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The reference relates to the income-tax assessment for the year 1977-78 for which the previous year ended on March 31, 1977. The father of the assessee, the late Kesavan, was the owner of 4 acres and 86-3/4 cents of land situated outside the Quilon Municipality limits. On his death, the property devolved on the assessee, her brother and her sister and they came into joint possession under partition deed dated February 14, 1964. The property was under attachment of the Income-tax Department for arrears of income-tax due from the late Kesavan even during his lifetime. While the attachment was thus in force, on March 17, 1977, the assessee, her brother and her sister along with her mother sold the property to the Kerala State Warehousing Corporation for a consideration of Rs. 6,20,000. As per the terms of the document an amount of Rs. 1,99,681.04 had to be paid by the vendee to the Department for and on behalf of the vendors. A further sum of Rs. 2,44,693.40 was reserved with the purchaser for payment to the Income-tax Department towards interest if any when it is finally held to be due by the Central Board of Direct Taxes. In case no amount was found due, the amount thus reserved has to be paid to the vendors within one month after the decision of the Central Board. The balance amount of Rs. 1,75,625.56 was to be paid to the vendors on or before October 30, 1977, with interest at 12 per cent. per annum.

4. On the first question, it is contended on behalf of the assessee that the Tribunal had failed to apply the principle laid down by the Supreme Court in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367. The property originally belonged to the father of the assessee. Admittedly, during his lifetime demand had been raised against him towards income-tax liabilities and the properties were under attachment. On the death of their father, what was obtained by the assessee and other legal heirs was property subject to the claim of the Income-tax Department. It was under these circumstances when the property was sold on March 17, 1977, that the vendee was directed to pay part of the consideration directly to the Income-tax Department towards the tax liability of their late father.

9. Yet another decision relied on by the .Revenue was K.V. Idiculla v. CIT [1995] 214 ITR 386 (Ker). One of the questions decided in the above case was whether a debt to be discharged from the assets obtained under a will can be treated as an amount diverted by overriding title and deductible in computing capital gains. The assessee obtained house property under a will executed by his father which contained a clause that certain amounts due to the assessee's wife from the testator should be paid out of the property bequeathed. After the death of the assessee's father, the assessee transferred the property to his wife and in his returns he claimed the amount of debt due to his wife which was discharged by him as per the directions in the will as deduction for the purpose of computation of income for capital gains. Referring to Sitaldas Tirathdas' case [1961] 41 ITR 367 (SC), this court took the view that the obligation to discharge the debt due to the assessee's wife was self-imposed. There was no case that the assessee's wife had sought any charge on the property for the amount due to her. The payment of debt was nut made by virtue of any overriding obligation to make such payment. But it was made to discharge an obligation created by the testator himself in favour of his daughter-in-law. Therefore, it cannot be taken as diversion at the source before it reached the assessee.

10. What we have to consider in this case is whether going by the dictum laid down in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 (SC) and affirmed in Addl. CIT v. Gurjargravures Pvt. Lid. [1978] 111 ITR 1 (SC), the attachment of the property even during the lifetime of the assessee's father would create an overriding title. Whether the income-tax liability was satisfied after the income was received by the assessee or before it came to her hands. Admittedly, the attachment of the property for recovery of arrears due from the assessee's father occurred during his lifetime itself. We have already referred in detail to the relevant provisions under the rules providing the procedure for recovery of tax including attachment of immovable property of the assessee. Rule 15 and Rule 52 would clearly show that on attachment of the property of the defaulter a charge or an obligation is created on the property to satisfy the tax liability. On the death of the assessee's father the property devolved on the assessee. But the death of the assessee's father would not free the property from the abovementioned charge or obligation. The assessee inherits the property subject to the charge created by way of an attachment. Therefore, when part of the sale consideration was directly paid by the vendee to the Income-tax Department to satisfy the tax liability of the assessee's late father it cannot be taken that payment was made by the assessee after the income has reached her hands. This is not a case where the testator created a self-imposed or gratuitous obligation as in the case of K.V. Idiculla v. CIT [1995] 214 ITR 386 (Ker). Here in the present case the property devolved with the statutory liability in view of the attachment made by the Income-tax Department during the lifetime of the father of the assessee. The dictum laid down by the Privy Council in Raja Bejoy Singh Dudhuria's case [1933] 1 ITR 135, is directly applicable to the facts of the present case. To that extent of the liability of the deceased father of the assessee, the income is diverted from the assessee and it is directed to the Income-tax Department. To that extent the sale consideration was not received by the assessee as her income.