Casual and non-recurring receipt: arbitration fee to a sitting judge was held exempt from income tax

A solitary arbitration fee received by a sitting High Court judge was held to be a casual and non-recurring receipt, not income arising from the exercise of a profession, vocation or occupation. The receipt was neither capital gain nor business income, and it was not shown to be additional remuneration for employment. Because the department failed to establish that the judge was carrying on a separate occupation as an arbitrator, and the payment was isolated and not legitimately expected to recur, it remained exempt. The later agreement to pay fees did not by itself change the character of the receipt. The amount was therefore not chargeable to income-tax.

---

---

Issues: Whether the sum of Rs. 20,000 received as arbitration fee by a sitting High Court judge was income liable to tax or was exempt as a casual and non-recurring receipt not arising from the exercise of a profession, vocation or occupation.

Analysis: The receipt was not capital gain and did not arise from business or as additional remuneration of an employee. The controlling question was whether the payment arose from the exercise of a profession, vocation or occupation. A sitting High Court judge could not ordinarily be treated as carrying on a separate profession or vocation as an arbitrator, and a solitary or exceptional engagement, accepted under special circumstances and without any pre-existing course of dealing, did not amount to the exercise of an occupation in the relevant sense. The receipt was also not shown to be anything other than isolated, exceptional, and not legitimately expected to recur. The later agreement to pay fees did not by itself deprive the receipt of its casual character. On the facts, the department did not establish that the amount arose from the exercise of a profession, vocation or occupation.

Conclusion: The receipt was exempt under section 4(3)(vii) and was not taxable income in the assessee's hands.

Final Conclusion: The reference was answered against the revenue, holding that the arbitration fee was a casual and non-recurring receipt not chargeable to income-tax on the facts found.

Ratio Decidendi: A solitary, exceptional receipt is exempt as casual and non-recurring unless it is shown to arise from the assessee's own profession, vocation or occupation actually carried on as such; mere engagement for payment does not, by itself, constitute the exercise of an occupation.

---