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Parelkar, Gore and Parpia Vs. Commissioner of Income-tax, Bombay City-i - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberI.T. Reference No. 76 of 1957
Judge
Reported in[1958]34ITR312(Bom)
ActsIncome Tax Act, 1922 - Sections 4(3)
AppellantParelkar, Gore and Parpia
RespondentCommissioner of Income-tax, Bombay City-i
Appellant AdvocateN.A. Palkhivala, Adv.
Respondent AdvocateG.N. Joshi, Adv.
Excerpt:
.....is satisfied, the client may ask them to construct the building. it was precisely under those circumstances that they applied to the all-india medical institute and submitted their plans for the construction of the building. we take it that their object was not to win the third prize but the first prize, and the first prize carried with it the additional advantage -an all -powerful advantage -of their getting this important work. therefore, clearly this particular activity of the golfer could be seperated from his activity as a professional......25,000 and the third prize was rs. 10,000. the architect getting the first prize was to get the work and the prize of rs. 50,000, was to be considered as part of his fees for the work. now, the assessees practise as architects and having the requisite qualifications they also submitted their plans and they, as we pointed out, were fortunate in getting the third prize which was rs. 10,000. the question is whether this receipt constitutes income which is liable to tax and the contention of the assessees was that it is exempt from tax by reason of the provisions of section 4(3)(vii). 2. section 4(3)(vii) exempts from tax casual and non-recurring income; but in order that section 4(3)(vii) should apply, the receipt must not be a receipt arising from business or the exercise of a.....
Judgment:

Chagla, C.J.

1. The assessees were the fortunate recipients of a prize of Rs. 10,000 from the All-India Medical Institute at Delhi and they got this prize under the following circumstances. The Medical Institute wanted to construct a Medical Centre at Delhi for providing teaching and research facilities for all branches of medical science and the building was estimated to cost Rs. 178 lakhs. The Institute invited applications from architects practicing in India who had certain qualifications, and after considering the plans submitted by various architects the Institute was to give three prizes in order of merit - the first prize was Rs. 50,000, the second prize was Rs. 25,000 and the third prize was Rs. 10,000. The architect getting the first prize was to get the work and the prize of Rs. 50,000, was to be considered as part of his fees for the work. Now, the assessees practise as architects and having the requisite qualifications they also submitted their plans and they, as we pointed out, were fortunate in getting the third prize which was Rs. 10,000. The question is whether this receipt constitutes income which is liable to tax and the contention of the assessees was that it is exempt from tax by reason of the provisions of section 4(3)(vii).

2. Section 4(3)(vii) exempts from tax casual and non-recurring income; but in order that section 4(3)(vii) should apply, the receipt must not be a receipt arising from business or the exercise of a profession, and if we are satisfied that this is a receipt from the exercise of a profession, then no further questions arise. It is difficult to understand how it can possibly be contended that the receipt obtained by the assessees was not the result of the exercise of their obtained by the assessees was not the result of the exercise of their profession. It is part of their professional duty to submit plans for construction of buildings. Any client of theirs who wants to put up a building may ask them to submit a plan, and if the client is satisfied, the client may ask them to construct the building. It was precisely under those circumstances that they applied to the All-India Medical Institute and submitted their plans for the construction of the building. We take it that their object was not to win the third prize but the first prize, and the first prize carried with it the additional advantage - an all - powerful advantage - of their getting this important work. In submitting their plan they exercised their professional skill; they acted a architects. Their intention in submitting the plan was not merely to win a prize, but to get the work, and, therefore, it was as a result of their professional skill that they ultimately succeeded in getting the prize of Rs. 10,000. It is true, as the authorities show, that if the receipt is not directly connected with the assessee's profession but is only incidentally connected, then the receipt will not go out of the ambit of section 4(3)(vii). Can it possibly be said in this case that the receipt was not directly connected with the profession of the assessees, but only incidental to it The work which the assessees did and which ultimately resulted in the coming in of this receipt was the ordinary work which they do as architects. It was directly the exercise of their profession and it was the result of their professional activity which made it possible for them to earn this receipt.

3. Mr. Palkhivala has drawn our attention to an English case which, in our opinion, does not touch the point which we have to decide in this case. That is the decision in Down (H. M. Inspector of Taxes) v. Compston. That was the case of a professional golfer also engaged in private games of golf on handicap terms and laid bets against those who played with him and made a large sum of money; and the question was whether the bets which the golfer won were liable to tax. Mr. Justice Lawrence came to the conclusion that these bets did not arise from his employment as a professional golfer. Now the facts which the English court has to consider were entirely different from the facts that we have to consider. In playing a private game the golfer was not exercising his profession; in laying the bet he was not doing something which was ordinarily a part of his profession; and, as Mr. Justice Lawrence points out, in laying the bet he took the risk, although it might have been a remote risk, of losing the bet. Therefore, clearly this particular activity of the golfer could be seperated from his activity as a professional. It cannot be said in this case that the activity of the assessees could be separated from their normal ordinary activity as architects.

4. We must, therefore, answer the question submitted to us in the negative.

5. Assessees to pay the costs.

6. Question answered in the negative.


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