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Addl. Commissioner of Income-tax Vs. K. Ramabrahmam and Sons (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 154 of 1976
Judge
Reported in[1978]115ITR369(AP)
ActsIncome Tax Act, 1961 - Sections 2(14) and 195(1)
AppellantAddl. Commissioner of Income-tax
RespondentK. Ramabrahmam and Sons (P.) Ltd.
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateM.J. Swamy and ;J.V. Sinivasa Rao, Advs.
Excerpt:
.....and officers of crew was sort of entertainment expenses and there was no regularity in these payment - payment was not received by single individual every time - payment was of casual and non-recurring nature - there was no obligation on company to pay these expenses and no right of members of crew to receive these types of payment - held, voluntary payments to members of crew does not attract section 195. - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields..........application inasmuch as the payments made to the masters and chief officers of the ships were not income chargeable under the i.t. act, 1961. the revenue, however, contended that they should be treated as income in the hands of non-residents. the tribunal agreed with the contention of the assessee and held that payments made by the assessee were in the nature of casual and non-recurring receipts in the hands of non-residents which are not chargeable under the i.t. act. thereupon, the revenue made an application for reference to this court of the question which we have extracted earlier.3. it is contended by mr. rama rao, that the tribunal was wrong in treating the amounts paid by the assessee to non-residents as casual and nonrecurring in nature and that it is income within the meaning.....
Judgment:

Amareswari, J.

1. In this case the only question that has been referred to us for our opinion is :

'Whether, on the facts and in the circumstances of the case, Section 195(1) of the I.T. Act, 1961, is attracted ?'

2. For answering the question, a few facts may be stated. The assessee is a private limited company carrying on business of stevedoring at Visakhapatnam. It appears that the assessee-company is in the habit of paying certain amounts to the masters and chief officers of various ships. Different payments have been made during the assessment years 1964-65, 1965-66 and 1966-67. The ITO applied Section 195(1) of the Act and directed the asses-see to pay the tax on the aforesaid payments. The assessee paid the tax under protest and filed appeals before the AAC contesting the liability. The appeals filed by the assessee were dismissed by the appellate authority. Thereafter, the assessee carried the matter in further appeal to the Tribunal. The main contention raised was that the provisions of Section 195(1) have no application inasmuch as the payments made to the masters and chief officers of the ships were not income chargeable under the I.T. Act, 1961. The revenue, however, contended that they should be treated as income in the hands of non-residents. The Tribunal agreed with the contention of the assessee and held that payments made by the assessee were in the nature of casual and non-recurring receipts in the hands of non-residents which are not chargeable under the I.T. Act. Thereupon, the revenue made an application for reference to this court of the question which we have extracted earlier.

3. It is contended by Mr. Rama Rao, that the Tribunal was wrong in treating the amounts paid by the assessee to non-residents as casual and nonrecurring in nature and that it is income within the meaning of Section 2(24) ofthe I.T. Act. Amounts were paid for the service rendered by the non-residents and probably pursuant to mutual understanding between the assesseeand the non-residents. Hence, Section 1 95 is attracted. On the other hand, it iscontended by Mr. Swamy on behalf of the assessee, that the findings givenby the Tribunal are perfectly correct and there is no obligation on the partof the assessee to make these payments and since amounts were paid gratisat the assessee's own will and pleasure to facilitate its business or as a measure of business expediency, it cannot be construed as income in the handsof the non-residents chargeable under the I.T. Act, 1961. To resolve thisquestion, it is necessary to refer to the provisions of Section 195(1) of the I.T. Act,1961. It is as follows :

'Any person responsible for paying to a non-resident, not being a company, or to a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India, any interest, not being 'interest on securities', or any other sum, not being dividends, chargeable under the provisions of this Act, shall, at the time of payment, unless he is himself liable to pay any income-tax thereon as an agent, deduct income-tax thereon at the rates in force : Provided that nothing in this sub-section shall apply to any payment made in the course of transactions in respect of which a person responsible for the payment is deemed under the proviso to Sub-section (1) of Section 163 not to be an agent of the payee. '

4. 'Income' is defined in Section 2, Sub-section (24). It is an inclusive definition, but is not exhaustive. It is not capable of exact definition. It has got a legal concept. Various decisions have laid down that income is anything which can properly be described as income and is taxable under the Act unless expressly exempted. The only question for consideration is whether payments that have been received by the persons to whom the asses-see paid can be regarded as income chargeable under the Act. On the facts of this case, we find that payments were not received by a single individual or individuals from time to time. Payments were made to different persons at different times and there is absolutely no regularity or certainty. Every time payment was not made to the same person as the crew differs from ship to ship. Payments were voluntarily made by the assessee in connection with its business. It is contended by Mr. Swamy that they are in the nature of some entertainment expenses. We are of the opinion that the payments represented cash receipts in the hands of the recipient and there is no contractual obligation on the part of the assessee to make payments ; nor is there any right on the part of the non-residents to receive these amounts. In these circumstances, these payments cannot be regarded as income chargeable under the Act. As already stated, there is no obligation on the part of the payer, and no right to receive the same by the recipient. Payments do not arise out of any contract or obligation between the assessee and the recipients. There is no obligation either by virtue of a contract or in law to make these payments. They are made voluntarily by the assessee towards entertainment of the crew. We, therefore, hold that Section 195(1) is not attracted in the present case. We agree with the view expressed by the Tribunal and answer the question in the negative and in favour of the assessee. No costs. Advocate's fee Rs. 250.


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