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Additional Commissioner of Income-tax Vs. Brijlal Gupta - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 647 of 1972
Judge
Reported in[1974]94ITR88(All)
ActsIncome Tax Act, 1961 - Sections 256(2); Supreme Court Rule - Order 4 - Rules 2, 4, 5, 24 and 25
AppellantAdditional Commissioner of Income-tax
RespondentBrijlal Gupta
Appellant AdvocateDeokinandan and ;Gopal Behari, Advs.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
- - this function can be validly performed by the clerk of the senior advocate as well......counsel invited our attention to rules 4 and 5 of chapter 26 which deals with the advocate's clerk. rule 4 gives the form of an application for the registration of a clerk which is to be made by an advocate by letter addressed to the deputy registrar. this rule applies to all advocates, be they senior or otherwise. learned counsel emphasised that the form prescribed by rule 4 begins with the phrase ' i beg ' and urged that this rule does not apply to senior advocates because a senior advocate is not expected to use the phrase ' i beg '. no authority or any provision was cited in support of .this submission and we are not aware of any practice or any principle of propriety which may preclude a senior counsel from using the prescribed language beginning ' i beg' in an application for.....
Judgment:

Satish Chandra, J.

1. The Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question for the opinion of this court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that payment at the rate of 10% received as clerkage by the assessee as a result of contract between him and the client as a senior advocate on the Rolls of the Bar Council did not form part of his income ?'

2. The question relates to the assessment year 1969-70. The assessee is practising as a senior advocate, generally before this court. He returned gross professional income at Rs. 80,745. He claimed that 10% of this amount, namely, Rs. 8,074.50, was received in addition by him for being paid as clerkage to his clerical establishment and was not assessable as his income. The Income-tax Officer held that the clerkage is received by the assessee and then paid to the clerks and so it was not a case of diversion at source but appropriation only. The Income-tax Officer found that out of the sum of Rs. 8,074.50 a sum of Rs. 3,600 was paid by the assessee to his daughter-in-law on the footing that she assisted him in his professional work. This was held not to be permissible deduction. The balance of Rs. 4,474 was allowed as a valid deduction.

3. The assessee went up in appeal. The Appellate Assistant Commissioner held that the clerkage was never received as a part of the income of the assessee. It was an amount payable to the staff who assisted him in the professional work. As the same does not form part of the total income of the assessee the question of considering deductibility of the same from the professional receipts does not arise. He disallowed the addition of Rs. 3,600.

4. The Income-tax Officer went up in appeal to the Tribunal. The Tribunal upheld the finding that the receipt of Rs. 8,074.50 did not form part of the income of the assessee. The Tribunal also went into the question of the genuineness of the payment made to the daughter-in-law and held that she did assist the assessee in his professional work and the payment of Rs. 3,600 was justified, for the services rendered by her in his professional work.

5. At the instance of the Commissioner of Income-tax the Tribunal has referred the question of law mentioned above for the opinion of this court. The question referred by the Tribunal does not relate to the finding with regard to the justifiability of the disputed deduction. The Commissioner of Income-tax has filed the connected application under Section 256(2) of the Income-tax Act, 1961, praying that seven additional questions may be required to be referred to this court. At the hearing, learned counsel appearing for the Commissioner confined his submission to questions Nos. 6 and 7 mentioned in the application. These two questions relate to the finding that the daughter-in-law rendered services to the assessee in his professional work and, therefore, the payment was justified. These questions would arise only if the other finding of the Tribunal upon which it has referred the question to us, namely, that the clerkage did not form part of the income of the assessee, is answered in favour of the department.

6. Chapter XVI, Rule 24, of the rules of this court, provides that a sum calculated at the rate of 10% of the taxed fee of the advocate of a party shall, subject to a minimum of two rupees, be included in the taxation of costs on account of the fee of such advocate's clerk. The statutory provisions provide for taxation of clerk's fee at 10% of the fee paid to the advocate. Rule 25 requires the advocate, including the senior advocate, to file a fee certificate. In cases in which a senior advocate is appearing such certificate shall be accompanied by a voucher/receipt signed by the senior advocate for the fee paid to him. The rules do not require any certificate of payment of clerk's fee. But, nonetheless, the rules require taxation of clerkage. This shows that the rules of the court recognise a standing practice of the clerks receiving 10% of the sum paid to an advocate as his fee. The assessee claimed 10% of the fee paid to him as clerkage. This claim was accepted by the Assistant Commissioner of Income-tax and the Tribunal. We have no material before us to hold that this finding of fact was not based on sufficient material. It is obvious that on facts the receipt as clerkage is not part of the professional income of the assessee and so the question whether it was diversion at source owing to an overriding title or a case of appropriation of income does not arise for decision.

7. For the revenue, learned counsel invited our attention to Rules 4 and 5 of Chapter 26 which deals with the advocate's clerk. Rule 4 gives the form of an application for the registration of a clerk which is to be made by an advocate by letter addressed to the Deputy Registrar. This rule applies to all advocates, be they senior or otherwise. Learned counsel emphasised that the form prescribed by Rule 4 begins with the phrase ' I beg ' and urged that this rule does not apply to senior advocates because a senior advocate is not expected to use the phrase ' I beg '. No authority or any provision was cited in support of .this submission and we are not aware of any practice or any principle of propriety which may preclude a senior counsel from using the prescribed language beginning ' I beg' in an application for registration of his clerk. The use of the word ' beg ' in the prescribed from does not, in our opinion, exclude its applicability to a senior advocate.

8. Rule 5 gives in detail the matters which a clerk may perform. It provides that a registered clerk shall not make any motion or advance an argument in court. He may act in matters oi a routine nature which do not require the personal attendance of the advocate and may do the following acts, namely :

(1) receiving notice on behalf of his master ;

(2) obtaining report qn an appeal or application from the stamp reporter before its presentation;

(3) presenting an appeal or application before the reader of the court or the Registrar ;

(4) obtaining office report on an application for adjournment;

(5) taking back an appeal or application filed if found defective or returned by him for presentation in court; . . . . etc. etc.

9. Learned counsel invited our attention to the rules framed by the Supreme Court and argued that a senior counsel cannot act and so his clerk cannot do any of the functions which are included in acting. Order IV, Rule 2(b), of the Supreme Court Rules, provides that:--' A senior advocate shall not--

(i) file a vakalatnama or act in any court or tribunal in India,

(ii) appear without an advocate on record in the court or without a junior in any other court or tribunal in India.

(iii) accept instructions to draw pleadings or affidavits, advise on evidence or do any drafting work of an analogous kind in any court or tribunal in India or undertake conveyancing work of any kind whatsoever but this prohibition shall not extend to settling any such matter as aforesaid in consultation with a junior.

(iv) accept directly from a client any brief or instructions to appear in any court or tribunal in India. Explanation.--In this order--

(i) ' acting ' means filing an appearance or any pleadings or applications in any court or tribunal in India, or any act (other than pleading) required or authorised by law to be done by a party in such court or tribunal either in person or by his recognised agent or by an advocate or attorney on his behalf.

(ii) ' tribunal' includes any authority or person legally authorised to take evidence and before whom advocates are, by or under any law for the time being in force, entitled to practise.

(iii) ' junior ' means an advocate other than a senior advocate.'

10. But these rules do not prohibit a clerk of a senior advocate from doing the acts mentioned in Rule 5 of Chapter XXVI of the rules of this court. A senior advocate can appear along with a junior advocate. There is no prohibition of any kind that the clerk of a senior advocate cannot function in accordance with Rule 5 of Chapter XXVI of the rules of this court. Moreover, even if it may be assumed, for the sake of argument, that if a senior counsel is prohibited from acting, his clerk would also be similarly restrained, even then there are many things mentioned in Rule 5 which will not really amount to acting on the part of the clerk; for instance, Sub-clause (4) speaks of obtaining an office report on an application for adjournment. If a senior counsel makes an application for adjournment on personal grounds it cannot be said that he was acting within the meaning of Order IV, Rule 2(b), and so his clerk can validly obtain office report on such applications. Rule 25 of Chapter XVI specifically authorises the clerk of an advocate to file a fee certificate to the Bench reader of the office of the court. This function can be validly performed by the clerk of the senior advocate as well. It is, therefore, difficult to accept the submission that under the rules a senior advocate's clerk has no function whatever to perform and, therefore, if a senior advocate maintains a clerk the practice is illegal. Since in the present case, on facts, it has not been disputed that the assessee did maintain a clerical establishment and since it is also not disputed that he received the disputed amount as clerkage only, we are not inclined to accept the submission that the receipt of clerkage was illegal or invalid. In our opinion, the view of the Tribunal that this receipt was not part of the professional income of the assessee, on the materials, is eminently justified. We would answer the question referred to us in the affirmative, in favour of the assessee and against the department.

11. In view of our answer to the question referred to us the application made by the Commissioner for requiring the Tribunal to refer to us the two other questions has become infructuous because those questions are now merely academic. The application is accordingly dismissed.

12. The assessee shall be entitled to the costs of this reference which we assess at Rs. 200. The fee of learned counsel is assessed at the same figure. We make no order as to costs of the connected application.


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