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The Commissioner of Income-tax Central, New Delhi Vs. P.N. Behl - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome Tax Reference Appeal No. 3 of 1967
Judge
Reported inILR1971Delhi338; [1972]84ITR125(Delhi)
ActsIncome tax Act, 1922 - Sections 4(3) and 10(2)
AppellantThe Commissioner of Income-tax Central, New Delhi
RespondentP.N. Behl
Advocates: G.C. Sharma,; V. Kumaria,; A.N. Kirpal and;
Cases ReferredCommissioner of Incometax v. Shaw Wallace
Excerpt:
.....obtained from the two foreign parties. there was no doubt a sort of agreement between the assessed and those two foreign parties; but the receipt in itself was entirely fortuitous and exceptional. the petitioner may go abroad once again and yet he may not be lucky enough to get hold of a foreigner who should give him money and also look after his house during his absence for a short period. the tribunal was, thereforee, right in holding that the receipt fell within the ambit of section 4(3)(vii) of the act. it was not only casual but also non-recurring. - - roman's case was confined to its own facts and it was clearly stated therein that attending a conference may itself advance the business, profession or a vocation, of the assessed. rao's case that there are some trees which yield..........in support of this statement was produced before him. the same was thereforee added to the assessed's income from un-disclosed source. (6) during the course of the appeal before the appellate assistant commissioner the assessed produced a letter from one shri o. p. singhal of united states of america to the effect that the assessed had given a flat on a care-taker basis to one mr. leone collavo and miss crista brauer, for which he was paid rs. 3,000.00 by these two parties. the appellate assistant commissioner accepted the assessed's explanationn and the sum of rs. 3,000.00 was thereforee deleted 'as asscssee's income from un-disclosed source. (7) against the decision of the appellate assistant commissioner the income-tax officer filed an appeal before the income-tax appellate.....
Judgment:

Hardayal Hardy, J.

(1) In this reference under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the 'Act') the following two questions of law have been referred to this court by the Income-tax Appellate Tribunal (Delhi Bench 'A' New Delhi) :

(1)Whether on the facts and in the circumstances of the case, the expenditure of Rs. 5,282.00 incurred by the assessed in connection with his foreign tour was a revenue expenditure entitled to deduction in computing his professional income (2) Whether, on the facts and in the circumstances of the case. the Tribunal was right in holding that the sum of Rs. 3.000.00 received by the assessed was receipt of a casual and non-recourring nature exempt from tax u/s. 4(3) (vii) of the Indian Income-tax Act 1922?

The respondent who will herein-after be referred to as 'Asscssee' is a medical practitioner and is a specalist in the treatment of skin diseases. The assessment year is 1958-59, the relevant previous year being the financial year, ending on 31st March, 1958.

(2) During the previous year, the assessed went from New Delhi to .Stockholm to attend the International Congress of Dermatology as an official delegate .from India. The assessed claimed a sum of Rs. 5682.00 as expenses incurred by him, on this tour. According to him before he went to Stockholm he also visited Russia for a week and the United Kingdom for two weeks. In Stockholm he stayed for K .about a week. The expenses claimed were Rs. 4',032- on air passage and the balance of Rs. l,650.00 was on living and other miscellaneous expenses

(3) The Income-Tax Officer dis-allowed the entire expenses on the ground that this is an expenditure of a capital nature as visit of the assessed to attend the International Congress of Dermatology was ostensibly to further his knowledge and as such it brought into existence an asset or an advantage of an enduring nature. The Incometax Officer also mentioned that there was no voucher for hotel expenses and as such the expenses to the extent of Rs. 1650.00 were not verifiable.

(4) Against the decision of the Income-tax Officer the assessed preferred an appeal before the Appellate Assistant Con-ir.lissioner. D Relying on a decision of the Madras High Court in Dr. P. Vudunialyan v. Commissioner of Income-fax Madras 40 I.T.R. 501 the Appellate Assistant Commissioner held that expenditure of Rs. 4,032.00 on air passage was not an expenditure of a capital nature but was an expenditure of a revenue nature and was therefore::.' allowable. As regards the expenses of Rs. l,650.00 on boarding and lodging etc. the Appellate Assistant Commissioner held that having regard to the fact that the assessed was abroad for a period of about 40 days. the expenses were not excessive. The entire sum uf R:;. 5.682.- was thereforee held as admissible deduction in computing the asscssee's professional income.

(5) The second contention of the assessed was with respect to another sum of Rs. 3.000.00 which according to the Income-tax Officer was his income from un-disclosed source and had, thereforee, been added to his income. This amount formed part of the house-hold expenses incurred by the assessed during the previous year. It was found by the Income-tax Officer that after excluding the expenditure in the nature of house, rent, life insurance premium, income-tax etc. the assessed had only a sum of Rs. 5,159.00 for being apent on household expenses. According to the Income-tax Officer, the sum of Rs. 5,159.00 was in-adequate in view of the standard of living of the assessed. When called upon to explain the smallness of the household expenses the assessed stated before the Income-tax Officer that he had obtained a sum of Rs. 3,000.00 from an American family to whom he had given a flat on care-taker basis when he was going abroad and his family was not staying at Delhi. The assessed stated before the Income-tax Officer that if this sum of Rs. 3,000.00 was taken into account the total sum spent on house-hold expenses would amount to over Rs. 8,000.00 which was quite adequate. The Incoine'tax (officer dis-believed the statement of the assessed as no evidence in support of this statement was produced before him. The same was thereforee added to the assessed's income from un-disclosed source.

(6) During the course of the appeal before the Appellate Assistant Commissioner the assessed produced a letter from one Shri O. P. Singhal of United States of America to the effect that the assessed had given a flat on a care-taker basis to one Mr. Leone Collavo and Miss Crista Brauer, for which he was paid Rs. 3,000.00 by these two parties. The Appellate Assistant Commissioner accepted the assessed's Explanationn and the sum of Rs. 3,000.00 was thereforee deleted 'as asscssee's income from un-disclosed source.

(7) Against the decision of the Appellate Assistant Commissioner the Income-tax Officer filed an appeal before the Income-tax Appellate Tribunal and it was contended that the entire expenditure of Rs. 5,682.00 on the foreign tour of the assessed were expenditure of a capital nature and hence not allowable. In any case, that part of the expenditure incurred on boarding and lodging which was obviously an expenditure of a personal nature was disallowable under section 10(2) (xv) of the Act. The tribunal found that there was no dispute that in the instant case, the foreign tour was a study-CHW-lecture tour and as such the tribunal was of the opinion that the ratio of decision in the case of Dr. P. Vadainalayan v. Commissioner of Income-tax Madras 40 I.T.R. 501 was applicable to the facts D of the case. It was, thereforee, held that the Appellate Assistant Commissioner was justified in holding that the sum of Rs. 5.6S2.00 spent by the assessed on study-cw/n-lecture tour was not an expenditure of a capital nature. As regards the contention that the expenditure of a personal nature had been included in the foreign tour, the tribunal estimated such personal expenditure at Rs. 400- and accordingly allowed the departmental appeal in part to the extent of Rs.400.00. As regards the remaining sum of Rs. 1250.00 it was held that the same was allowable under section 10(2) (xv) of the Act.

(8) As regards the second contention of the department relating to the sum of Rs. 3,000.00 the tribunal held that the Appellate Assistant Commissioner had rightly accepted the assessed's Explanationn that the sum of Rs. 3,000.00 was not income from un-disclosed source and that the assessed had got the said amount from an American family by allowing his flat to be used on care-taker basis during his absence on tour.

(9) It was urged before the tribunal that if the sum of Rs. 3,000.00 was to be accepted, as forming part of the income of the assessed it can only be rental for sub-letting the flat and was thereforee taxable under section 12 of the Act. The Tribunal, however, held that since the assessed was not the owner of the flat but was only a tenant and that he had never sublet the house earlier and it was sublet only for a short period on care-taker basis, the receipt of Rs. 3,000.00 by the assessed was of a casual and non-recurring nature and as such exempt from tax under section 4(3)(vii) of the act. In support of this finding, the tribunal relied on Privy Council's observations in regard to the concept of except to the extent of Rs. 4.000.00 mentioned herein-above and dismissed Department's appeal.

(10) At the instance of the Commissioner of Income-tax the two questions that have been reproduced above were referred to this court.

(11) At the hearing of the reference, the attention of the learned counsel for the Commissioner was invited to a decision of this court in I.T.R. No. 23 of 1965 (The Commissioner of Income-tax v. Dr. M. S. Shroff, Darya Ganj, Delhi) (-') decided on 14th September, 1970 by both of us and it was pointed out that there was not much difference between that case and the first question involved in the present case. Mr. Sharma, however, pointed out that although the attention of this court had been drawn to several decisions, a Bench decision of Mysore High Court was riot considered. It is true that this particular decision of Mysore High Court was not brought to our iiotice. We will, thereforee, have to examine the said decision in the light of the facts of the present case. Mr. Sharma also pointed out that in the case of Dr. M. S. Shroff it was found by the tribunal that the main object and purpose of the expenditure was for the assessed to keep himself up todate in the techniques of his profession. It was no doubt true that the assessed was also an employee of Dr. Shroff's Charitable Hospital and thereforee in the process of his study tour abroad, the assessed had also incidentally derived some benefit in his capacity as an employee and as such there was need for apportionment of the expenses between the assessed and his employer.

(12) In the present case according to (Mr. Sharma, the main purpose and object of the assessed's visit abroad was to attend the International Congress of Dermatology and thereforee, the expenses could only be attributable to his trip abroad as a delegate. In tilis connection our attention was invited to a Bench decision of Mysore High Court in Commissioner of Income-tax, Mysore v. Dr. B. V. Roman, : [1966]59ITR20(KAR) . In that case the assessed, an astrologer by profession. who was also publishing an astrological magazine, was the elected Second Vice-President of Astro-Scientists, and was invited to attend the World Congress of Astro-Scientists at New York, which he did. During his stay in the U.S.A. and in other countries through which he travelled, he delivered lectures on astrology and also took the opportunity to know the advances made by astrology in those countries. In assessment proceedings he claimed the expenses incurred by him during his tour as a deduction under section 10(2) (vx) of the Indian Income-tax Act, 1922 on the grounds: (1) tliat he was interested in making the American audience interested m Hindu astrology: and (2) that he studied the system and methods adopted in the U.S.A. of design, editing and methods and some of these were introduced by him in his magazine to suit foreign taste. The Incometax Officer held that the expenditure was not laid out wholly and exclusively for the purpose of the assessed's business. His appeal to the Appellate Assistant Commissioner was dismissed but the claim was allowed by the appellate-tribunal. The short question ielerred to the High Court was whether on the facts and in the circumstances of the case the sum of Rs. 10,483.00 was an allowalile expenditure under section 10(2) (xv) of the Indian Income-tax Act, 1922. The High Court held that on the facts and in the circumstances of the case, the expenditure was not allowable expenditure for what section 10(2) (xv) requires is that the expenditure should have been wholly and exclusively expended to advance the cause of the assessed's business profession or vocation. 'The expenditure in that case was primarily incurred for the purpose of going over to the United States of America for attending the conference and the advantage gained for the assessed's business, profession or vocation was secondary and was a remote consequence and it was not for that purpose that the expenditure had been incurred. A number of decisions were cited and considered by K. S. Hegde, J. who wrote the judgment of the High Court to bring out the distinction between the expenditure having been wholly and exclusively incurred for the purpose of assessed's business, profession or vocation and it was pointed out that what the tribunal had to decide was not whether the expenditure had nothing to do with the assessed's business, profession or vocation but whether it was incurred wholly and exclusively for the purpose of the assessed's busines, profession or vocation. Instead of addressing itself to that question, the tribunal seemed to have examined the facts of the case to find out whether the expenditure in question was in any way un-connected with the profession or vocation of the assessed. This was held to be a wholly wrong approach and did not accord with the requirements of section 10(2) (xv).

(13) The case is, thereforee, not an authority for the proposition in which the tribunal has come to a definite finding as to whether the expenditure was incurred wholly and exclusively for the purpose of the assessed's business, profession or vocation. If the tribunal's finding was in favor of the assessed on that point, the actual decision in the case might have gone in his favor.

(14) This is what was said in that case :

'WEdo not mean to say that whenever a business man or a person practicing any profession or having a vocation attends a conference of his co-business men or persons having the same profession or vocation, the expenditure incurred in that connection cannot be considered as expenditure within section 10(2) (xv). If an assessed attends a conference with the said purpose of advancing his businness profession or vocation and if the expenditure the deduction of which is claimed, was incurred for that purpose, then certainly he is within section 10(2) (xv).'

(15) In the present case the tribunal accepted the finding of the Appellate Assistant Commissioner and held that the foreign trip was undertaken by the assessed as a study-CMm-lecture tour in three countries and thereforee came within the ambit of the decision of the Madras High Court in Dr. Vadamalayan's case. The expenditure was incurred by the assessed not only as a delegate to attend the International Congress of Dermatology, which by itself was as much a study-cum-lecture tour, as visits paid by the assessed to U.S.S.R. and United Kingdom where he lectured on subjects connected with his profession.

(16) We have already said that the decision in Dr. B. V. Roman's case was confined to its own facts and it was clearly stated therein that attending a conference may itself advance the business, profession or a vocation, of the assessed. By his presence the assessed may not only cause benefit to his fellow professionals but he may also benefit himself by the experience which he gains by attending the conference. International congresses are generally, divided into seminars and study groups. A delegate to the Congress, thereforee, comes in contact with the fellow professionals from the various countries abroad and thus manages to keep himself abreast of the modern developments and techniques in the subject for which the congress is held. The knowledge and experience gained by him helps him on his return to the countries and makes his pursuit in the profession of greater benefit to himself and to the patients who seek his advice. The expenditure which the assessed incurs in attending such a conference is substantially for his own business or profession.

(17) This is the view that was taken by a Bench decision of the Andhra Pradesh High Court in Commissioner of Income-tax, A.P. v. S. Krishna Rao : [1970]76ITR664(AP) where the case of Dr. B. V. R Raman was held not to have said anything different and the decision was distinguished on the ground that the learned Judge there had reached the conclusion that the amount spent in that case was not spent for the purpose of business. In that case the assessed who was the owner of a printing press, attended the International Printers Conference in Amsterdam representing the Andhra Pradesh Printer's Association. Besides attending the conference at Amsterdam he was visiting various countries in Europe and utilised his time for studying the various types of printing and machinery. The expenses of the tour were held to be an expenditure incurred by a businessman in keeping him abreast of the latest techniques of his business and were incurred wholly and exclusively for that purpose.

(18) The view taken by the tribunal, is thereforee, not only in accord with the decision of this court in Dr. M. S. Shroff's case where the decision of Madras High Court in Dr. P. Vadamalayan's^) case was followed by us but is also in consonance with what was held by Andhra Pradesh High Court in Commissioner of Income-tax, A.P. v. :S. Krishna Rao's^) case.

(19) The first question is, thereforee, answered in favor of the assessed and against the Commissioner.

(20) The second question relates to an item of Rs. 3,000.00 which according to the Appellate Tribunal has been held to be a receipt of a casual and non-recurring nature exempted from tax under section 4(3)(vii) of the Act. The question as to how far a receipt is of a casual and non-recurring nature is not easy of decision. What is required in the case is that the receipt must be both casual and non-recurring. If the receipt, though casual is recurring, this clause can have no application. Neither the words casual nor recurring have been defined in the Act. In the Shorter Oxford English Dictionary the word 'casual' is defined as meaning '(1)' subject to or produced by chance; accidental fortuitous, (ii) coming at uncertain times; not to be calculated on, unsettled - . . . - .'. What Q is thereforee essential about the receipt being a casual it must be the production of a chance, accident or fortuitous and that means that it is neither calculated nor settled nor is there any likelihood of coming at a certain time. It is in this sense that the word has to be understood. In some cases it has been observed that a receipt which is fore-seen, known, anticipated and provided for by an agreement cannot be regarded as casual. This proposition is, however, to broad and sweeping. A man may make a bet in the hope that it will bring in a receipt but in that case there has to be an agreement between him and the book maker. There is also his anticipation that if the bet succeeds, it will bring in a calculated sum of money. It is, however, the incidental and fortuitous nature of the result that will make the receipt casual.

(21) In Chuni Lal Kalyan Dass I.L.R. 47 All. 368 the word 'non-recurring' seems to have been construed to imply impossibility of recurrence. In Rani Arnrit Kanwar v. Coinmissioner of incometax : [1946]14ITR561(All) Malik, J said that the word 'non-recurring' does not mean that the receipt has not, as a matter of accident or as a matter of fact, recurred, but there is a claim or right in the recipient to expect its recurrence.

(22) On behalf of the Revenue, our attention lias been invited to several decisions of High Courts. In Commissioner of Income-lax, Madras v. V. P. Rao : [1950]18ITR825(Mad) the same meaning was given to the word 'casual' in section 4(3)(vii) of the Act. as was given in the Shorter Oxford English DICTIONARY. There a retired Judge agreed to serve as an arbitrator under section 234 of the Madras Local Boards Act, 1920 for inquiring and reporting about a dispute which had arisen between two District Boards. The government agreed to pay him for the work a consolidated fee of Rs. 3,000'- and traveling allowances on the scale admissible for High Court Judges. The assessed claimed that the sum of Rs. 3,000.00 received by him was exempt from assessment under section, 4(3)(vii). It was held that the amount received by him fell within the scope of the term 'income, profits or gains'' under section 6 for it arose from the exercise of the occupation of an arbitrator by the assessed and that it was also not a receipt of a casual nature. In B. Malick v. Commissioner of lncome-tax U.P. : [1968]67ITR616(All) a case cited by the counsel for the assessed, this case was dissented from by the High Court of Allahabad on the ground that it was the case of a retired Judge and not the case of a sitting judge with which the court was concerned. Whether the difference between the status of the two judges made such a great difference as to convert the receipt of one of them into a receipt from income, business or profession and the receipt of the other, as that of a casual and non-recurring nature is not one that arises for decision in the case before us. The fact remains that two different views have been taken. What was material in the case before the High Court of Allahabad was that in that case the receipt of Rs. 20,000^- by Chief Justice B. Malick was held to be a case of casual and non-recurring nature and it was said that there was neither a plan nor a design on the part of the Seamed Chief Justice to act as Umpire or Arbitrator. The arbitration was accepted by him as a result of pressure and the claim of public interest which was placed before him in order to induce him to accept the arbitration. M. H. Beg J. who agreed with Manchanda J. said that the word 'casual' as defined in the third edition of Webster's New International Dictionary meant as follows :

'SUBJECtor produced as a result of chance; without design; not resulting from plan: without specific motivation, special interest or constant purpose; without foresight, plan or method, occurring, uncountered. acting or performed without regularity or at random; occasional.' In the present case also the premises occupied by assessed did not belong to him. He was a tenant. His family was already away in U.K. for about 8 months. When he was about to leave the country he was contacted by Shri O. P. Singlial of United -States of America and he gave his house to two Americans on a care-taker basis and was paid a sum of Rs. 3,000.00 for that purpose. This was the first and the last time on which he gave his house to two foreigners for a short period, He could not sublet the property and thereforee there was no rental income for the same nor was it a part of the business of the assessed to let out his properties. In such circumstances it is not necessary to accept the meaning of the word 'income' in the case of Commissioner of Incometax v. Shaw Wallace & Co. 6 Inc C 178 that it was likened pictorially to the fruit of a tree or the crop of a field for it was said by Panchapakesa Ayyar J. in V. P. Rao's case that there are some trees which yield only once like the plantain tree; but all the same, there was neither any design nor any plan behind the money that the assessed obtained from the two foreign parties. There was no doubt a sort of agreement between the assessed and those two foreign parties; but the receipt in itself was entirely fortuitous and exceptional. The petitioner may go abroad once again and yet he may not be lucky enough to get hold of a foreigner who should give him money and also look after his house during his absence for a short .period. The tribunal was, thereforee, right in holding that the receipt fell within the ambit of section 4(3)(vii) of the Act. It was not only casual but also non-recurring.

(23) The second question is thereforee answered in favor of the assessed and against the Revenue. The assessed will also have his costs. Counsel's fee Rs. 200.00.


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