1982 (3) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Whether the presents received during Grahapravesam constitute taxable income.
2. The distinction between gifts and business receipts for tax purposes.

Summary:

Issue 1: Whether the presents received during Grahapravesam constitute taxable income.

The respondent, an individual named Paramanand Uttamchand, received presents during the Grahapravesam ceremony of his new family residence. The Income Tax Department assessed these presents as taxable income. The respondent contested this, arguing that the presents were gifts and not taxable under the I.T. Act. The AAC agreed and deleted the assessment, a decision upheld by the Tribunal. The Department appealed, leading to the present case.

Issue 2: The distinction between gifts and business receipts for tax purposes.

The court examined whether the presents could be considered income. It noted that gifts are generally not income as they are windfalls and lack recurrence, unlike earned or unearned income. However, gifts can be taxable if received by virtue of employment, profession, or business. The court referenced English and Indian precedents where voluntary payments were taxed due to their connection to the recipient's profession or business.

The Department argued that the presents were business receipts, citing the relationship between the respondent and the givers, many of whom were borrowers. However, the court found no evidence that the presents were linked to the respondent's money-lending business. The court emphasized that gifts received during personal events like Grahapravesam should not be automatically considered business receipts, even if the recipient is a businessman.

The court criticized the assessment order for its bias against businessmen and money-lenders, noting that the presents were given out of personal regard and not as business transactions. The Tribunal's decision was upheld, ruling that the presents were not taxable income.

Conclusion:

The court answered the reference in the affirmative, supporting the Tribunal's decision that the presents received during Grahapravesam were not taxable income. The Department was ordered to pay the costs of the reference to the respondent, with counsel's fee set at Rs. 500.