2015 (4) TMI 229 - HC - Income Tax

Receipt of an award from B. D. Goenka Foundation - whether was taxable as assessee s income as the said institution was not covered by section 10(17A)? - Held that - The causa causans in the present case is not directly relatable to the carrying on of vocation as a journalist or as a publisher. It is directly connected and linked with the personal achievements and personality of the person i.e. the appellant. Further, it is to be noted that the payment in this case was not of a periodical or repetitive nature. The payment was also not made by an employer; or by a person associated with the vocation being carried on by the appellant; or by a client of his. The prize money has in the instant case been paid by a third person, who was not concerned with the activities or associated with the vocation of the appellant. It being a payment of a personal nature, it should be treated as capital payment, being akin to or like a gift, which does not have any element of quid pro quo. The aforesaid prize money was paid to the assessee on a voluntary basis and was purely gratis. The correct legal position is that Section 10 exclusively deals with the exempt income not exigible to tax and should not per se be relied upon to ascertain whether the receipt would be a revenue receipt i.e. income chargeable to tax under sub-section (24) to Section 2 read with the charging provisions. The question of exemption under Section 10 would only arise if at the first instance, the receipt is found to be a revenue receipt. It would be incorrect to first examine whether a particular receipt has been exempted and then on the said reasoning and ratio proceed to decipher and hold that the amount/receipt is income for the purposes of the Act i.e. the Income Tax Act. In International Instruments vs. CIT, (1981 (3) TMI 59 - KARNATAKA High Court) it has been held that A receipt may not be income at all within the proper connotation of that term and yet may come within the express exemption in this section, due to the over- anxiety of the draftsman to make the fact of non- taxability clear beyond possibility of doubt. Just because a certain receipt is not exempt under Section 10, it doesn t follow that it is a revenue receipt and hence income. In G.R. Karthikeyan (1993 (4) TMI 9 - SUPREME Court), the Supreme Court has made an observation that when a particular income or receipt is exempt to a limited extent, it may be a relevant factor for determining the meaning of the expression income . However, this statement should not be read in isolation, bereft of the context in which it was made. This clearly illustrates that the main thrust there was on highlighting that the term income is of widest amplitude and should be given a natural and grammatical meaning. Casual income is income. Once, it is settled, that the receipt is income, partial exemption would necessarily indicate that the non- exempt part is taxable. ₹ 1 lakh received by the appellant- assessee as an award from B.D. Goenka Trust for Excellence in Journalism would be a capital receipt and hence not income taxable under the Act, i.e. Income Tax Act, 1961. - Decided in favour of assessee.

Summary

Issues Involved:
1. Taxability of Rs. 1 lakh award received by the appellant from B. D. Goenka Foundation.
2. Applicability of Section 10(17A) of the Income Tax Act, 1961 to the award.

Issue-Wise Detailed Analysis:

1. Taxability of Rs. 1 lakh award received by the appellant from B. D. Goenka Foundation:

The appellant, an Editor in Chief of a magazine, received Rs. 1 lakh as an award from B. D. Goenka Foundation for excellence in journalism. The Assessing Officer added this amount to the appellant's income, asserting it was taxable. The appellant argued that the award was a testimonial of recognition, not income, and cited various judgments supporting this claim, including S. A. Ramakrishnan vs. CIT, C.P. Chitrarasu vs. CIT, and CIT vs. M. Balamuralikrishna.

The Commissioner of Income Tax (Appeals) agreed with the appellant, stating the award was not for services rendered and could not be considered income. However, the Tribunal reversed this decision, holding that the initial onus was on the appellant to prove the exemption and that the award was taxable as income.

The High Court analyzed the term "income" under Section 2(24) of the Act, which includes profits, gains, perquisites, and other specified categories. It concluded that not all receipts are income; capital receipts are not taxable unless specified. The Court referred to several judgments, including Krishna Menon vs. CIT and Divecha (P.H.) vs. CIT, to distinguish between personal gifts and income. The Court held that the award was a capital receipt, akin to a personal gift, and not taxable as it was not related to the appellant's vocation or services rendered.

2. Applicability of Section 10(17A) of the Income Tax Act, 1961 to the award:

Section 10(17A) exempts awards instituted in public interest by the Central or State Government or other approved bodies. The Tribunal held the award was taxable as it did not meet these criteria. The appellant argued that the award was a personal gift and not income, making Section 10(17A) irrelevant.

The High Court clarified that Section 10 deals with exempt income and should not determine whether a receipt is income. The Court referred to the Supreme Court's decision in Divecha (P.H.) vs. CIT, stating that the question of exemption arises only if the receipt is income. Since the award was a capital receipt, the exemption under Section 10(17A) was not applicable.

Conclusion:

The High Court concluded that the Rs. 1 lakh received by the appellant as an award from B. D. Goenka Foundation was a capital receipt and not taxable under the Income Tax Act, 1961. The substantial questions of law were answered in favor of the appellant, and there was no order as to costs.