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Issues Involved:
1. Nature of the Rs. 10,000 payment to Mr. Sen. 2. Taxability of the Rs. 10,000 payment under Section 4(3)(vii) of the Income-tax Act, 1922. Issue-Wise Detailed Analysis: 1. Nature of the Rs. 10,000 Payment to Mr. Sen: The primary issue is whether the Rs. 10,000 payment received by Mr. Sen from Messrs. Mugniram Bangor & Co. was a casual and non-recurring receipt or a payment arising from the exercise of his profession. Mr. Sen argued that the payment was a non-recurring casual receipt and thus not taxable. He contended that the payment was a gift or inam for the benefit he secured for the shareholders of the Indian Iron and Steel Company, and not for any professional services rendered to Messrs. Mugniram Bangor & Co. The court examined the circumstances under which the payment was made. Mr. Sen had represented Mr. Khandelwala, a shareholder, at a meeting of the Indian Iron and Steel Company, and successfully negotiated terms that benefited the shareholders. The payment was made by Messrs. Mugniram Bangor & Co., who profited from the successful floatation of new shares, as a gesture of appreciation for the benefits derived from Mr. Sen's actions. The court considered precedents such as Herbert v. Mcquade and Blakiston v. Cooper, where voluntary payments made in respect of services rendered were held to be taxable. The court concluded that the Rs. 10,000 payment was directly connected to Mr. Sen's professional activities and was not a mere gift or testimonial unconnected to his professional services. 2. Taxability of the Rs. 10,000 Payment under Section 4(3)(vii) of the Income-tax Act, 1922: The relevant provision under scrutiny was Section 4(3)(vii) of the Income-tax Act, 1922, which exempts from tax any receipts that are casual and non-recurring in nature, provided they do not arise from the exercise of a profession, vocation, or occupation. The court analyzed whether the payment could be classified as a casual and non-recurring receipt. Although the Commissioner of Income-tax assumed the payment was casual and non-recurring, the court focused on whether it arose from the exercise of Mr. Sen's profession. The court determined that the payment was indeed a result of Mr. Sen's professional activities. It was not a general testimonial but a specific reward for the professional services rendered by Mr. Sen at the shareholders' meeting. The court emphasized that the payment was made because of the beneficial results Mr. Sen's professional actions produced for the shareholders, which indirectly benefited Messrs. Mugniram Bangor & Co. In conclusion, the court held that the Rs. 10,000 payment was a receipt arising from the exercise of Mr. Sen's profession as a lawyer and Advocate. Therefore, it was not exempt from tax under Section 4(3)(vii) of the Income-tax Act, 1922. Judgment: The court answered the reference in the negative, holding that the Rs. 10,000 payment received by Mr. Sen was assessable to income-tax. No order was made as to costs.
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