1984 (1) TMI 2 - HC - Income Tax

Arbitration receipts deemed taxable under Income-tax Act: Court rules on occupation status

The court held that the receipts from arbitration work were taxable as they constituted an 'occupation' under section 10(3) of the Income-tax Act, 1961. ... Casual And Non-recurring Receipt Issues Involved:1. Whether the sum of Rs. 28,830 received by the assessee as remuneration for arbitration work is exempt under section 10(3) of the Income-tax Act, 1961.Detailed Analysis:Issue 1: Exemption under Section 10(3) of the Income-tax Act, 19611. Facts and Background:- The assessee disclosed a total income of Rs. 8,576 for the assessment year 1970-71, including Rs. 28,830 received as remuneration for arbitration work, claimed as exempt under section 10(3) of the Income-tax Act, 1961.- The Income-tax Officer taxed this amount, noting the assessee had been receiving such remuneration since 1964-65, which had been previously taxed without objection.- The Appellate Assistant Commissioner ruled in favor of the assessee, stating the arbitration work was casual and non-recurring, thus exempt under section 10(3).- The Tribunal, on appeal by the Revenue, found the assessee had specialized knowledge and regularly engaged in arbitration work since his retirement, indicating it was an 'occupation.'2. Tribunal's Findings:- The assessee had specialized knowledge in industrial law and was sought after as an arbitrator.- The assessee's qualifications, skill, and experience in arbitration were well-known.- The assessee accepted arbitration work every year since 1962-63 through a firm of solicitors.- The arbitration work was not done gratis or for pleasure but as a regular activity.- The claim for deductions for rent and attendant pay indicated the permanency of the establishment.- The activity of arbitration was considered an 'occupation' subsidiary to his main occupation of agriculture.3. Arguments:- Assessee's Counsel:- Contended that arbitration work was different from other kinds of work and not a regular business or profession.- Claimed the receipts were casual and non-recurring, thus exempt under section 10(3).- Cited the case of B. Malick v. CIT [1968] 67 ITR 616 (All) to support the claim.- Revenue's Counsel:- Argued the arbitration work was regular and systematic, engaging the assessee's time and attention since retirement.- Contended the work was not casual or non-recurring, making the receipts taxable.- Distinguished the case of B. Malick v. CIT on the grounds of different facts and circumstances.4. Court's Analysis:- Section 10(3) excludes receipts of a casual and non-recurring nature unless they arise from business, profession, or occupation.- The court examined whether the receipts were from an 'occupation' and thus taxable.- The assessee's post-retirement activities included agriculture and arbitration, with the latter not being a business or profession.- The court referenced the definitions of 'business' and 'profession' under the Act, concluding the activities did not fit these categories.- The court considered whether the activities constituted a 'vocation' or 'occupation.'- The court noted the regularity and continuity of the arbitration work, the establishment maintained by the assessee, and the fact that previous receipts were taxed without objection.- The court concluded the arbitration work was an 'occupation' due to the regular and systematic nature of the activities.5. Precedents:- CIT v. M Ahmad Badsha Saheb [1943] 11 ITR 590 (Mad): Distinguished as the assessee was a merchant with a one-time arbitration role.- CIT v. V P Rao [1950] 18 ITR 825 (Mad): Applied as the case involved a retired judge regularly engaging in arbitration work.- B. Malick v. CIT [1968] 67 ITR 616 (All): Distinguished due to the unique circumstances of a sitting judge being requested to act as an umpire.Conclusion:The court held that the arbitration work constituted an 'occupation' under section 10(3) of the Income-tax Act, 1961, and the receipts from such work were taxable. The question was answered in the affirmative and against the assessee, with no order as to costs.