1978 (3) TMI 75 - HC - Income Tax

Arbitration income not exempt under Income Tax Act; deemed occupation, not casual.

K. Sankaran Versus Commissioner Of Income-Tax, Kerala

K. Sankaran Versus Commissioner Of Income-Tax, Kerala - [1978] 115 ITR 561, 1978 CTR 311 Issues Involved:1. Whether the remuneration received by the assessee for arbitration and commission work was casual and non-recurring in nature.2. Whether such receipts arise from the exercise of a profession, vocation, or occupation.Detailed Analysis:Issue 1: Casual and Non-Recurring Nature of ReceiptsThe primary question was whether the remuneration received by the assessee for various arbitration and commission assignments was casual and non-recurring, thereby qualifying for exemption under clause (3) of section 10 of the I.T. Act, 1961.- Arbitration in Cannanore-Tellicherry Electricity Dispute (1962-63): The assessee, a retired Chief Justice, was appointed as an arbitrator under the Madras Electricity Undertaking (Acquisition) Act, 1954. The remuneration of Rs. 12,000 was agreed upon after consultation and paid during the financial year 1961-62.- Gwalior Rayons Arbitration (1964-65 to 1966-67): The assessee was persuaded to accept the arbitration work with a remuneration of Rs. 15,000 for ten sittings, later adjusted to Rs. 750 per additional sitting. The total remuneration received over three assessment years was Rs. 47,250.- Revision of Stage Carriage Fares (1967-68 and 1968-69): The assessee chaired a government committee with a fixed honorarium of Rs. 1,000 per month plus allowances. The total received was Rs. 9,968 over two years.- Engineering Employees' Association and Kerala State Electricity Board Dispute (1968-69): The assessee was appointed arbitrator with a fixed remuneration of Rs. 15,000.- Enquiry into Irregularities in Kerala State Electricity Board Contracts (1968-69 and 1969-70): The assessee was appointed as the Commission of Enquiry with a fixed honorarium of Rs. 15,000 per month.- Dispute between Kerala State Electricity Board and Ministerial Gazetted Officers (1969-70): The assessee served as a one-man commission with a remuneration of Rs. 10,000.- Allegations against Travancore Devaswom Board Members (1970-71 to 1972-73): The assessee was appointed to conduct an enquiry with a monthly honorarium of Rs. 1,500.The court concluded that the receipts were not casual as they were anticipated, agreed upon, and remunerated as per fixed terms. The remuneration was foreseen and calculated, thus failing the test of being 'casual.'Issue 2: Receipts Arising from the Exercise of a Profession, Vocation, or OccupationThe court examined whether the receipts could be classified as arising from the exercise of a profession, vocation, or occupation.- Definition and Scope: The court referred to various judgments and dictionary definitions to interpret 'profession,' 'vocation,' and 'occupation.' It was observed that 'occupation' has a broad meaning, encompassing any activity that occupies time and attention.- Case References: The court discussed the judgments in CIT v. V. P. Rao and Malick's case. In V. P. Rao's case, the Madras High Court held that remuneration for arbitration work by a retired judge was income from an occupation. In contrast, in Malick's case, the Allahabad High Court ruled that the remuneration received by a sitting Chief Justice for arbitration work was casual and non-recurring due to the extraordinary circumstances surrounding the appointment.- Conclusion: The court agreed with the broader interpretation of 'occupation' as anything that occupies time and attention. It concluded that the activities undertaken by the assessee constituted an occupation. Therefore, the receipts were not exempt under section 10(3) as they arose from the exercise of an occupation.Final Judgment:The court held that the remuneration received by the assessee was not casual and non-recurring and arose from the exercise of an occupation. The question referred by the Tribunal was answered in the negative, against the assessee, and in favor of the department. No order as to costs was made.