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Mridula A. Sarabhai Vs. Commissioner of Expenditure-tax, Gujarat I - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberExpenditure-tax Reference No. 2 of 1966
Judge
Reported in[1969]73ITR85(Guj)
ActsExpenditure Tax Act, 1957 - Sections 5
AppellantMridula A. Sarabhai
RespondentCommissioner of Expenditure-tax, Gujarat I
Appellant Advocate R.J. Kolah, Adv.
Respondent Advocate J.M. Thakore, Adv.
Excerpt:
.....of the revenue as if the contention was a fact. the tribunal appeared to be of the view that 'vocation occupation of a public worker even where the public worker is wealthy enough does not ordinarily lead to an expenditure of the kind which we have consider here'.but it is impossible to see how from the mere largeness of the expenditure an inference can be raised that the expenditure was not in connection with the occupation of the assessee but was the expenditure of a 'whole party or organisation'.if an assessee is sufficiently rich and the work in which he is engaged has become a passion with him and he spends his entire fortune on that work, can it be said that, merely because the expenditure incurred by him is large, it can have not connection with his occupation ? the tribunal..........was working chiefly for the emotional integration between the people of india and kashmir and she incurred expenditure amounting to rs. 1,06,420 in the first year of account and rs. 96,474 in the second year of account on publication of educative and informative literature in the subject of emotional integration between the people of india and kashmir. this expenditure in both the accounting years consisted of items such as postage and telegrams, cost of publication of literature in english, cost of publication of literature in hindi, salaries of staff, legal expenses, travelling expenses and telephone expenses. the assessee had to borrow moneys for the propose of meeting this expenditure and on the borrowings the assessee paid a sum of rs. 2,200 by way of interest in the first year of.....
Judgment:

Bhagwati, C.J.

1. This reference raises a question whether certain expenditure incurred by the assessee is exempt from expenditure-tax under section 5(a) of the Expenditure Act, 1957. The reference arises out of assessments to expenditure-tax made on the assessee as an individual for the assessment years 1958-59 and 1959-60, the corresponding accounting years begin the financial years ended 31st March, 1958, and 31st March, 1959. The assessee during the relevant years of account was working chiefly for the emotional integration between the people of India and Kashmir and she incurred expenditure amounting to Rs. 1,06,420 in the first year of account and Rs. 96,474 in the second year of account on publication of educative and informative literature in the subject of emotional integration between the people of India and Kashmir. This expenditure in both the accounting years consisted of items such as postage and telegrams, cost of publication of literature in English, cost of publication of literature in Hindi, salaries of staff, legal expenses, travelling expenses and telephone expenses. the assessee had to borrow moneys for the propose of meeting this expenditure and on the borrowings the assessee paid a sum of Rs. 2,200 by way of interest in the first year of account. The assessee in the course of her assessment to expenditure-tax claimed that the expenditure of Rs. 1,06,420 and Rs. 2,200 in the first assessment year and Rs. 96,474 in the second assessment year was exempt from expenditure-tax under section 5(a) as it was incurred wholly and exclusively for the purpose of the vocation or occupation carried on by her and in support of that claim she filed an affidavit dated 30th September, 1959, giving detailed particulars of her activities since the last forty years with a view to showing that what she was doing constituted her vocation or occupation and that the expenditure incurred by her was in connection with the said vocation or occupation. The claim of the assessee to exemption was, however, negatived by the Expenditure-tax Officer on the ground that there was no possibility of any income arising from the activities of the assessee and her activities were nothing but 'propagation of the assessee's views or thoughts on political problems in which he was interested' and they could not, therefore, be regarded as vocation or occupation within the meaning of section 5(a). The assessee thereupon preferred appeals to the Appellate Assistant Commissioner but the Appellate Assistant Commissioner took the same view as the Expenditure-tax officer and rejected the appeals. The assessee then carried for the two assessment years. The Tribunal disagreeing with the view taken by the revenue authorities observed that, in order that an activity should be a vocation or occupation within the meaning or section 5(a), it was not necessary that there should be any element of profit making motive in it or that it must be capable of producing income. The Tribunal held that the activities described in the affidavit of the assessee occupied her fully and she was completely dedicated to her work and her activities must, therefore, be considered to be her vocation or occupation within the meaning of section 5(a). The Tribunal then proceeded to consider whether the expenditure in question was incurred by the assessee wholly and exclusively for the purpose of her vocation or occupation and came to the conclusion, that having regard to the magnitude of the expenditure, it was not possible to say that the expenditure was incurred by her in connection with her vocation or occupation but it was an expenditure of a 'whole party or organization.' The Tribunal accordingly negatived the claim for exemption and rejected the appeals for both the assessment years. The assessee thereupon applied for a reference and on the application of the assessee, the Tribunal referred for our opinion the following two questions :

'(1) Whether, on the facts and in the circumstances of the case, the activities carried on by the assessee constituted vocation or occupation within the meaning of section 5(a) of the Expenditure-tax Act

(2) If the answer to the above question is in the affirmative, whether the expenditure of Rs. 1,06,420 and Rs. 2,200 in the first year and Rs. 96,474 in the second year was wholly and exclusively incurred for the purpose of the assessee's vocation or occupation ?'

2. The assessee had of course asked for a reference only of the second question which was decided against her by the Tribunal but the Commissioner submitted that, if a reference was being made, the first question should also be referred and hence the two questions before us.

3. So far as the first question is concerned, the Tribunal held that the activities carried on by the assessee constituted her vocation or occupation within the meaning of section 5(a) and this conclusion of the Tribunal is challenged before us on behalf of the revenue. We are of the view, for reasons which we shall presently state, that the activities carried on by the assessee constituted her 'occupation' within the meaning of section 5(a) and it is, therefore, not necessary for us to consider whether they constituted her 'vocation' as well. The question as to what is the true meaning and scope of the word 'occupation' in section 5(a) came up for consideration before us in Expenditure-tax Reference No. 1 of 1966 (Commissioner of Expenditure-tax v. Ambalal Sarabhai) and in a judgment delivered by us this morning in that case, we pointed out that mere absence of profit-making motive or intent does not take an activity out of the category of 'occupation', nor is it necessary that the activity must be capable of producing income before it can fall within the category of 'occupation'. We then proceeded to consider the meaning of the word 'occupation' and observed :

'The decided cases illustrate the futility of attempting a definition of the word 'occupation'. So vast is the range of human activity and so diverse and varied its nature that it is well-nigh impossible to find a definition exclusive or inclusive which will take in all activities falling within the matrix of 'occupation' is a word of large and indefinite import and its meaning is not susceptible of any precise or definite formulation. No universal test can be laid down for determining when an activity amounts to an 'occupation' and when it does not. But there are certain features which are, in any view of the matter, definitely indicative of what is 'occupation' and they are clearly brought out....' in a passage discussing the meaning of the word 'occupation' in Corpus Juris Secundum, volume 67, page 74, which we quoted in that judgment. After quoting the passage we pointed out that : '... whatever else 'occupation' may comprise, activity in a specific line of endeavour which engages or occupies time and attention of a person and which is carried on with certain amount of continuity or regularity in the sense that it is not 'momentary' - not 'an isolated or semi-occasional and temporary adventure' in that line of endeavour - would certainly constitute 'occupation'.'

4. Applying this test we held in that case that the activity of the assessee's wife constituted her occupation within the meaning of section 5(a). The same test must also be applied here and if we apply it to the facts of the present case, it is clear that the activities of the assessee must be held to be her 'occupation' within the meaning of section 5(a).

5. Now the activities of the assessee are described in the affidavit filed by her before the Expenditure-tax Officer and this affidavit has been accepted by the Tribunal as representing the correct facts. Paragraph 1 of the affidavit sets out the broad nature of the activities of the assessee since the year 1920 and it says :

'Since 1920 as part time and from 1930 as whole time I have been pursuing the vocation or occupation of public worker in the national field and of journalism. In pursuing this vocation or occupation, I had the privilege of being actively associated with several public causes of national importance and disseminating knowledge about them to the public. In doing so success depends mainly on public goodwill and support and consequently it has always been necessary to use some instruments or other for educating, informing or enlisting the support of the public, for the benefit of causes of public utility and value.'

6. Pragraph 2 gives some particulars of the activities in appendices I and II and the material part of appendix I is as follows :

'Since 1946, under the direction and guidance of Gandhiji and Shri Jawaharlal Nehru, I was closely associated with the last phase of Gandhiji's movement of 'Do or Die' on the anti-communal front. From that year to this day, I have specially worked as a national emotional integration worker, now known as Shanti Sainik. A special phase of this activity consisted of....

My activities for the people of Kashmir since 1953 are a part of this movement.'

7. Then in paragraph 3 the affidavit proceeds to state :

'During the year of account, 1-4-1957 to 31-3-1958, I was working chiefly for the emotional integration between the people of India and Kashmir and incurred expenditure on publication and distribution of educative and informative literature on that subject. Expenditure amounting to Rs. 1,06,420, as per particulars given below, was incurred by me wholly and exclusively for the purpose of the aforesaid vocation or occupation carried on by me :...'

8. It will be seen from these statments in the affidavit that since 1930, at any rate, the assessee was devoting her full time and attention to public work in the national field and also to journalism and since 1946, she was working actively as a national emotional integration worker and as a part of this activity she was working since 1953 for the emotional intergration between the people of India and Kashmir. During the relevant years of account, she was working chiefly for the emotional intergration between the people of India and Kashmir and she published considerable educative and informative literature on that subject. Now in order to decide whether these activities of the assessee could be said to constitute her 'occupation' or not, it is entirely irrelevant whether her activities were in consonance with the policy of the Government of India or not. All that we are concerned to inquire is whether on the application of the proper test they constituted her 'occupation'. We must not allow our judgment to be influenced by the consideration that what she was doing might not be in the best interests of the country. The assessee was devoting her full time and attention to the activities of public work in the cause of emotional intergration as also journalism and these activities carried on by her were not momentary nor in the nature of an isolated or semi-occasional and temporary adventure in the line of public work or journalism but they were carried on by her with continuity and regularity, so much so that they had almost become a part of her life work : she was dedicated to public work, particularly in the cause of emotional integration. She incurred large expenditure out of her own moneys for the purpose of securing what she conceived to be best for emotional integration between the people of India and Kashmir and devoted her whole time and attention to that work. Her activities must, therefore, be regarded as constituting her 'occupation' within the meaning of section 5(a). In this view, it becomes unnecessary to consider whether her activities also constituted 'vocation' within the meaning of that section.

9. That takes us to the next question whether the expenditure in respect of which exemption was claimed by the assessee was incurred by the assessee wholly and exclusively for the purpose of her occupation. The Tribunal found against the assessee on this question and the reasons which weighed with the Tribunal were, to quote from the order of the Tribunal :

'It was his contention' (that is the contention of counsel for the revenue) 'that the expenditure here was the expenditure of a political party and that it could not be held to be the expenditure of the assessee's vocation or occupation. Shri Palkhivala's contention, on the other hand was that the expenditure was for a public and not a private cause and was non-personal, the intention of the Act being to levy tax on personal expenditure only. As a matter of fact, it appears that it could hardly be denied that the large expenditure in question is not the expenditure of any one person, but is the expenditure of a whole organization or party. What was personal expenditure of the assessee and has been accepted by her as taxable is also sufficiently large even in regard to items which appear in both categories. It could, therefore, be said that the expenditure in question is not strictly the expenditure of any single person but it the expenditure of a whole party or organization. Can then the expenditure be said to be the expenditure of the assessee's vocation or occupation The vocation or occupation of a public worker, even where the public worker is wealthy enough, does not ordinarily lead to an expenditure of the kind and degree which we have to consider here. The mere fact that the assessee is a public worker interested in a certain party cannot be held to entitle her to say that the expenditure is one which flows from and is natural to her vocation or occupation... The only question before us is whether the assessee can claim exemption on the ground that the expenditure is incurred by her wholly and exclusively for the purpose of her vocation or occupation. It is difficult to answer that question in the assessee's favour.'

10. The finding of the Tribunal was that the expenditure in question was not strictly expenditure of any single person but was expenditure of a whole party or organisation and it was on the basis of this finding that Tribunal came to the conclusion that the expenditure was not one in connection with the vocation or occupation of the assessee. Now this finding of the Tribunal, though a finding of fact, is clearly unsupported by any material on record. It is difficult to see on what material the Tribunal came to the conclusion that the expenditure incurred by the assessee was the expenditure of a 'whole party or organisation'. There is nothing on record, not even an iota of evidence, to show that there was any party or organisation with which the assessee was associated or connected or that the assessee incurred the expenditure for the benefit of any such party or organisation. It is no doubt true that the learned counsel appearing on behalf of the revenue contended before the Tribunal that the expenditure was 'the expenditure of the political party' and that it could not, therefore, be held to be the expenditure of the assessee's vocation or occupation but that contention was not based on any material on record and the Tribunal was clearly in error in accepting the contention of the learned counsel on behalf of the revenue as if the contention was a fact. The Tribunal manifestly travelled beyond the record and acted without any evidence at all in holding that the expenditure claimed by the assessee a exempt from tax was expenditure of a 'whole party or organisation'. The affidavit of the assessee, on the contrary, showed that the expenditure was incurred by her for the purpose of her activities, namely, the work of emotional intergration between the people of India and Kashmir, which she was carrying on during the relevant years of account and there was no material on record to contradict this statment made in the affidavit of the assessee. The only circumstance relied upon by the Tribunal for holding that there was no connection between the expenditure and the activities of the assessee was that the expenditure was very large. The Tribunal appeared to be of the view that 'vocation occupation of a public worker even where the public worker is wealthy enough does not ordinarily lead to an expenditure of the kind which we have consider here'. But it is impossible to see how from the mere largeness of the expenditure an inference can be raised that the expenditure was not in connection with the occupation of the assessee but was the expenditure of a 'whole party or organisation'. If an assessee is sufficiently rich and the work in which he is engaged has become a passion with him and he spends his entire fortune on that work, can it be said that, merely because the expenditure incurred by him is large, it can have not connection with his occupation The Tribunal also referred to the fact that what was admittedly the personal expenditure of the assessee was also sufficiently large 'even in regard to items which appear in both categories' but it is difficult to see what bearing this fact has on the question whether the expenditure claimed by the assessee was incurred in connection with her occupation. It is obvious that the Tribunal was misled by the largeness of the expenditure into thinking that the expenditure was the expenditure of a 'whole party or organization'. As a matter of fact, it is difficult to appreciate what is meant by the Tribunal when it says that the expenditure was the expenditure of a 'whole party or organisation'. Does the Tribunal mean to suggest that the expenditure was incurred by the assessee for the benefit of some party or organisation If so, the expenditure would be in the nature of gift to the party or organisation and as such would be exempt from expenditure-tax. Perhaps what the purpose of advancement of a certain policy of a party or organisation. But if the policy of a party or organisation also happens to be the policy of the assessee whose occupation is public work and journalism, how can the expenditure incurred by her for the purpose of canvassing that policy before the public and cultivating public opinion in support of that policy, as did many a political worker during the struggle for freedom. Can it be said that the expenditure incurred by such political worker is not in connection with his occupation as a political worker We are of the view that the Tribunal in holding that the expenditure claimed by the assessee was not incurred for the purpose of her occupation acted without any evidence and misdirected itself as to the true position in law. The expenditure was clearly expenditure incurred by the assessee wholly and exclusively for the purpose of her occupation and must be held to be exempt under section 5(a).

11. Our answer to the first question referred to us, therefore, is that the activity carried on by the assessee constituted her 'occupation' within the meaning of section 5(a) of the Expenditure-tax Act, 1957, and our answer to the second question is in the affirmative. The Commissioner will pay the costs of the reference to the assessee.


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