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Siddhartha Publications (P.) Ltd. Vs. Commissioner of Income-tax, Delhi - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Judge
Reported in[1981]129ITR603(Delhi)
ActsIncome Tax Act, 1922 - Sections 4(3)
AppellantSiddhartha Publications (P.) Ltd.
RespondentCommissioner of Income-tax, Delhi
Cases ReferredSeaham Harbour Dock Co. v. Crook
Excerpt:
.....non-recurring in nature because the payments is one for the recurrence of which the payee has no right of expectation. it was, thereforee, clearly a casual receipt of casual and non-recurring..........difficult to describe the receipt in question as a trade receipt arising from the business of the assessed. we think that the tribunal erred in coming to the conclusion that the amount received by the assessed from the organisation in question was an income receipt liable to tax. we, thereforee, answer the question referred to us in the negative and in favor of the assessed. as the assessed has succeeded, it will be entitled to costs in this reference.
Judgment:

S. Ranganathan, J.

1. This is a reference under s. 256(1) of the I. T. Act, 1961. The reference is at the instance of the assessed, M/s. Siddhartha Publications (P.) Ltd., which is now under compulsory winding-up proceedings in this court and is represented by the official liquidator. The reference relates to the assessment year 1963-64 for which the relevant previous year was the calendar year 1962.

2. The assessed is a private limited company and was publishing an English magazine, 'Thought'. The assessed approached an organisation known as 'Worldwide Partnership' (for solidarity with Africa, Asia and Latin America) with its headquarters at Bonn for some financial assistance. In a letter dated October 1, 1962, addressed to the above organisation the assessed explained that the little magazine run by it suffered from indifferent quality primarily because it was unable to pay adequately to the writers. It was pointed out that the assessed was keen to give a brighter look to the magazine by way of improving its format and layout and also help the contributors if it could have some help in the matter. The organisation replied by a letter dated October 17, 1962, from which it appears that the assessed had suggested that the organisation should create bulk subscriptions for the magazine run by the assessed. By this letter the said organisation intimated its decision to give the assessed a sum of DM. 24,000 (equivalent to Rs. 28,342). This letter makes it clear that they had decided to give this sum as a donation and that they were unable to follow up the suggestion of the assessed of either creating bulk subscriptions or increasing the amount. The letter concluded : 'Since we are unable from this end to make out well-founded proposals, we, nevertheless, hope that this contribution may also help you to increase your circulation and to put your paper on a more economical footing.' The question that arose was whether this sum of Rs. 28,342 was liable to income-tax in the hands of the assessed. The ITO held that the amount was taxable. The AAC, however, was of opinion that the receipt by the company was a casual and non-recurring receipt and could not be legally treated as income. However, on further appeal the Tribunal was of opinion that the assessed had approached the Worldwide Organisation for financial assistance in its business and that the said organisation had given a sum of money to the assessed not merely as a windfall or a gift pure and simple but with the object that the paper might increase its circulation and the paper might be put on a more economical footing. It was clear, said the Tribunal, that the donation had been made to the assessed for the purposes of its business and with the object of improving the get-up and the layout of the magazine and to put it on a more stable economical footing. The amount of Rs. 28,342, though solitary in character, had been given to the assessed as a result of the business activity of the assessed-company and could not be said to be a donation without any consideration. The Tribunal, thereforee, held that the donation was a business receipt liable to income-tax under the Act.

3. Aggrieved by the above decision of the Tribunal the assessed moved the Tribunal to make a reference to this court. The question which has been referred to us for our decision is :

'Whether, on the facts and in the circumstances of the case, the sum of Rs. 28,342 received by the assessed from World Partnership Organisation was a revenue receipt liable to be included in the assessment of the assessed ?'

4. We are of opinion that the view taken by the Tribunal cannot be supported on the facts and in the circumstances of the present case. We are unable to agree that the amount received is to be treated as business receipt in the hands of the assessed. In our opinion, the AAC was right when he pointed out that the receipt in question was a casual and non-recurring receipt. It is casual because it depended on the sweet will of the donor and, if not paid, could not be enforced against him. It is also clearly non-recurring in nature because the payments is one for the recurrence of which the payee has no right of expectation. Even where voluntary payments are made continuously over a period of time month after month it has been held that such voluntary payments made without consideration and without any source which can be properly described as a real source of income but depended entirely on the whim of the donor cannot be described as income payments. (See H.H. Maharani Shri Vijaykuverba Saheb of Morvi v. CIT : [1963]49ITR594(Bom) ). In the present case the assessed had no right to expect any assistance from the Partnership Organisation. This was the solitary approach made by the assessed to any outsider and it was also the solitary receipt of this nature. It was, thereforee, clearly a casual receipt of casual and non-recurring nature. The next question is whether it could be said to arise from the business of the assessed. The Tribunal has held that since the assessed is conducting a newspaper and the payment was asked for and given as a result of the business activity of the assessed-company, it should be treated as a receipt arising from business. We are unable to agree with this conclusion. Though it is mentioned that the foreign organisation had been formed for the promotion of literary and educational facilities and though the assessed also requested this organisation for financial assistance by taking a large number of subscriptions or giving a subsidy, this request was not acceded to by the organisation. The letter from the organisation dated October 17, 1962, makes it clear that they had decided to give the sum purely as a donation. In other words, the receipt was not towards any business purposes but was purely in the nature of a donation. It was only a gift or bounty and it cannot be described as a trade receipt in its true sense.

5. In the above context, we may refer to the decision of the Supreme Court in Bengal Textiles Association v. CIT : [1960]39ITR723(SC) . In that case the appellant-association had been formed for the purposes of meeting the procurement and wholesale distribution of cotton piece-goods in Bengal. The membership of the association was restricted to dealers who were engaged in wholesale trade in piece-goods. By an agreement between the Government of Bengal and the association certain privileges were conferred on the association and by one of the clauses the Government agreed to pay every month the administrative expenses incurred in the previous month. The question was whether the payments made by the Government to the appellant could be treated as business profits for the purposes of the Business Profits Tax Act. This question was answered in the affirmative. But in the course of the judgment the court pointed out that in such cases the question to be asked is whether the payment was of a benevolent nature and could be described as a bounty or subsidy or whether it is a receipt in respect of certain specific services rendered to the Government. It was held that in the case before the court the payments were made for the services rendered to the Government and, thereforee, the facts negatived their being a subsidy. On the other hand, in the present case, no service were rendered by the assessed to the foreign organisation nor was there any mutual or commercial arrangement between the donor and the assessed as to the terms for the provision of financial assistance to the assessed. The payment was purely by way of a donation or a gift.

6. The facts and decision in Seaham Harbour Dock Co. v. Crook [1931] 16 TC 333 (HL), referred to by the Supreme Court in the above case, are of interest. In that case, a dock company, contemplating an extension of its dock, applied for financial assistance to the unemployment grants committee. The committee sanctioned grants from time to time as the work progressed, several times a year and over a period of several years. Though Rowlatt J. was inclined to the view that the receipts were annual profits or gains liable to tax, the company was successful in its appeals. In the House of Lords, Lord Buckmaster pointed out that the question whether it was a trade receipt had to be unhesitatingly answered by saying that it was nothing whatever of that kind. The same answer, it appears to us, should come out more unhesitatingly in the present case. The Bombay decision in Mehboob Productions P. Ltd. v. CIT : [1977]106ITR758(Bom) , also furnishes an instance of a receipt, more closely connected with the trade than the one here, which was held not to be of income character because it was of a casual and non-recurring nature.

7. In the light of the above decisions and having regard to the facts and circumstances of this case, we find it difficult to describe the receipt in question as a trade receipt arising from the business of the assessed. We think that the Tribunal erred in coming to the conclusion that the amount received by the assessed from the organisation in question was an income receipt liable to tax. We, thereforee, answer the question referred to us in the negative and in favor of the assessed. As the assessed has succeeded, it will be entitled to costs in this reference.


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