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Commissioner of Income-tax Vs. Smt. Kamla Devi Khajanchi and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 65 of 1978
Judge
Reported in[1986]157ITR367(Raj)
ActsIncome Tax Act, 1961 - Sections 10(3), 256, 256(1) and 256(2)
AppellantCommissioner of Income-tax
RespondentSmt. Kamla Devi Khajanchi and ors.
Appellant Advocate J.P. Joshi, Adv.
Respondent Advocate Rajesh Balia, Adv.
Excerpt:
.....on the basis of several decisions of the supreme court that when an assessee carried on business, the question whether a certain transaction made by him was carried on in the course of business or whether such a transaction constituted an adventure in the nature of trade, implying the existence of certain elements in the adventure which in law would invest it with the character of trade, is essentially one of law, and that makes the question whether the particular transaction made by the assessee in the present case is in the nature of trade a mixed question of law and fact. 9. as the question sought to be referred does not appear to us to have been properly framed, we would like to reframe the question as under :whether, on the facts and in the circumstances of the case, the..........held that the reproduction charges paid to the assessee by the government of india were not in the nature of business, profession or vocation, nor can the said amount be held to arise out of an adventure in the nature of trade. it was held that the receipts in question were casual or non-recurring in nature, not arising from any business or exercise of profession or vocation. the appellate authority allowed the appeal and allowed the deduction claimed by the assessee.4. the income-tax officer, b-ward, bikaner, who was the assessing authority, filed an appeal before the income-tax appellate tribunal, jaipur bench, jaipur (hereinafter called ' the tribunal'), against the order passed by the appellate assistant commissioner. there was a difference of opinion between the judicial member and.....
Judgment:

Dwarka Prasad, J.

1. This is an application by the Commissioner of Income-tax, Jodhpur, under Section 256(2) of the Income-tax Act, 1961, for calling for a reference.

2. While proceeding with the assessment of income of the assessee relating to the assessment year 1967-68, the Income-tax Officer found that the assessee was paid a sum of Rs. 9,500 at the rate of Rs. 500 per painting as reproduction charges for allowing the Director of Advertising and Visual Publicity, Ministry of Information and Broadcasting, New Delhi, for taking photographs of 19 paintings. It appears that the assessee had a valuable collection of old paintings, some of which were selected for reproduction in the India Diary, 1966, published by the Government of India in the Ministry of Information and Broadcasting. A photographer from the photo division of the Ministry went to the residence of the assessee and took the photographs of 19 paintings, for which a sum of Rs. 9,500 were paid as mentioned above. The assessee claimed exemption in respect of the aforesaid income of Rs. 9,500 under Section 10(3) of the Income-tax Act. The Income-tax Officer did not accept the contention of the assessee and included the sum of Rs. 9,500 in the assessable income of the assessee, as computed by him by his order dated November 19, 1971.

3. On an appeal preferred by the assessee, the Appellate Assistant Commissioner of Income-tax, Bikaner, held that the reproduction charges paid to the assessee by the Government of India were not in the nature of business, profession or vocation, nor can the said amount be held to arise out of an adventure in the nature of trade. It was held that the receipts in question were casual or non-recurring in nature, not arising from any business or exercise of profession or vocation. The appellate authority allowed the appeal and allowed the deduction claimed by the assessee.

4. The Income-tax Officer, B-Ward, Bikaner, who was the assessing authority, filed an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter called ' the Tribunal'), against the order passed by the Appellate Assistant Commissioner. There was a difference of opinion between the judicial member and the accountant member of the Tribunal on the question as to whether the receipt of Rs. 9,500 by the assessee, by way of reproduction charges for allowing 19 of his paintings to be photographed by the representative of the Directorate of Advertising and Visual Publicity of the Government of India for including in the pictorial diary, could be held to be exempt from tax under Section 10(3) of the Income-tax Act. The President of the Tribunal, on account of the difference of opinion between the members of the Tribunal, referred the case to the Vice-President of the Tribunal, who agreed with the finding of the judicial member and held that merely because the assessee was offered some amount by way of reproduction fee for allowing the representative of the Government of India to take photographs of his paintings, the reproduction charges received by the assessee could not be held to be income arising out of business, profession or vocation. The Tribunal consequently dismissed the appeal by its order dated August 31, 1977.

5. The Commissioner of Income-tax, Jodhpur, moved an application before the Tribunal seeking a reference of a question of law arising out of its order dated August 31, 1977, to this court. The Tribunal, by its order dated January 3, 1978, held that no question of law arose out of the order passed by it on August 31, 1977, dismissing the appeal filed by the Department before the Tribunal. Hence, an application under Section 256(2) has been moved before us on behalf of the Commissioner of Income-tax, Jodhpur.

6. It was argued by the learned counsel for the Department that whether the sum of Rs. 9,500 received by the assessee on account of the sale of photographs of 19 paintings would be excludible under Section 10(3) of the Act or not is a question of law which could be decided by this court only after a reference is made by the Tribunal. Learned counsel for the respondent, on the other hand, supported the view taken by the Tribunal and argued that the finding of the Tribunal that the assessee was not carrying on any business of sale or purchase of paintings or their photographs and that the income which arose to the assessee by way of charges for taking photographs of 19 paintings was not received by him out of business, profession or vocation was one of fact and could not form the subject-matter of a reference to this court under Section 256(2) of the Act.

7. At this stage, this court is only called upon to consider as to whether a question of law arises out of the order passed by the Tribunal dated August 31, 1977, dismissing the appeal filed by the Department before it. It may be pointed out that while deciding the application filed before the Tribunal under Section 256(1) of the Act, the Tribunal considered the matter on merits as to whether the aforesaid income was received by the assessee as arising out of business, profession or vocation, but then the Tribunal proceeded to hold that the finding arrived at by the Tribunal was purely one of fact. The question whether, in the particular facts and circumstances of the case, the income arising to the assessee by way of reproduction fee amounted to income from business, profession or vocation or was an adventure in the nature of trade, is essentially a question of law. In our view, although the facts are well-established and there is no dispute about them that the income of Rs. 9,500 was received by the assessee by way of reproduction charges for allowing the representative of the Government of India to take photographs of his paintings for reproduction in the Pictorial India Diary published by the Government of India, yet the question as to whether such receipt in the hands of the assessee could be held to be exempt under Section 10(3) of the Act is essentially a question of law. Even after the facts found by the Tribunal are accepted, the application of legal principles to such facts as have been found to be proved is necessary for the purpose of coming to the conclusion as to whether the said income fell within the four corners of Section 10(3) of the Act, so that the same may be deducted from the assessable income of the assessee. It. is now well-established on the basis of several decisions of the Supreme Court that when an assessee carried on business, the question whether a certain transaction made by him was carried on in the course of business or whether such a transaction constituted an adventure in the nature of trade, implying the existence of certain elements in the adventure which in law would invest it with the character of trade, is essentially one of law, and that makes the question whether the particular transaction made by the assessee in the present case is in the nature of trade a mixed question of law and fact.

8. It was observed by the Tribunal, while dismissing the application of the Department under Section 256(1) of the Act for making a reference that a single venture, though casual and non-recurring, may arise out of business, profession or vocation. What is required to be decided in the present case is that on the basis of the established facts, what was the nature of the transaction on account of which the assessee received a sum of Rs. 9,500. If the nature of the transaction does not constitute business or trade, then such income would fall within the exception contained in Section 10(3), even if it is of casual and non-recurring nature. But, it cannot be held that the decision about the nature of such a transaction is purely a finding of fact. In our view, it would amount to an application of the legal principles to the facts found by the Tribunal. As such, we think it is a proper case in which the Tribunal should be called upon to state the case and refer the question of law arising out of the order of the Tribunal dated August 31, 1977, to this court.

9. As the question sought to be referred does not appear to us to have been properly framed, we would like to reframe the question as under :

' Whether, on the facts and in the circumstances of the case, the receipt of Rs. 9,500 by the assessee, by way of reproduction charges for allowing the taking of photographs of 19 paintings, was exempt from tax under Section 10(3) of the I.T. Act, 1961 '

10. We, therefore, direct the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to state the case and refer the above-mentioned question arising out of its order dated August 31, 1977, to this court for its opinion.

11. The parties are left to bear their own costs.


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