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TMI Blog1950 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... d from service in June 1941. He was also a Barrister but never practised at the Bar. After retirement he had also no whole time profession, vocation or occupation, when he was leading the life of a pensioner. In September 1941, some 3 1/2 months after his retirement, the Madras Government asked him whether he would find it convenient to serve as an arbitrator for enquiring and reporting about a dispute which had arisen between the District Boards of Krishna and west Godavari in the matter of apportionment of the sale proceeds of the Bezwada-Masuli-patara railway, as the Government proposed to take action under Section 234, Madras Local Boards Act, 1920, and to refer the dispute to an arbitrator for enquiry and report. He was also informed that he would be paid a lump fee of ₹ 3000 for the work and travelling allowance on the scale admissible for High Court Judges. He replied at once agreeing to serve as an arbitrator, and he was appointed arbitrator by a G. O. dated 23-9-1941 which also fixed his lump sum remuneration at ₹ 3000 and travelling allowance on the scale admissible for High Court Judges. He then worked as an arbitrator. Even according to him, the work was qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantive applications, and that there is no provision as in the Civil P. C., for the filing of cross-objections; and, further that the respondents had not paid the requisite court-fee for the reference, and that the request was also barred by time, and that the question had not been raised before the Income Tax Appellate Tribunal when it heard Mr. V. P. Rao's case and there appeared to be also no provision of law for awarding costs or interest to the successful party before the Income Tax Appellate Tribunal, So we are not concerned with the other question now and the only question before this Court is the question regarding the taxability of the said ₹ 3000 or the alleged right to be exempted from taxation under Section 4(3)(vii) of the Act. 3. We have perused the entire records and heard the learned counsel on both sides. Before we proceed further, it may be as well to quote Section 4(3) and Section 4(3)(vii), Income Tax Act for understanding the various contentions to be stated presently; Section 4(3) and Section 4(3)(vii) run as follows : 4 (3) : Any income, profits or gains falling within the following classes shall not be included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been modified by the Privy Council itself, in a judgment delivered three years later in Gopal Saran Narain Singh v. Commissioner of Income Tax. Their Lordships of the Privy Council have held that the word income is not limited by the words profits and gains and that anything which can properly be described as income is taxable under the Income Tax Act unless expressly exempted. In Rani Amrit Kunwar v. Commissioner of Income Tax, C. P. U. P. AIR1946All306, a case decided by three Judges of the Allahabad High Court, Braund J. has exhaustively discussed the case-law till 1946 and has finally held : In short, the English Income Tax Act, by its charging provisions, has taxed only those particular types of income which can be brought within the various schedules whereas the Indian Income Tax Act has charged whatever is income, profits and gains on the proper construction of these expressions. It is obvious that the fee or remuneration of ₹ 3000 got by Mr. V. P. Rao for this work of arbitration would fall within the scope of the word income in Section 6; he himself actually showed it in his return of income though he contended that it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted, the result would be to strike out that qualifying passage from the section, and to make all receipts, whether arising from business or not, which are of a casual and non-recurring nature, within the exemption. 6. We agree with the above observation. 7. Mr. Rama Rao Sahib for the Commissioner of Income Tax agreed that the ₹ 3000, in this case were not receipts arising from business and were not also receipts by way of addition to the remuneration of Mr. V. P. Rao as an employee. He also conceded that the receipts did not arise from the exercise of a profession or vocation, as Mr. V. P. Rao was not by profession an arbitrator. Nor was his vocation arbitration. Mr. Rama Rao Sahib said that 'vocation' would mean, the calling in which a person passes his life adopting the definition in Partridge v. Mallandaine, (1886) 18 Q. B. D. 276 : (66 L. J. Q. B. 251) and he conceded that Mr. V. P. Rao was not passing his life in arbitration. But he strongly contended that the remuneration of ₹ 3000 was a receipt arising from Mr. V. P. Rao's occupation as an arbitrator in the said proceedings, and so he would not claim exemption from taxati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts arose from Mr. V. P. Rao's occupation as an arbitrator but that there was a substantial distinction between the meaning of the word from and the meaning of the words from the exercise of and that the words exercise of connoted the existence of a profession or vocation or occupation that a person already pursues, and that, if the person did not follow the profession or vocation or occupation of an arbitrator, a solitary receipt like this from arbitration proceedings engaged in by him could not be said to have arisen from the exercise of an occupation. We cannot agree. The words from the exercise of in Section 4(3)(vii) cannot be given the meaning given to it by the Income Tax Appellate Tribunal and by learned counsel for the assessee but must be given the natural meaning in the ordinary English idiom. Very few people speak of receipts arising from the exercise of a business, and only speak of receipts arising from business ; whereas the usual phrase for receipts from a profession, vocation or occupation is receipts arising from the exercise of a profession, vocation or occupation. If the argument of the Income Tax Appellate Tribunal in its judgment is correct, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or occupation. As we have already pointed out, the assessee is a merchant dealing in hides and his agreement to act as an arbitrator was entirely apart from his business. When he agreed to assist in settling the differences of the heirs of the Nawab no stipulation was made for remuneration. He obviously consented to act as he was a friend of the family but; it turned out that the task involved far more time than was anticipated and this was the reason why Gentle J, decided to grant the arbitrators a reward for their services. There was no obligation to remunerate the arbitrators; and if Gentle J. had refused to sanction remuneration nothing would have been payable. In our opinion, the facts of this case show that this is a receipt of a casual and non-recurring nature. It has been said that the assessee may act as an arbitrator in another case. That may be so; but he is not a professional arbitrator and it is very unlikely that he will be called upon to act in a case like the one referred to. There can be no rule laid down with regard to what is of a casual and non-recurring nature. Each case must be decided on its particular facts. We think that in the circumstances of this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded merely as a casual gift, or windfall or a mere personal testimonial. 10. In Ahmad Badsha Sahib's case [1943]11ITR590(Mad), it is obvious that the payment was a casual gift or personal testimonial for good work; where there was no stipulation to pay, or promise to pay or obligation to pay or an expectation of payment, when the work was taken on. That would explain the difference in the view taken in that case. In Hobbs v. Hussey, (1942) 24 T C 153, Lawrence J, held that a sum of money received by a Solicitor's Clerk, who had never carried on the profession of an author, for the serial rights in his life story published in a newspaper called the People was assessable to Income Tax as it was in essence remuneration for the performance of services by him. In this case also, the true nature of the transaction was the performance of service by Mr. V. P. Rao as an arbitrator, and the remuneration for that occupation was agreed already before the occupation was taken on. 11. In Commr. of Income Tax v. Indra Sen [1940]8ITR187(All) Braund J. has remarked as follows : I should, for myself, be very unwilling to try to lay down any gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athias that there can be no general presumption that an exemption from the provisions of a sub-section of the Indian Income Tax Act is intended as a complete exemption from tax, and that an assessee will be liable to be taxed regarding the income which is not strictly proved to be not taxable under an exemption. 14. In view of all the above considerations, we are satisfied that ₹ 3000 in question in this case arose from the exercise of the occupation of arbitrator by Mr. V. P. Rao, and that therefore, the assessee cannot claim exemption under Section 4(3)(vii) of the Act and the sum would be taxable, as urged by the Commissioner of Income Tax. That would, by itself, be sufficient to reverse the finding of the Income Tax Appellate Tribunal and to declare the sum to be taxable. But for completeness we consider also the contention of the learned counsel for the Income Tax Commissioner, that the receipt of ₹ 3000 would not also be of a casual and nonrecurring nature and could not therefore be exempted on that ground also, though we restrict our finding to the expression casual and do not want to go into the more complicated matter of the non-recurring nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not a case where there has been a purely voluntary service rendered and then something given in respect of that. It is a case in which, induced very probably by the voluntary service, the parties chose to enter into a contract for remuneration in respect of services. I think that that was the conclusion at which the Commissioners arrived. I think they rightly thought that this was a case assessable under case 6, and accordingly it results that the appeal, in my opinion, fails and must be dismissed. In Ryall v. Hoare, (1921-24) 8 Tax Cas. 521 : (1923-2 K. B. 447) the bankers of a company refused to allow its overdraft to be increased except upon the joint and several personal guarantee of its directors of whom the respondents were two. In consideration of such a guarantee the company granted to each of the directors a commission of two per cent. on the whole amount guaranteed. The respondents contended that the commissions arose from a casual, unsought and exceptional transaction and were not chargeable to Income Tax. It was held by Rowlatt J. that the commissions were not casual profits or gains and had been properly assessed to Income Tax and the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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