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Commissioner of Income-tax Vs. V.P. Rao (Deceased) and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCase Referred No. 26 of 1946
Judge
Reported inAIR1951Mad1; [1950]18ITR825(Mad); (1950)IIMLJ580
ActsIncome Tax Act, 1922 - Sections 4 and 4(3)
AppellantCommissioner of Income-tax
RespondentV.P. Rao (Deceased) and ors.
Appellant AdvocateC.S. Rama Rao Shaib, Adv.
Respondent AdvocateA. Ramachandran, Adv. for ;G. Gopalakrishnan, Adv.
Cases ReferredIn Ryall v. Hoare
Excerpt:
direct taxation - exemption - sections 4 and 4 (3) of income tax act, 1922 - remuneration for acting as arbitrator - assessee received rs. 3000 for his performance of service as arbitrator - assessee agreed to do arbitration because of promise given by government to pay him remuneration - remuneration was fixed and expected by assessee - assessee cannot claim exemption under section 4 (3) (ii) - sum so earned taxable. - - before we proceed further, it may be as well to quote section 4 (3) and section 4(3) (vii), income-tax act for understanding the various contentions to be stated presently; rao would not come under the definition of 'income' given by the privy council as there would be no recurrence of such income like fruits or crops from a tree or harvest. there are some trees.....panchapakesa ayyar, j.1. this is a cage referred to us under section 66(1), income-tax act, 1922, by a bench of the income-tax appellate tribunal, madras bench. at the instance of the commissioner of income-tax, the tribunal has referred to this court for decision the following question :'whether on the facts and circumstances of the case set out above, the sum of rs. 3000 received by the respondent as remuneration for acting as an arbitrator under section 234, madras local boards act of 1920, was a receipt exempt from assessment under section 4 (3) (vii), income-tax act?'the undisputed facts are briefly these: the assessee, mr. v. p. rao, was a member of the indian civil service and a judge of the madras high court before he retired from service in june 1941. he was also a barrister but.....
Judgment:

Panchapakesa Ayyar, J.

1. This is a cage referred to us under Section 66(1), Income-tax Act, 1922, by a Bench of the Income-tax Appellate Tribunal, Madras Bench. At the instance of the Commissioner of Income-tax, the Tribunal has referred to this Court for decision the following question :

'Whether on the facts and circumstances of the case set out above, the sum of Rs. 3000 received by the respondent as remuneration for acting as an arbitrator under Section 234, Madras Local Boards Act of 1920, was a receipt exempt from assessment under Section 4 (3) (vii), Income-tax Act?'

The undisputed facts are briefly these: The assessee, Mr. V. P. Rao, was a member of the Indian Civil Service and a Judge of the Madras High Court before he retired from service in June 1941. He was also a Barrister but never practised at the Bar. After retirement he had also no whole time profession, vocation or occupation, when he was leading the life of a pensioner. In September 1941, some 3 1/2 months after his retirement, the Madras Government asked him whether he would find it convenient to serve as an arbitrator for enquiring and reporting about a dispute which had arisen between the District Boards of Krishna and west Godavari in the matter of apportionment of the sale proceeds of the Bezwada-Masuli-patara railway, as the Government proposed to take action under Section 234, Madras Local Boards Act, 1920, and to refer the dispute to an arbitrator for enquiry and report. He was also informed that he would be paid a lump fee of Rs. 3000 for the work and travelling allowance on the scale admissible for High Court Judges. He replied at once agreeing to serve as an arbitrator, and he was appointed arbitrator by a G. O. dated 23-9-1941 which also fixed his lump sum remuneration at Rs. 3000 and travelling allowance on the scale admissible for High Court Judges. He then worked as an arbitrator. Even according to him, the work was quasi-judicial, and the parties to the dispute appeared by learned counsel, the late Mr. Govindarajachari appearing for the Krishna District Board and the Advocate-General for the West Godavari District Board. Mr. V. P. Rao, received the written statements on both sides, heard evidence and arguments and submitted his report to the Government and was paid the sum of Rs. 3000, the remuneration promised to him for the work, besides the travelling allowance drawn by him on the scale admissible for High Court Judges. He showed this Rs. 3000, in his return of annual income for the year of assessment 1942-43, along with other income of Rs. 29,444, got as salary for the period he had worked as High Court Judge, pension for the remaining period and income from securities, debentures and other investments. He claimed exemption under Section 4 (3) (vii), Income-tax Act, regarding the Rs. 3000, got as remuneration or fee for the arbitration work. The Income-tax Officer held that he was not entitled to exemption from assessment under Section 4 (3) (vii) and that the Rs. 3000 were taxable. The assessee appealed, and the Appellate Assistant Commissioner held that the amount was taxable as salary or remuneration and was not a casual and nonrecurring receipt. The respondent then appealed to the Income-tax Appellate Tribunal. The Tribunal held, mainly relying on a ruling of a Bench of this Court reported in Commissioner of Income-tax v. Ahmed Badsha Sahib : AIR1944Mad63 the facts of which they held to be not distinguishable from the facts in this case, that the said sum of Rs. 3000 would fall within the purview of Section 4 (3) (vii) and would not be taxable, and directed that the total income of the assessee should be reduced by the said Rs. 3000. The Commissioner of Income-tax thereupon applied for the case being referred to this Court under Section 66 (1), Income-tax Act.

2. During the pendency of that application Mr. V. P. Rao died, and his legal representatives were brought on record. They wanted another question to be referred to this Court in addition, namely, 'whether the Income-tax Appellate Tribunal has no power to award costs and interest in any appeal before it.' This question has not been referred to this Court because the Income-tax Appellate Tribunal held, that all applications for reference under Section 66 of the Act must be by substantive applications, and that there is no provision as in the Civil P. C., for the filing of cross-objections; and, further that the respondents had not paid the requisite court-fee for the reference, and that the request was also barred by time, and that the question had not been raised before the Income-tax Appellate Tribunal when it heard Mr. V. P. Rao's case and there appeared to be also no provision of law for awarding costs or interest to the successful party before the Income-tax Appellate Tribunal, So we are not concerned with the other question now and the only question before this Court is the question regarding the taxability of the said Rs. 3000 or the alleged right to be exempted from taxation under Section 4 (3) (vii) of the Act.

3. We have perused the entire records and heard the learned counsel on both sides. Before we proceed further, it may be as well to quote Section 4 (3) and Section 4(3) (vii), Income-tax Act for understanding the various contentions to be stated presently; Section 4 (3) and Section 4 (3) (vii) run as follows :

'4 (3) : Any income, profits or gains falling within the following classes shall not be included in the total income of the persons receiving them; ....

(vii) Any receipts not being capital gains chargeable according to the provisions of Section 12B and not being receipts arising from business or the exercise of a profession, vocation or occupation, which are of a casual and non-recurring nature, or are not by way of addition to the remuneration of an employee.'

4. The learned counsel appearing on behalf of the assessee raised several contentions. The first was that the fee or remuneration of Rs. 3000 involved in this case would not be 'income, profits or gains' chargeable to income-tax under Section 6, Income-tax Act; and though they may be 'receipts' within the meaning of the exemption clause under Section 4 (3) (vii), the charging of tax can only be made on 'income, profits and gains' as defined in Section 6, and not on any 'receipts' mentioned in this exemption clause. He relied on the ruling of the Privy Council in Commissioner of Income-tax, Bengal v. Shaw, Wallace & Co. and the definition of 'income' there. Their Lordships have remarked in the course of that judgment as follows :

'The object of the Indian Act is to tax 'income' a term which it does not define. It is expanded, no doubt, into 'income, profits and gains,' but the expansion is more a matter of words than of substance. Income, their Lordships think, in this Act, connotes a periodical monetary return 'coming in with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something, which is often loosely spoken of as 'capital.'

It was urged, therefore, that this single fee or remuneration got from a solitary act of arbitration performed by Mr. V. P. Rao would not come under the definition of 'income' given by the Privy Council as there would be no recurrence of such income like fruits or crops from a tree or harvest. We cannot agree. There are some trees which yield only once like the plantain tree. Besides, the above definition of 'income' given by the Privy Council has been modified by the Privy Council itself, in a judgment delivered three years later in Gopal Saran Narain Singh v. Commissioner of Income-tax . Their Lordships of the Privy Council have held that the word 'income' is not limited by the words 'profits and gains' and that anything which can properly be described as 'income' is taxable under the Income-ax Act unless expressly exempted. In Rani Amrit Kunwar v. Commissioner of Income-tax, C. P. & U. P. : AIR1946All306 , a case decided by three Judges of the Allahabad High Court, Braund J. has exhaustively discussed the case-law till 1946 and has finally held :

'In short, the English Income-tax Act, by its charging provisions, has taxed only those particular types of income which can be brought within the various schedules whereas the Indian Income-tax Act has charged whatever is income, profits and gains on the proper construction of these expressions.'

It is obvious that the fee or remuneration of Rs. 3000 got by Mr. V. P. Rao for this work of arbitration would fall within the scope of the word 'income' in Section 6; he himself actually showed it in his return of income though he contended that it would be exempt from tax under Section 4 (3) (vii). It would at any rate certainly fall within the term 'profits and gains' in Section 6 for nobody can gainsay the fact that he gained or profited by the said fee or remuneration to the extent of Rs. 3000.

5. The next contention of the learned counsel for the assesaee was that under Section 4 (3) (vii) even receipts arising from business or exercise of a profession, vocation or occupation would be excluded from the exemption only if they were of a casual and non-recurring nature. Mr. Rama Rao Sahib for the Commissioner of Income-tax, contended, on the other hand that the exemption under Section 4 (3) (vii) would not enure at all for any receipt arising from business or the exercise of a profession, vocation or occupation. His contention was that the exemption would not be given, (1) for receipts arising from business or the exercise of a profession, vocation or occupation, (2) to receipts which were not of a casual and non-recurring nature ; and (3) to receipts which were by way of addition to the remuneration of an employee. We agree with him and hold that a receipt arising from business, or the exercise of a profession, vocation or occupation will not come within this exception. It was observed by Walsh and Eyves JJ. in In the matter of Ghunilal Kalyandas : AIR1925All469 :

'The question is whether that sum is a receipt, not being a receipt arising from business or the exercise of a profession, vocation or occupation which was of a casual and non-recurring nature. In answer to that question one has first to determine the grammatical construction of the exemption. In so doing, one has to bear in mind that it is an exemption, and therefore, of a negative nature, and inasmuch as it does not correspond with any provision contained in any similar legislation in England, and has not apparently been the subject of any decision in India, we have to interpret it as a matter of first impression guided only by the arguments of counsel on either side. In our view, the passage beginning with the word 'not' and ending with the word 'occupation' is an exception upon an exception, that is to say, the word 'which' relates only to receipts which are not receipts arising from business or the exercise of a profession, vocation or occupation. If the argument on behalf of the assessee were adopted, the result would be to strike out that qualifying passage from the section, and to make all receipts, whether arising from business or not, which are of a casual and non-recurring nature, within the exemption.'

6. We agree with the above observation.

7. Mr. Rama Rao Sahib for the Commissioner of Income-tax agreed that the Rs. 3000, in this case were not receipts arising from business and were not also receipts by way of addition to the remuneration of Mr. V. P. Rao as an employee. He also conceded that the receipts did not arise from the exercise of a profession or vocation, as Mr. V. P. Rao was not by profession an arbitrator. Nor was his vocation arbitration. Mr. Rama Rao Sahib said that 'vocation' would mean, the calling in which a person passes his life adopting the definition in Partridge v. Mallandaine, (1886) 18 Q. B. D. 276 : (66 L. J. Q. B. 251) and he conceded that Mr. V. P. Rao was not passing his life in arbitration. But he strongly contended that the remuneration of Rs. 3000 was a receipt arising from Mr. V. P. Rao's occupation as an arbitrator in the said proceedings, and so he would not claim exemption from taxation under Section 4 (3) (vii) of the Act. He further contended that the said fee or remuneration was also not of a casual and non-recurring nature, and that for this reason also that would not be exempt from taxation under Section 4 (3) (vii). He gave the definition of 'occupation' as 'being occupied with, or engaged in something' relying on the Oxford Dictionary. The learned counsel for the assessee urged vehemently that the word 'occupation' would mean the trade or calling by which a person seeks his livelihood as stated in Mr. Sampath Aiyangar's Commentary on the Indian Income-tax Act, and that it would mean much the same thing as 'vocation'. We cannot agree. No doubt, 'occupation' is used sometimes in the same sense as vocation. But it is used more often in the other sense mentioned by Mr. Rama Rao Sahib. In the New English Dictionary edited by E, A. Baker, M. A. D. D., one of the meanings given for 'occupation' is 'the state of being employed or engaged in some way'. In the Law Lexicon of British India, by Mr. Ramanatha Aiyar, 1940 Edn. the meaning given for 'occupation' is 'the principal business of one's life ; vocation, calling, trade ; the business which a man follows to procure a living or obtain wealth ; that which occupies or engages one's time or attention; etc.'

It is obvious that this arbitration business in which Mr. V. P. Rao was engaged for some months, occupied and engaged his time and attention for those months and that he took up the business in order to obtain wealth namely Rs. 3000, though not to seek his livelihood, as he was evidently having a comfortable living even from his pension and investments. If Mr. V. P. Rao himself were asked daring the period he was engaged in these arbitration proceedings what he was occupied with, he would have said 'with the arbitration proceedings between the two Local Boards.' So, we have no doubt whatever that the Rs. 3000, in question were receipts of Mr. V. P. Rao arising from his 'occupation' as an arbitrator in the said proceedings.

8. The next contention of the learned counsel for the assessee was that, even so, the receipts could not be said to have arisen from the exercise of an occupation. His argument has evidently been taken over from the judgment of the Income-tax Appellate Tribunal which seems to have thought that the receipts arose from Mr. V. P. Rao's occupation as an arbitrator but that there was a substantial distinction between the meaning of the word 'from' and the meaning of the words 'from the exercise of' and that the words 'exercise of' connoted the existence of a profession or vocation or occupation that a person already pursues, and that, if the person did not follow the profession or vocation or occupation of an arbitrator, a solitary receipt like this from arbitration proceedings engaged in by him could not be said to have arisen from the exercise of an occupation. We cannot agree. The words 'from the exercise of' in Section 4 (3) (vii) cannot be given the meaning given to it by the Income-tax Appellate Tribunal and by learned counsel for the assessee but must be given the natural meaning in the ordinary English idiom. Very few people speak of receipts arising from the exercise of a business, and only speak of receipts arising from business ; whereas the usual phrase for receipts from a profession, vocation or occupation is 'receipts arising from the exercise of a profession, vocation or occupation.' If the argument of the Income-tax Appellate Tribunal in its judgment is correct, all the three words, profession, vocation and occupation would mean much the same thing, and the use of the three different words in the Act would be otiose. That is also one of the reasons why we disagree with the meaning sought to be given to the word 'occupation' by the learned counsel for the assessee. In our opinion, there is nothing in the words 'exercise of' to require us to hold that the person exercising the occupation should be of the said profession, vocation or occupation already. The meaning of the word 'exercise' in the New English Dictionary is 'act of using, employing or exerting.' Receipts got as remuneration by a person, who is not already having the occupation of arbitrator on being appointed as an arbitrator will in our opinion, be receipts arising from the exercise of the occupation of an arbitrator even though it had been exercised only once.

9. It was urged by the learned counsel for the asaessee that a Bench of this Court, consisting of Sir Lionel Leach C. J. and Lakshmana Rao J., had held in Commissioner of Income-tax v. Ahmed Badsha Sahib : AIR1944Mad63 relied on by the Income-tax Appellate Tribunal also that the sum of Rs. 7000 paid by the Court to an arbitrator as remuneration was not a receipt arising from the exercise of a profession, vocation or occupation; and that there is nothing to distinguish this case from that and to hold that the receipt of Rs. 3000 arose from the exercise of a profession, vocation or occupation. We cannot agree. In that case, the arbitrator had not stipulated for, or been promised, or had even expected, any remuneration. He had occupied himself with the work of arbitration as a friend of the family without any desire to obtain wealth or profit or gain, and that made it a hobby and not an occupation ; but in this, case, Mr. V. P. Rao was offered a definite remuneration, and asked whether he would accept the work for that remuneration and the travelling allowance on the scale admissible for High Court Judges, and he agreed to do the work only in the expectation of that remuneration, and so, the thing became an occupation instead of a mere hobby. The learned Chief Justice in delivering the judgment of the Bench in the Ahmed Badsha Sahib's case : [1943]11ITR590(Mad) remarked :

'Now it is clear that Rs. 7000 is not a receipt arising from the exercise of a profession, vocation or occupation. As we have already pointed out, the assessee is a merchant dealing in hides and his agreement to act as an arbitrator was entirely apart from his business. When he agreed to assist in settling the differences of the heirs of the Nawab no stipulation was made for remuneration. He obviously consented to act as he was a friend of the family but; it turned out that the task involved far more time than was anticipated and this was the reason why Gentle J, decided to grant the arbitrators a reward for their services. There was no obligation to remunerate the arbitrators; and if Gentle J. had refused to sanction remuneration nothing would have been payable. In our opinion, the facts of this case show that this is a receipt of a casual and non-recurring nature. It has been said that the assessee may act as an arbitrator in another case. That may be so; but he is not a professional arbitrator and it is very unlikely that he will be called upon to act in a case like the one referred to. There can be no rule laid down with regard to what is of a casual and non-recurring nature. Each case must be decided on its particular facts. We think that in the circumstances of this case the Income-tax Appellate Tribunal took the correct view. Therefore the answer to the question referred is that Rs. 7000 is not assessable.'

Here Mr. V. P. Rao was a retired High Court Judge, and his agreement to act as an arbitrator, at the request of the Government which chose him as a suitable person for that kind of work was in consonance with his judicial equipment and ability. Of course there might have been dozens of others, vakils, professors, merchants, etc., who could have done that arbitration work, but that will not make any difference to our view. Mr. V. P. Rao agreed to do this arbitration work between the two Local Boards only because of the promise by the Government to pay him a lump sum remuneration of RS. 3000 besides travelling allowance on the scale admissible for High Court Judges. It was not a case where no remuneration had been fixed, or was expected, and where a lump sum was given finally as a kind of unexpected windfall of a casual or accidental nature. It will be interesting to note, in this connection, the obiter of Rowlatt J. in Ryall v. Hoare, 8 T C 521 : (1923-2 K. B. 447) later on approved by the Court of Appeal in England. The learned Judge says :

'Again, take the case of a person who is appointed to perform some services, which might possibly be by way of an office, a person appointed not carrying on any trade or any business, but who happens to be appointed as a retired Judge, was appointed some years ago to hold a very important arbitration in connection with the London water appointed with a lump sum remuneration to do a particular piece of work, or to take a humbler instance, which is more familiar perhaps to us here, the case of a Judge's Marshall, who gets a little appointment for a week or two in the experience of everybody (many, certainly, who hear me now) he suffers a deduction of income-tax when his modest emolument is paid to him.'

Though it is only an obiter, it is an obiter of an eminent Judge and has been approved by the Court of Appeal, and we agree with the reasoning underlying it. In Corbett v. Duff, (1941) 23 T C 777, Lawrence J. held that the payment made to a Football player, out of the gate collections and sale of tickets and further contributions by the Football League would amount to remuneration for employ, ment and would be taxable, and could not be regarded merely as a casual gift, or windfall or a mere personal testimonial.

10. In Ahmad Badsha Sahib's case : [1943]11ITR590(Mad) , it is obvious that the payment was a casual gift or personal testimonial for good work; where there was no stipulation to pay, or promise to pay or obligation to pay or an expectation of payment, when the work was taken on. That would explain the difference in the view taken in that case. In Hobbs v. Hussey, (1942) 24 T C 153, Lawrence J, held that a sum of money received by a Solicitor's Clerk, who had never carried on the profession of an author, for the serial rights in his life story published in a newspaper called the People was assessable to income-tax as it was in essence remuneration for the performance of services by him. In this case also, the true nature of the transaction was the performance of service by Mr. V. P. Rao as an arbitrator, and the remuneration for that occupation was agreed already before the occupation was taken on.

11. In Commr. of Income-tax v. Indra Sen : [1940]8ITR187(All) Braund J. has remarked as follows :

'I should, for myself, be very unwilling to try to lay down any general definition of what a 'business' profession 'vocation' or 'occupation' is, because it is a matter which, to my mind, must necessarily depend in every case upon the circumstances of the asseesee, the particular things he does, and the degree to which, and the object with which, he does them. A philatelist collects stamps for his own entertainment. A stamp dealer collects them for his profits. A country gentleman maintains a garden for his pleasure, while a market gardner or a florist does so for his profit. And yet, in neither case would it be right to say that either the desire for, or an indifference to, profit, as the case might be, was an exhaustive test, for business and pleasure may well be combined. And still less is it possible to my mind to say that an actual profit would necessarily convert what was primarily a hobby or a pastime into a business. For I do not doubt that many stamp and curio collectors entertain a secret hope that they may one day by good chance and to their profit acquire a rare and valuable specimen. And I think they would be surprised to know if that were to happen, that they had been carrying on a 'business'. The truth I think is in this, as in eo many other cases, that no exhaustive test can be applied but that all surrounding circumstances must be considered and commonsense applied. If there is one test which is, as I think, more valuable than another, it is to try to see what is the man's own dominant object--whether it was to conduct an enterprise of a commercial character or whether it was primarily to entertain himself. If the latter was his real objective, I do not think that the circumstance that his hobby might possibly yield him a reward is conclusive of this question whether what he was doing constitutes a 'business' 'profession' 'vocation' or 'occupation' within the meaning of this Act.'

12. It is obvious that Mr. Ahmed Badsha acted as an arbitrator in the 1943 Madras case : [1943]11ITR590(Mad) primarily to entertain himself and not in the expectation of any gain of a pecuniary nature; and that Mr. V. P. Rao in the present case, took on the work of arbitration primarily because of the pecuniary emoluments offered, and not to entertain himself.

13. It has been held by the Privy Council in Commissioner of Income-tax, Madras v. S. L. Mathias that there can be no general presumption that an exemption from the provisions of a sub-section of the Indian Income-tax Act is intended as a complete exemption from tax, and that an assessee will be liable to be taxed regarding the income which is not strictly proved to be not taxable under an exemption.

14. In view of all the above considerations, we are satisfied that Rs. 3000 in question in this case arose from the exercise of the occupation of arbitrator by Mr. V. P. Rao, and that therefore, the assessee cannot claim exemption under Section 4(3)(vii) of the Act and the sum would be taxable, as urged by the Commissioner of Income-tax. That would, by itself, be sufficient to reverse the finding of the Income-tax Appellate Tribunal and to declare the sum to be taxable. But for completeness we consider also the contention of the learned counsel for the Income-tax Commissioner, that the receipt of Rs. 3000 would not also be of a casual and nonrecurring nature and could not therefore be exempted on that ground also, though we restrict our finding to the expression 'casual' and do not want to go into the more complicated matter of the 'non-recurring nature' as distinguished from 'non-recurring occurrence.'

15. As remarked by the Bench in the 1943 Madras case : [1943]11ITR590(Mad) no rule can be laid down with regard to what is of casual and non-recurring nature, and each case must be decided on its particular facts. In the present case, we have no doubt whatever that the receipt of Rs. 3000 from this arbitration work by Mr. V. P. Rao was not casual. Mr. Rama Rao Sahib argues that the word 'casual' can only be applied to accidental or fortuitous receipts; occurring without stipulation, contract, calculation or design.' We agree. It must be in the nature of an unforeseen windfall, like the finding of an article of value, or money won in a bet, and the getting of an unexpected gift or legacy, and not, as in this case, the realisation of a sum of Rs. 3000 promised and agreed on and expected. The getting of a sum of money by a cloth and grain merchant, who had given up that business, as commission or brokerage on the sale of immoveable property was held in In the matter of Chunilal Kalyandas : AIR1925All469 to be of not a casual and non-recurring nature and to be therefore taxable. In Brocklesby v. Marricks, (1934) 18 Tax Cas. 576, Finlay J. held that where the parties chose to enter into a contract for 'remuneration in respect of services' the sum paid under the contract would be taxable. There, an architect in practice, was on a social occasion told by the owner of an estate that he wished to sell his property. Later on he arranged a meeting between the owner and a client, the outcome of which was that the client purchased the estate on behalf of his company. Subsequently the appellant entered into an agreement, which was recorded in correspondence, with the purchasing company, whereby he undertook to endeavour to dispose of the estate and, in conjunction with the company, to negotiate with the parties concerned on the terms that the company should pay him one-fourth of the net profits of the sale. The estate was sold soon afterwards and the appellant received from the company his share of the net profits thereof. He took no part in the negotiations for the acquisition or the sale of the estate; he was not consulted in regard thereto; and did no work in connection with the estate as a surveyor or architect beyond the preparation of a plan which was not in fact used. Finlay J. remarked:

'It is not a case where there has been a purely voluntary service rendered and then something given in respect of that. It is a case in which, induced very probably by the voluntary service, the parties chose to enter into a contract for remuneration in respect of services. I think that that was the conclusion at which the Commissioners arrived. I think they rightly thought that this was a case assessable under case 6, and accordingly it results that the appeal, in my opinion, fails and must be dismissed.'

In Ryall v. Hoare, (1921-24) 8 Tax Cas. 521 : (1923-2 K. B. 447) the bankers of a company refused to allow its overdraft to be increased except upon the joint and several personal guarantee of its directors of whom the respondents were two. In consideration of such a guarantee the company granted to each of the directors a commission of two per cent. on the whole amount guaranteed. The respondents contended that the commissions arose from a casual, unsought and exceptional transaction and were not chargeable to income-tax. It was held by Rowlatt J. that the commissions were not casual profits or gains and had been properly assessed to income-tax and the judgment was confirmed by the Court of Appeal. Here too, we are satisfied that the receipt of Rs. 3000 by Mr. V. P. Rao as remuneration for his services as arbitrator was not casual, accidental or exceptional, and so on that ground also it could not be exempted from income-tax under Section 4 (3) (vii).

16. In this view, we do not think it necessary to go into the more complicated question as to whether the receipt of Rs. 3000 by Mr. V. P. Rao could be also termed to be 'a receipt of a non-recurring nature' and into the contention of Mr. Rama Rao Sahib that the receipt was also not of a non-recurring nature because though it did not actually recur it might have recurred as Mr. V. P. Rao might in view of the remuneration of Rs. 3000 for this arbitration have undertaken other arbitrations of a like nature.

17. In view of our finding that the receipt of Rs. 3000 by Mr. V. P. Rao as remuneration for the arbitration proceedings taken on by him arose from the exercise of the occupation of an arbitrator by him and that it was not a receipt of a casual nature we answer the question referred to ua under Section 66 (1) as follows :

'On the facts and circumstances set out, the sum of Rs. 3000 received by the respondent as remuneration for acting as an arbitrator under Section 234, Madras Local Boards Act, 1920, was not a receipt exempt from assessment under Section 4 (3) (vii), Income-tax Act.'

As the assessee has failed in his contentions before us he will pay the usual costs in this case to the Commissioner of Income-tax. Advocate's fees Rs. 250.


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