1985 (9) TMI 2 - SC - Income Tax

Assessee received large amounts as donations for sponsoring and helping the movement of spreading the Christian religion by publishing a daily newspaper - assessee carried on a vocation and the amounts were received in the course of such vocation -there is a nexus between the activities of the assessee and payments received by him - therefore they are not in the nature of casual and non-recurring receipts and they are taxable

Summary

Issues Involved:
1. Assessability of sums received as income for the assessment years 1960-61 and 1961-62.
2. Exemption of sums under section 4(3)(vii) of the Indian Income-tax Act, 1922.

Detailed Analysis:

Issue 1: Assessability of Sums Received as Income

The primary issue was whether the sums of Rs. 2,90,220 and Rs. 3,63,750 received by the assessee during the assessment years 1960-61 and 1961-62, respectively, were assessable as income. The Income-tax Officer (ITO) scrutinized the accounts and found that the amounts were credited in the assessee's ledger without detailed information about the donors. The ITO presumed that these amounts were given by the Indian Christian Crusade, U.S.A., and treated them as remuneration for the work done by the assessee in propagating the ideals of the Indian Christian Crusade, U.S.A. The ITO concluded that these amounts were connected with the business of the assessee and were liable to be taxed as business income.

The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, rejecting the assessee's contention that the amounts were personal gifts. The AAC found that the assessee was engaged in propagating religious ideals and that the donations were regular and continued, indicating they were meant to aid the running of the newspaper, which was the business carried on by the assessee.

In further appeal, the Tribunal held that the amounts did not represent remuneration or payments for services rendered and were casual and non-recurring. However, the High Court, relying on the Tribunal's findings, held that the receipts arose from the exercise of a vocation, making them taxable income.

Issue 2: Exemption Under Section 4(3)(vii) of the Indian Income-tax Act, 1922

The second issue was whether these sums were exempt from taxation under section 4(3)(vii) of the Indian Income-tax Act, 1922. The High Court noted that receipts of casual and non-recurring nature would not be included in the total income of a person unless they arose from the exercise of a vocation. The High Court found a direct link between the activities of the assessee and the payments received, concluding that the payments were made to help the assessee run the newspaper, which was a medium for propagating religious ideals. Therefore, the receipts arose from the exercise of an occupation and were not exempt under section 4(3)(vii).

The Supreme Court upheld the High Court's decision, stating that the amounts were received in the course of the assessee's vocation and were not casual and non-recurring. The Court referenced the case of Krishna Menon v. CIT, where it was held that teaching Vedanta was a vocation and the payments received were taxable income. Similarly, the assessee's activities of propagating religious ideals constituted a vocation, and the donations received were taxable income.

The Supreme Court also addressed the argument that the High Court had improperly interfered with the Tribunal's findings of fact. The Court found that the High Court had not breached any principles and had correctly concluded that the receipts were taxable income arising from the assessee's vocation.

Conclusion

The Supreme Court dismissed the appeals, affirming that the sums received by the assessee were taxable income arising from the exercise of a vocation and were not exempt under section 4(3)(vii) of the Indian Income-tax Act, 1922. The Court held that the High Court was correct in its judgment and the receipts were rightly taxed as business income.