1982 (8) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Legality of reopening the assessment u/s 147(a).
2. Taxability of the gift as professional income.

Summary:

Issue 1: Legality of Reopening the Assessment u/s 147(a)

The assessee, a prominent surgeon, received a gift of land from a patient, Kanagasabai Pillai, who had been treated and cured by the assessee. The ITO reopened the assessment for the year 1960-61 u/s 147(a) of the I.T. Act, 1961, treating the value of the gifted land as taxable income. The assessee contended that the reopening was illegal. The AAC rejected this contention, and the Tribunal did not address it further as the primary focus was on the nature of the gift.

Issue 2: Taxability of the Gift as Professional Income

The main question was whether the gift was made in appreciation of the assessee's personal qualities or as remuneration for professional services. The ITO held it was taxable income, while the AAC found it to be a casual and non-recurring receipt, not arising from the profession. The Tribunal upheld the AAC's view, noting the gift was made two years after the treatment and there was no evidence that the services merited such a high remuneration.

The Revenue argued that the onus was on the assessee to prove the gift was not taxable, citing P. Krishna Menon v. CIT and Amarendra Nath Chakraborty v. CIT. The assessee countered with Mahesh Anantrai Pattani v. CIT and Parimisetti Seetharamamma v. CIT, arguing the gift was for personal qualities, not professional services.

The court distinguished the present case from P. Krishna Menon and Amarendra Nath Chakraborty, noting the professional services had already been compensated. It aligned with the principles in Mahesh Anantrai Pattani and Parimisetti Seetharamamma, concluding the gift was out of personal esteem and not for professional services.

Conclusion:

The court answered the question in the negative, ruling that the sum of Rs. 65,000 was not chargeable to tax as professional income. The Revenue was directed to pay the costs of the assessee, with counsel's fee set at Rs. 500.