1985 (6) TMI 63 - AT - Income Tax

Political pensioner's token payment not taxable under Income-tax Act due to voluntary nature & lack of legal right.

The payment received by the assessee as a political pensioner was held not to qualify as 'income' under the Income-tax Act, 1961. The token payment was ... Assessment Year, Previous Year Issues:Assessment of political pension as income under the Income-tax Act, 1961 for the assessment year 1980-81.Analysis:The appeal pertains to the assessment of Rs. 1,260 received by the assessee as political pension for the assessment year 1980-81. The assessee claimed the amount to be exempt, while the Income Tax Officer (ITO) assessed it as 'pension as disclosed.' The first appellate authority held it to be exempt under section 10(17B) of the Income-tax Act, 1961. The amount was received by the assessee as a political sufferer, a freedom fighter during the British regime, without any consideration or source, solely based on the services rendered during the freedom movement. The payment was voluntary and continuous, depending on the discretion of the giver. The key issue was whether this amount qualifies as 'income' under the Act.The provisions of sections 2(24), 2(45), and 5 of the Income-tax Act, 1961, along with the charging section 4, were analyzed to determine the taxability of the amount received by the assessee. It was established that not all receipts can be deemed as 'income' for tax purposes. The nature of the receipt and the relevant taxing provisions play a crucial role in determining whether a receipt constitutes income. In this case, the amount received by the assessee was considered a 'dole,' a receipt without consideration, and not falling within the ambit of 'income' as defined in the Act. Legal precedents were cited to support the argument that voluntary payments without a legal right or consideration are not taxable as income.The conclusion reached by the learned Judicial Member and the Accountant Member was in favor of the assessee. The payment received by the assessee as a political pensioner was held not to qualify as 'income' under the Income-tax Act, 1961. The token payment was considered an honorarium for the services rendered as a freedom fighter, not a pension for specific services. The voluntary nature of the payment, without any legal right or consideration, led to the decision that it does not constitute taxable income. Legal precedents were cited to support the view that such voluntary payments, solely dependent on the whim of the payer, cannot be categorized as income for tax purposes. The judgment emphasized the importance of recognizing and respecting such payments made to freedom fighters without subjecting them to taxation.