1966 (10) TMI 3 - HC - Income Tax

Kerala High Court: Printing income taxable as business income under Income-tax Act

Thayat Versus Commissioner of Income-Tax, Ernakulam.

The High Court of Kerala upheld the Tribunal's decision, ruling in favor of the department. The court determined that the income derived by the assessee ... Assessee is the author of a book - agreement with the Govt. of Kerala, whereby he undertook to print an edition of the book and supply the copies of that edition to the Govt. of Kerala - Tribunal was right in holding that the provisions of s. 12AA of the Act did not apply and that the income of the assessee was income from business Issues:1. Interpretation of section 12AA of the Income-tax Act, 1922 regarding the time taken by the assessee to write a book.2. Permission to raise the contention that the income of the assessee did not fall under section 12AA of the Income-tax Act, 1922.3. Determination of whether the income of the assessee was income from business or a casual or non-recurring income.Analysis:The judgment delivered by the High Court of Kerala involved a reference by the Income-tax Appellate Tribunal regarding the assessment year 1959-60. The key questions revolved around the interpretation of section 12AA of the Income-tax Act, 1922. The assessee, an author of a book, had sold the copyright to a publisher in 1956 but later reacquired it to print a Kerala edition for the Government of Kerala. The crux of the matter was whether this agreement constituted an assignment of the copyright triggering the application of section 12AA.The court examined the agreement between the assessee and the Government of Kerala and concluded that it did not involve an assignment of the copyright but rather a contractual obligation to print and supply copies of the book. The court highlighted that the right to publish the Kerala edition remained with the assessee, who acted as both the printer and publisher. The absence of any indication of the Government acquiring publishing rights supported this finding.Furthermore, the court referenced the Copyright Act, 1957, and the Press and Registration of Books Act, 1867, to emphasize that the agreement did not transfer the copyright ownership to the Government. The court noted the failure of the assessee to provide a copy of the Kerala edition as evidence, which would have revealed his dual role as the printer and publisher. Consequently, the court agreed with the Tribunal's decision and answered the questions against the assessee, confirming that the income in question was from business and not exempt as a casual receipt.In conclusion, the High Court of Kerala upheld the Tribunal's decision, ruling in favor of the department and holding that the income derived by the assessee from printing the Kerala edition was taxable as business income. The judgment provided a detailed analysis of the contractual obligations and copyright implications, ultimately clarifying the application of section 12AA in the context of the case.