Professional receipts after discontinuance retain their source character and cannot be moved to the residuary head of income.

Outstanding professional fees received after discontinuance of a profession by an assessee on the cash basis retained their character as professional income. The Supreme Court majority held that the heads of income are mutually exclusive, so income traceable to a specific source cannot be shifted to the residuary head merely because it is not brought to tax under the corresponding computing provision in the year of receipt. The decisive question was the true character of the receipt, not the timing of receipt. As the amounts were fruits of professional activity, they were not taxable as income from other sources.

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Issues: Whether outstanding professional fees received after discontinuance of the profession by an assessee maintaining accounts on the cash basis were chargeable to tax under the head of professional income or under the residuary head of income from other sources.

Analysis: The majority held that the receipts were fruits of professional activity and therefore fell under the head of profits and gains of profession. The heads of income under the Act were treated as mutually exclusive, so income referable to a specific head could not be shifted to the residuary head merely because it was not chargeable under the corresponding computing provision in the year of receipt. The relevant inquiry was the character of the income, not the time of receipt. Since the profession had been discontinued and the receipts could not be brought to tax under the computing provision for professional income, they did not become income from other sources merely by reason of later receipt. The dissenting view took the opposite position and treated the receipts as falling within the residuary head.

Conclusion: The receipts were not taxable under section 10 or under section 12, and the appeals succeeded for the assessee.

Ratio Decidendi: Income arising from a professional source remains classified under that source according to its true character, and it cannot be transferred to the residuary head merely because it is received after discontinuance of the profession or escapes computation under the specific charging provision.

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