1937 (8) TMI 11 - HC - Income Tax

Summary

Issues:
1. Whether the allotment of shares to the applicant amounts to income assessable under the law?
2. Whether the allotment of shares qualifies as income exempted under Section 4(3)(vii) of the Act?

Analysis:

Issue 1:
The case involved a question of law referred by the Commissioner of Income Tax regarding the taxability of shares allotted to the applicant by the Directors of a company. The applicant, an employee, received fully paid up shares worth Rs. 15,000 as recognition for his services in promoting investments in the company. The Income Tax Officer assessed this allotment as taxable income, leading to an appeal by the applicant. The court analyzed whether the shares received constituted income assessable under the Act. The court considered the nature of the payment, absence of a contractual obligation, and the purpose behind the allotment to determine if it qualified as income.

Issue 2:
The second aspect of the case revolved around whether the allotment of shares fell under the exemption provided in Section 4(3)(vii) of the Act. The court examined the definition of income as per the Act and the interpretation provided by the Privy Council in a relevant case. It was crucial to determine if the shares received by the applicant could be categorized as a windfall or a casual, non-recurring receipt. The court emphasized that the applicant's activities did not align with a business venture or a contractual agreement for remuneration, leading to the conclusion that the allotment of shares did not constitute assessable income under the Act.

Conclusion:
The court, after thorough analysis, concluded that the allotment of shares to the applicant did not amount to income assessable under the law. The court held that the receipt of shares was exempt from assessment, considering the nature of the payment and the absence of a legal claim against the company. The judgment favored the applicant, and the costs were ordered to be borne by the Department, with a specified fee for the Counsel for the Income Tax Department.