1974 (5) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Whether the payment of Rs. 1,50,000 to the assessee is income assessable in his hands as a casual and non-recurring receipt not arising from any business, profession, or vocation.
2. Whether the Tribunal was justified in upholding the exclusion of Rs. 1,50,000 from the total income of the assessee-firm.

Detailed Analysis:

1. Nature of the Payment to the Assessee:
The primary issue was whether the payment of Rs. 1,50,000 to the assessee was income assessable in his hands. The Tribunal had held that the payment was a casual and non-recurring receipt not arising from any business, profession, or vocation carried on by the assessee. However, the High Court examined the facts and circumstances, including the nature of the payment and the activities leading to it.

The facts revealed that the payment was made by Tata Company to the firm, which was constituted shortly before the payment, ostensibly for services rendered in securing investment from the Maharaja of Jaipur. The Tribunal found that the payment was not connected to any business or professional activity by the assessee and was a reward for "friendly assistance."

However, the High Court disagreed, emphasizing that the payment was made for specific services rendered by the assessee in persuading the Maharaja to convert his deposit into investment. The court noted that the formation of the firm and the subsequent payment were part of a calculated arrangement to compensate for the services rendered. The court concluded that the payment was not a mere gift but a remuneration for services rendered, making it taxable.

2. Exclusion of Rs. 1,50,000 from the Firm's Income:
The second issue was whether the Tribunal was justified in upholding the exclusion of Rs. 1,50,000 from the total income of the assessee-firm. The Tribunal had agreed with the Appellate Assistant Commissioner that the payment did not constitute the income of the firm since it was received for actions taken before the firm's existence.

The High Court analyzed the partnership's formation and the payment's context, noting that the firm was created shortly before the payment was made. The court observed that the cheque was issued in the firm's name, but the amount was credited to the personal account of Col. Keshri Singh, indicating that the payment was intended for him personally.

The court held that the payment was assessable in the hands of Col. Keshri Singh, not the firm, as it was received for services rendered by him personally. Thus, the Tribunal was correct in excluding the amount from the firm's income.

Conclusion:
The High Court concluded that the payment of Rs. 1,50,000 was assessable in the hands of Col. Keshri Singh as income arising from services rendered and not a casual or non-recurring receipt. Consequently, the court answered the first question in the negative, indicating that the Tribunal was not right in its earlier decision. For the second question, the court answered in the affirmative, upholding the exclusion of the amount from the firm's income. The parties were directed to bear their own costs.