1983 (6) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of Rs. 51,000 presented to the assessee.
2. Determination of whether the amount was a personal gift or income from profession/vocation.

Summary:

Issue 1: Taxability of Rs. 51,000 presented to the assessee

The primary question was whether Rs. 51,000 presented to the assessee on January 21, 1970, was taxable as the assessee's income for the assessment year 1970-71. The assessee, a former employee of M/s. Hasan Mohamed Rowther, had become actively involved in politics and held various positions within the Dravida Munnetra Kazhakam party. In 1970-71, an ad hoc committee formed by his partymen collected donations to present him with a purse to purchase a house. The then Chief Minister of Madras presented Rs. 56,000 to the assessee, which included Rs. 5,000 from his former employer. The assessing officer treated Rs. 51,000 as income received in the course of his vocation as a politician. However, the AAC accepted the assessee's contention that the amount was a personal gift and set aside the assessment order. The Revenue's appeal to the Tribunal failed, leading to this reference.

Issue 2: Determination of whether the amount was a personal gift or income from profession/vocation

The court examined whether the amount was connected to the assessee's profession or vocation. The assessing officer argued that politics was the assessee's vocation and the amount was income from this vocation. However, the court found no material evidence to support that Rs. 51,000 was remuneration for services rendered to the Dravida Munnetra Kazhakam party. The court referred to the case of Dilip Kumar Roy v. CIT [1974] 94 ITR 1 (Bom), where it was held that without evidence showing the amounts constituted income, the Tribunal's conclusion was not justified. The court also cited the Supreme Court's decision in Commr. of Expenditure-tax v. P. V. G. Raju [1975] 101 ITR 465 (SC), which held that political donations were voluntary gifts and not income.

The court concluded that the amount was presented to the assessee in appreciation of his personal qualities and not as remuneration for services rendered. The Revenue failed to provide evidence that the amount was income from the assessee's profession or vocation. Therefore, the court held that Rs. 51,000 was not taxable as the assessee's income and ruled in favor of the assessee, awarding costs of Rs. 500 to the assessee.