1984 (1) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 28,830 received by the assessee as remuneration for arbitration work is exempt under section 10(3) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Exemption under Section 10(3) of the Income-tax Act, 1961

1. Facts and Background:
- The assessee disclosed a total income of Rs. 8,576 for the assessment year 1970-71, including Rs. 28,830 received as remuneration for arbitration work, claimed as exempt under section 10(3) of the Income-tax Act, 1961.
- The Income-tax Officer taxed this amount, noting the assessee had been receiving such remuneration since 1964-65, which had been previously taxed without objection.
- The Appellate Assistant Commissioner ruled in favor of the assessee, stating the arbitration work was casual and non-recurring, thus exempt under section 10(3).
- The Tribunal, on appeal by the Revenue, found the assessee had specialized knowledge and regularly engaged in arbitration work since his retirement, indicating it was an "occupation."

2. Tribunal's Findings:
- The assessee had specialized knowledge in industrial law and was sought after as an arbitrator.
- The assessee's qualifications, skill, and experience in arbitration were well-known.
- The assessee accepted arbitration work every year since 1962-63 through a firm of solicitors.
- The arbitration work was not done gratis or for pleasure but as a regular activity.
- The claim for deductions for rent and attendant pay indicated the permanency of the establishment.
- The activity of arbitration was considered an "occupation" subsidiary to his main occupation of agriculture.

3. Arguments:
- Assessee's Counsel:
- Contended that arbitration work was different from other kinds of work and not a regular business or profession.
- Claimed the receipts were casual and non-recurring, thus exempt under section 10(3).
- Cited the case of B. Malick v. CIT [1968] 67 ITR 616 (All) to support the claim.
- Revenue's Counsel:
- Argued the arbitration work was regular and systematic, engaging the assessee's time and attention since retirement.
- Contended the work was not casual or non-recurring, making the receipts taxable.
- Distinguished the case of B. Malick v. CIT on the grounds of different facts and circumstances.

4. Court's Analysis:
- Section 10(3) excludes receipts of a casual and non-recurring nature unless they arise from business, profession, or occupation.
- The court examined whether the receipts were from an "occupation" and thus taxable.
- The assessee's post-retirement activities included agriculture and arbitration, with the latter not being a business or profession.
- The court referenced the definitions of "business" and "profession" under the Act, concluding the activities did not fit these categories.
- The court considered whether the activities constituted a "vocation" or "occupation."
- The court noted the regularity and continuity of the arbitration work, the establishment maintained by the assessee, and the fact that previous receipts were taxed without objection.
- The court concluded the arbitration work was an "occupation" due to the regular and systematic nature of the activities.

5. Precedents:
- CIT v. M Ahmad Badsha Saheb [1943] 11 ITR 590 (Mad): Distinguished as the assessee was a merchant with a one-time arbitration role.
- CIT v. V P Rao [1950] 18 ITR 825 (Mad): Applied as the case involved a retired judge regularly engaging in arbitration work.
- B. Malick v. CIT [1968] 67 ITR 616 (All): Distinguished due to the unique circumstances of a sitting judge being requested to act as an umpire.

Conclusion:
The court held that the arbitration work constituted an "occupation" under section 10(3) of the Income-tax Act, 1961, and the receipts from such work were taxable. The question was answered in the affirmative and against the assessee, with no order as to costs.