1973 (5) TMI 10 - HC - Income Tax

Whether, Tribunal was legally correct in holding that payment at the rate of 10% received as clerkage by the assessee as a result of contract between him and the client as a senior advocate on the Rolls of the Bar Council did not form part of his income ? - Question answered in the affirmative

Summary

Issues:
Interpretation of income received as clerkage by a senior advocate for professional services and its inclusion in total income for assessment.

Analysis:
The case involved a senior advocate who received 10% of his professional fee as clerkage and claimed it was not part of his income. The Income-tax Officer initially disallowed a portion of the clerkage amount paid to the advocate's daughter-in-law as a deduction. However, the Appellate Assistant Commissioner and the Tribunal both held that the clerkage was not part of the advocate's income, and the payment to the daughter-in-law was justified for services rendered. The Tribunal referred a legal question to the High Court regarding the treatment of the clerkage amount. The High Court analyzed the rules governing advocate fees and clerkage, emphasizing that the rules recognize the practice of clerks receiving a percentage of the advocate's fee. The court found that the receipt of clerkage was not part of the advocate's professional income, thus diverting the income at source or appropriation did not apply.

The Revenue argued that specific rules prohibited a senior advocate's clerk from performing certain functions, citing Supreme Court rules. However, the High Court clarified that the rules did not restrict a senior advocate's clerk from carrying out routine tasks as outlined in the court rules. The court highlighted that the clerk of a senior advocate could still function within the permissible scope of duties, including filing fee certificates. Therefore, the court rejected the argument that maintaining a clerk as a senior advocate was illegal. The High Court upheld the Tribunal's decision that the receipt of clerkage was valid and not part of the advocate's income, ruling in favor of the assessee against the department.

In conclusion, the High Court answered the legal question in the affirmative, supporting the Tribunal's decision. As a result, the application by the Commissioner for additional questions became irrelevant, and the court dismissed it. The High Court awarded costs to the assessee and assessed the amount, concluding the judgment in favor of the advocate regarding the treatment of clerkage income.