1993 (2) TMI 31 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee, a firm of sharebrokers, was carrying on a profession for the purpose of computation of its tax liability.

Summary:

Issue 1: Whether the assessee, a firm of sharebrokers, was carrying on a profession for the purpose of computation of its tax liability

The controversy revolves around the assessee's claim that its activities as a sharebroker amounted to a profession, which would entitle it to a lower rate of surcharge on income-tax for the assessment years 1973-74, 1974-75, and 1975-76. The Income-tax Officer levied surcharge at the normal rate, and the Appellate Assistant Commissioner upheld this decision. However, the Income-tax Appellate Tribunal (the Tribunal) accepted the assessee's contention and directed the Income-tax Officer to treat the assessee as a firm carrying on a profession. This led to the reference at the instance of the Revenue.

The court examined the definitions of "business" and "profession" u/s 2(13) and 2(36) of the Income-tax Act, 1961, respectively. It noted that while "business" includes any trade, commerce, or manufacture, "profession" includes vocation. The court emphasized that "profession" involves special knowledge, education, and skill, distinguishing it from mere business activities.

The court referred to various definitions and discussions from legal dictionaries and Corpus Juris Secundum, concluding that a stockbroker's activities do not constitute a profession. The court highlighted that a stockbroker's primary role is to arrange the sale of shares or securities of others, which falls within the ambit of "business" rather than "profession."

The court also reviewed relevant case law, including decisions from the Allahabad High Court and the Supreme Court, but found them inapplicable to the case of a sharebroker. The court rejected the assessee's argument that the Tribunal's conclusion was a question of fact, asserting that the issue was a pure question of law.

In conclusion, the court held that the Tribunal was incorrect in treating the assessee as engaged in a profession. The assessee was not entitled to the benefit of a lower rate of surcharge on income-tax. The question was answered in the negative, in favor of the Revenue and against the assessee. No order as to costs was made.