THE POLICY LAB (TPL) - 53
OCTOBER 14, 2024

By J B Mohapatra

STATE's regulations of a citizen's domestic relations, while framing and implementing a uniform civil code, to govern and regulate the laws relating to marriage, divorce, succession and inheritance, touch all aspects of a citizen's life- from entitlement of child support to housing and from seeking loans from banks to compliances while requesting for a passport under the Passport Act 1967. Administration of tax laws, the Income Tax Act (ITA) for example, is necessarily entwined with personal civil code in certain matters, for example your entitlement to certain tax deduction only if you can prove that you are married or married with children etc. Administration of ITA in situations of succession and inheritance is also dependent on what the civil code lays down.

Some aspects of Uttarakhand's Uniform Civil Code 2024 (UCC 2024), the first among the States to roll out a uniform civil code, seeking to establish a religion-agnostic and uniform set of laws on marriage, divorce, succession and inheritance are worth examining to see in what manner UCC 2024 will interact with administration of ITA.

First the new regime of succession and inheritance, and specifically the order of preference and distribution of shares in intestate succession in section 49 of UCC 2024. The code introduces a scheme of intestate succession whereby the estate of the deceased, irrespective of property being self-acquired or ancestral, devolves first among Class-1 legal heirs, then upon Class-2 legal heirs if there are no surviving Class-1 heirs, and then to other relatives (who can be anyone related to the deceased except Class 1 and 2 legal heirs) if there are no surviving Class 1 or 2 legal heirs. Father and mother have been elevated as Class-1 legal heir. There remains under UCC 2024 no distinction between ancestral and self-acquired property in a situation of intestate succession.

Section 56(2)(x) of ITA is the most likely provision that should get triggered, if a person receives any sum of money without consideration, the aggregate value of which exceeds Rs 50,000 or any immovable property without consideration stamp duty value being in excess of Rs 50,000 or any property other than immovable property whose fair market value exceeds Rs 50,000. The provision would not apply if receipt is from any 'relative' or is under a will or by way of inheritance. Though the list of 'relative' referred to in section 56(2)(x) is far limited than what the UCC 2024 provides for in Schedule-2, it is unlikely that there would be a tax consequence arising on intestate succession under UCC 2024 even if the succession is in favour of a person not figuring as a relative u/s 56(2)(x) of ITA, since tax exemption continues to be available if receipt is by way of 'inheritance'.

Second, the definition of 'child' in section 3(1)(a) of UCC 2024 as below:

"'child' in relation to parents, means their biological child, and includes an adopted child, an illegitimate child, or a child born through surrogacy or assisted reproductive technology;"

In section 3(4)(a) of the UCC 2024, for the purposes of part 3 of the Code, definition of 'child' is further expanded as follows:

"'child' in relation to a man and a woman in a live-in relationship means their biological child, and includes an adopted child, an illegitimate child or a child born through surrogacy or assisted reproductive technology"

Section 379 of UCC 2024 in the context of the 'child' born of a live-in relationship reads as follows:

"Children of a live-in relationship- Any child of a live-in relationship shall be a legitimate child of the couple."

Contrast the above with the definition of 'child' in section 2(15B) of the Income Tax Act (ITA) reproduced as below:

"'child', in relation to an individual, in-cludes a step-child and an adopted child of that individual"

Specific instances in ITA where 'child' as a term and a class has been used are in section 64(1A) providing for clubbing of income of a minor child in the income of an individual, in section 80C providing for deduction in respect of life insurance premia, deferred annuity etc with respect to payments on behalf of a 'child' of an individual, in section 80D providing for deduction in respect of health insurance premia for 'dependent children' of the individual, in section 80DDA providing for deduction for maintenance and medical treatment in case of dependent 'children', in section 80DDB providing for deduction in respect of specified disease of dependent 'children' of an individual, and in section 80E providing for deduction in respect of interest on loan taken for higher education for 'children' of that individual.

While definition of 'child' introduced in ITA through Taxation Laws (Amendment) Act, 1975 with effect from 1-4-76 is inclusive and so far unamended since its introduction, legislature has consciously refrained from explicitly aligning the definition as provided in ITA with any other statute including the CrPC, leaving the executive's interpretation to the wisdom of the executive authority and the legal interpretation to the judiciary. UCC 2024 now expanding the definition of 'child' even further- to a child born out of a live-in relationship, and who is deemed as 'legitimate' under that statute- the distance between the ITA and the personal laws on the definition of 'child' should be growing that bit longer.

Third, the concept of 'live-in relationship' defined in section 3(4)(b) of UCC 2024 as follows:

"In part 3 of this Code, unless the context otherwise requires-

(b)'live-in relationship' means a relationship between a man and a woman (hereinafter referred to as 'partners') who cohabit in a shared household through a relationship in the nature of a marriage, provided that such relationship is not prohibited under part-3 of this Code"

Whether factors such as (i) live-in relationship requiring compulsory registration through a procedure detailed in section 381, (ii) requirement of an intimation of termination of a live-in relationship as per section 384 (iii) the right of a child born out of a live-in relationship to be considered as a legitimate child u/s 379 (iv) the right of maintenance for a female partner in case she is deserted by her partner as per section 388 and (v) defining live-in relationship in section 3(4)(b) of UCC as a 'relationship in the nature of marriage', mirroring same or similar processes statutorily required as well in case of marriage, for example (i) compulsory registration of marriage u/s 6 (ii) compulsory registration of a decree of divorce or nullity u/s 9 or (iii) legitimacy of child born of void and voidable marriage u/s 31, in the eyes of law elevate the live-in relationship to being that of a marriage will have consequences under ITA as well. Whether claims of deduction u/s 80C,80D, 80DD, and 80DDB statutorily allowable to an individual for investments/ expenditure made or incurred for or towards the 'wife' or the 'spouse' are also available in respect of a live-in partner will have to be considered on similar parameters as claim for those deductions in respect of 'child' born of a live-in relationship. Equally important for consideration will be the tax consequences arising on termination of live-in relationship provided in section 384 of UCC 2024, and the anti-tax abuse guardrails necessary as preventive measures.

It should be noted that unlike an available statutory definition of 'child' in ITA, there is no such general definition for either 'wife' or 'spouse' anywhere in ITA. Section 2(41) makes reference to 'wife' while defining "relative" as follows: "relative' in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. Spousal relationship through financial arrangements or transactions inter-se between spouses bears considerable significance for many provisions of ITA, for example section 40A(2)(b), section 64 or section 56(2)(x) for purposes such as tax reporting, detecting tax avoidance or for extending a tax exemption. In what manner, these tax provisions framed specifically in context of spousal relationship turn, whether adversely or favourably, in case of a live-in relationship under the UCC 2024, whether at a quasi-judicial or a judicial stage or get legislatively addressed should remain a matter of great interest. After all, this statutory recognition of live-in relationship cannot be just about attaching similar level of dignity conferred upon marriages but also about economic, tax and legal ramifications associated with a live-in relationship at par with relationships established through marriages.

Fourth is the extent of coverage of UCC 2024.

Section 1(3) reads as follows:

"It extends to the whole of the State of Uttarakhand and applies also to the residents of Uttarakhand who reside outside the territories to which this Code applies."

Section 3(1)(n) reads : "'resident' means a citizen of India, whether residing within or outside the territories of the State of Uttarakhand, who-

(i) is eligible to be a permanent resident under the notification issued by the State government in this regard, or

(ii) is a permanent employee of the State government or its undertakings/ entities, or

(iii) is a permanent employee of the Central government or its undertakings/ entities, employed within the territory of the State, or

(iv) has been residing in the State for not less than one year, or

(v) is a beneficiary of any scheme of the State government or the Central government, applicable in the State"

For the purposes of Part-3 - Live-in Relationship-, the applicable provision that is section 378 reads as follows:

"(1) It shall be obligatory for partners to a live-in relationship within the State, whether they are residents of Uttarakhand or not, to submit a statement of live-in relationship under sub-section (1) of section 381 to the Registrar within which they are so living.

(2) Any resident(s) of Uttarakhand staying in a live-in relationship outside the territory of the State may submit a statement of live-in relationship under sub-section (1) of section 381 to the Registrar within whose jurisdiction such resident(s) ordinarily resides."

Evidently, UCC 2024 extends to all Indian citizens who are 'residents' of Uttarakhand whether or not they continue to reside within or outside the State. Owning a property in the State is not a criterion of being a permanent resident of the State. Beneficiaries of State or Central schemes which are applicable in the State are also regarded as residents under UCC 2024, no matter that they are not permanent residents of the State. For live-in relationship, extent of coverage of UCC 2024 is wider and includes both residents within the meaning of section 2(n) of UCC 2024 as also any one else who engages in a live-in relationship within the State. It should imply that the meanings attributed to 'partner' in a live-in relationship and 'child' born of a live-in relationship for determining consequences the purposes of UCC 2024 will remain uniform no matter that either or both partners are not 'residents' of the State or that the live-in relationship by a 'resident' of the State is carried out outside the geographical limits of the State.

In conclusion, matters relating to marriage and divorce, infants and minors, adoption, wills, intestacy and succession, joint family and partition and all matters subject to personal laws before enactment of the Constitution or in short the whole universe of uniform civil code is an entry in the concurrent list and on which both the State or the Centre can legislate subject to Article 254, which makes the law passed by the Parliament prevail over that passed by the State legislature in case of repugnancy etc. The fact that UCC 2024 was legislated by the State and the President gave assent to that bill typifies a common historical fact among nations that laws on domestic and personal relations generally fall within the remit of a State's jurisdiction and that the federal government unless the State law is repugnant to what the Constitution provides, will defer to the State's laws and policies regarding domestic relations. Once more States enact their own State specific Civil Codes, the challenge will be uniformly synchronising the effects of those Codes while administering the ITA in a manner that is comprehensive and forward-looking.