1987 (1) TMI 180 - AT - Income Tax

Summary

Issues:
Determining whether the assessee firm's income from "Hundi dalali" qualifies as income derived from a profession for taxation purposes.

Analysis:
The judgment by the Appellate Tribunal ITAT Indore involved two appeals by the assessee for the assessment years 1982-83 and 1983-84, challenging the orders of the CIT(A). The key issue was whether the assessee, engaged in the business of "Hundi dalali," was entitled to the lower rate of taxation applicable to registered firms deriving income from a profession. The CIT(A) rejected the assessee's claim, stating that the income was derived from business activities rather than a profession.

The assessee argued that they utilized intellectual skill in their activities, facilitating safe and remunerative investments for interested parties seeking to lend money on interest. The assessee contended that their dalali income should be considered income from a profession based on legal precedents. The Departmental Representative, however, cited examples where individuals specialized in certain services were considered to be engaged in business rather than a profession.

The Tribunal examined the material presented, including the profit and loss account for the relevant years, and the tax rate schedule providing concessions for firms deriving income from a profession. The definitions of "business" and "profession" under the Income-tax Act were considered, but the Tribunal emphasized the common understanding of the term "profession" and the objective of lower tax rates for professional income.

The Tribunal highlighted that a profession typically involves intellectual or manual skills controlled by intellectual skill, distinguishing it from business activities focused on the production or sale of commodities. The Tribunal concluded that the assessee firm's activities did not require specialized intellectual skill and were more aligned with commercial services than professional services. Consequently, the Tribunal upheld the tax treatment applicable to businesses rather than professions, dismissing the appeals of the assessee.

In summary, the judgment delved into the distinction between business and profession, emphasizing the need for specialized intellectual skill in professional activities. The Tribunal determined that the assessee firm's dalali income did not meet the criteria for income derived from a profession, leading to the dismissal of the appeals.