1980 (8) TMI 117 - AT - Income Tax

Summary

Issues:
1. Whether income from a paying clinic should be taxed as income from salary or as income from profession.
2. Whether the expenditure claimed by the assessee for earning income from the paying clinic is reasonable and allowable.

Analysis:
1. The primary issue in this case was whether the income earned by an individual from a paying clinic should be considered as income from salary or income from profession. The assessee, an Associate Professor in a Medical College, earned income from a paying clinic, which he claimed should be treated as income from profession. The Income Tax Officer (ITO) disagreed and treated it as income from salary, relying on a specific judgment. The Appellate Assistant Commissioner (AAC) referred to a previous Tribunal order and held that income from the paying clinic should be taxed as income from profession, not salary. The Tribunal concurred with the AAC's decision, emphasizing that the income did not arise from an employer-employee relationship but from patients, thus not constituting salary income.

2. The second issue revolved around the expenditure claimed by the assessee for earning income from the paying clinic. The AAC allowed certain expenses but disallowed a contribution to professional societies and a journal subscription. The Tribunal analyzed each expense claimed by the assessee, including telephone rent, car maintenance, part-time orderly, professional society contributions, conference/seminar attendance, and stationery. The Tribunal found most of the claimed expenses to be reasonable and directly connected with earning income from the paying clinic. It allowed the majority of the claimed expenses, including the contribution to professional societies, stating that such expenses were necessary for earning income from the profession and should be deductible.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, confirming the AAC's decision to tax the income from the paying clinic as income from profession and allowing most of the claimed expenses incurred for earning that income.