlay on the part of the assessee before it is taxable, with respect to Hon'ble Court , does not appear to be equitable and needs reconsideration in the light of Indian law.

If amount involved is large , it may be worthwhile to fight it out.

Ashok Garg, Ex IRS
Advocate