Commissioner of Expenditure Tax,
Andhra Pradesh Vs. Shri PVG Raju, Rajah Of Vizianagaram  INSC 233 (29
CITATION: 1976 AIR 140 1976 SCR (1)1017 1976
SCC (1) 241
Expenditure Tax Act, (29 of 1957), s. 5 (a)
and (j)- Politics if a pro fession - Gratuitous payments towards election
expenses of party candidates and to office bearers- if 'donation'.
Under s. 5 (a) and (j) of the Expenditure Tax
Act, 1957, no expenditure tax shall be payable on any expenditure incurred by
the assessee wholly and exclu sively for the purpose of his business profession
or vocation, and on any expenditure incurred by the assessee by way of
The respondent-assessee was the Chairman of the
State Socialist Party and politics was his profession or occupation. He is a
wealthy socialist and spent Rs. 38,832/- towards election expenses of other
candidates of his party, and gave Rs. 47,867/- to the office-bearers of his
party to meet the expenses involved in party work.
HELD: The two amounts are eligible for
exclusion from expenditure tax.
[1021 B] (1) Under modern conditions,
politics is a profession or occupation. [1020 C] (2) But the expenses incurred
on behalf of other candidates cannot be the assessee's professional expenses.
[1020 D] (3) The amounts, however, fall under
s. 5(j) of the Act. When a person gives money to another without any material
return, he donates that sum. Therefore, when the assessee gave money to the
candidates of his party for their elections expenses, it was money gratuitously
given, that is he made donations. [1020 E-G] (4) Similarly, the amounts paid to
office-bearers of the party were not for any material return. They were for
loyalty or gratitude. Wholly motiveless donation is rare but material return
alone negates a gift or donation. Therefore, they also were outright gifts.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 30 of 1971.
Appeal by special leave from the judgment and
order dated the 19th February, 1970 of the Andhra Pradesh High Court in case
Reference No. 2 of 1967.
R. M. Mehta and S. P. Nayar for the
P. Ram Reddy and A.V.V. Nair for the
The Judgment of the Court was delivered by
KRISHNA IYER, J.
Politics and philanthropy may well fall
victims to the contruction of s. 5(a) and (j) of the Expenditure. Tax Act, 1957
(the Act for 1018 short) if we fall victim to the submission naively made, at
the first stage, by counsel for the State. In fairness to him, we must state
that later he retracted from that position, and rightly so, for the Act, in
spirit and letter, does not intend this blow on the profession of politics or
the disposition for donations.
A fair reading of the provisions in question convincingly
excludes from 'taxable expenditure' sums wholly and exclusively incurred for
the purpose of a profession or occupation carried on by the assessee and no
modern man may dispute that politics is a profession or occupation.
Likewise, expenditure by way of gift or
donation incurred by the assessee is also excluded and no politically conscious
soul will deny that donation to the party in a democracy squarely comes within
this exclusionary provision.
The factual matrix Expenditure tax under the
Act was sought to be levied from the assessee PVG Raju, the respondent before
Paradoxical, perhaps, it may appear-but here
is a case of a rich Maharaja practising the politics of socialism, spending
lavishly for furthering his party's popularity and the prospects of his fellow
candidates at the elections to the Andhra Pradesh Legislative Assembly. This
expenditure, falling under two heads, was taxed by the assessing authority and
upheld up to the Tribunal level. The High Court, on reference, reversed the findings
on both counts and the Commissioner of Expenditure Tax, the appellant,
challenges the legality of this verdict.
The best beginning in stating the facts may
well is to extract the questions of law referred by the Tribunal in its own
"(1) Whether on the facts and in the
circumstances of the case the expenditure of Rs. 38,832/- claimed to be the
amount incurred by the assessee for the benefit of other candidates for
election is excludible from the taxable expenditure either under Section 5 (a)
or under Section 5 (j) of the Expenditure Tax Act ? (2) Whether on the facts
and in the circumstances of the case the sum of Rs. 47,867/- claimed to be
party expenses could be excluded from the taxable expenditure of the assessee
either under Section 5(a) or under Section 5(i) of the Expenditure Tax Act ? We
have to assume the following facts as implied in the very questions referred to
the High Court and from the attendant circumstances. They are:
(a) that the respondent, during the relevant
period was the Chairman of the State Socialist Party which was interesting
itself in electoral politics;
1019 (b) the respondent was a wealthy
(c) that he was meeting not only the
expenditure of his own elections but spending moneys for the benefit of other
candidates belonging to his party;
(d) that he was issuing cheques to the
Secretary and other office-bearers of his party to meet the expenses involved
in party work.
He expended Rs. 38,832/- for propelling the
election prospects of other party candidates during the election.
Likewise, he gave Rs. 47,867/- to his party
through its office-bearers. On these facts the question is whether he is
eligible for exclusion of the two sums from expenditure tax either under s.
5(a) or under s. 5(j) of the Act.
Consideration of the legal issue It is
appropriate to start with reading the relevant portion of s 5 of the Act:
"s. 5. No. expenditure-tax shall be
payable under this Act in respect of any such expenditure as is referred to in
the following clauses, and such expenditure shall not be included in the
taxable expenditure of an assessee. . .
(a) any expenditure, whether in the nature of
revenue expenditure or capital expenditure, incurred by the assessee wholly and
exclusively for the purpose of the business, profession, vocation or occupation
carried on by him or for the purpose of earning income from any other source;
(b) to (i)...
(j) any expenditure incurred by the assessee
by way of, or in respect of any gift, donation or settlement on trust or
otherwise for the benefit of any other person." The assessee was Party
Chairman and politics was undoubtedly his profession or occupation, it being
admitted that his interest in politics was not causal nor sporadic but abiding
The contention of the respondent which met
with success before the High Court was that the election expenses of other
candidates set up by him as Chairman of the Socialist Party, loosely described
as 'party expenditure', were incurred wholly and exclusively for the purpose of
his 'profession' or 'occupation'. So, the first point which arrests our
attention in examining this contention is as to whether politics of the
socialist brand or otherwise is a profession or occupation.
There can hardly be any doubt that it is
either, or both. Harold Laski treated politics as a science and wrote his
well-known book on the Grammar of Politics, but the art of politics at a
practical level has also been the subject of comment and has been praised and
denounced on the basis that it is a profession. To Gandhiji it is sacred as
religion. In Lincoln it rises to noble heights of statesman- 1020 ship. Lenin,
Nehru and a galaxy of other great visionaries and makers and moulders of the
modern world have dedicated themselves to politics as a profession. Of course
in its vulgar and vicious manifestations, this occupation has been regarded by
literary giants like Dr. Johnson as the last refuge of a scoundrel'. Robert
Louis Stevenson has used barbed words: 'Politics is perhaps the only profession
for which no preparation is thought necessary (Familiar studies of Men and
Books, 'Yoshida-Torajiro'). George Bernard Shaw uses stinging language in Major
Barbara: 'He knows nothing;
and he thinks he knows everything. That
points clearly to a political career'. It is thus clear, without reference to
the wealth of case-law relied on by the High Court, that politics has been a
profession and, indeed, under modern conditions in India, perhaps the most
popularand uninhibited occupation-with its perils, of course. Law cannot take
leave of realities and therefore s. 5(a) must bear the construction that
politics is a profession or occupation.
The next question is whether the expenditure
incurred by the assessee for the election of candidates set up by him as
Chairman of his party can be legitimately regarded as incurred 'wholly and
exclusively' for the purpose of his profession or occupation. We have grave
doubts whether meeting the expenses of other candidates can be fulfillment of
his professional expenses, but this question deserves no deeper probe for the
simple reason that s. 5(j) embraces the expenditure as it does answer the
description of a donation.
When a person gives money to another without
any material return, he donates that sum. An act by which the owner of a thing
voluntarily transfers the title and possession of the same from himself to
another, without any consideration, is a donation. A gift or gratuitous payment
is, in simple English, a donation. We do not require lexicographic learning nor
precedential erudition to understand the meaning of what many people do every
day, viz., giving donations to some fund or other, or to some person or other.
Political donations are not only common, but
are assuming deleterious dimensions in the public life of our country. It is
therefore clear that when this Raja assessee gave money to the candidates of
his Party for them to meet their election expenses, he made donations. Even if
he met their election expenditure, it was money gratuitously given on their
behalf and therefore amounted to donation. Without straining language, we reach
the natural conclusion that what the respondent expended for the other
candidates during the elections was 'donation' in the language of the law.
There is no suggestion nor evidence that any
material return was in contemplation when he spent these sums. Being a
politically important man with plenty of money and vitally interested in
boosting his Party's standing in the State, he donated liberally for candidates
set up by the party. In this view s. 5(j) aplies to these donations which earn
exemption from the expenditure tax.
The next item relates to sums gives to the
Socialist Party. It is reasonable to assume that the amounts paid to the
office-bearers 1021 of the party were without an eye on any material return
other than loyalty or gratitude. They were outright gifts.
Indeed, many rich people out of diverse
motives make donations to political parties. The hope of spiritual benefit or
political goodwill, the spontaneous affection that benefaction brings, the
popularisation of a good cause or the prestige that publicised bounty
fetches-these and other myriad consequences or feelings may not mar a donation
to make it a grant for a quid pro quo. Wholly motiveless donation is rare, but
material return alone negates a gift or donation. We need not investigate the
propriety or political donations 'unlimited' and often invisible. All that we
need consider is whether such sums are gifts and donations or are
non-gratuitous payments with a tag of return. We have no doubt that on the
question as framed, and on the facts and circumstances present, these sums were
paid purely as gifts and donations to his Party by the respondent. It is not
surprising either, because he was the Chairman of the said party, had a long
and liberal purse from which to draw and a large circle of support to build up
in the long run.
The inevitable conclusion from our discussion
is that both the heads of expenditure fall under s.5(j) of the Act and,
therefore, flow out of the assessable zone. The High Court's conclusion is
sound and the appeal deserves to be and is hereby dismissed, but without costs.
V.P.S. Appeal dismissed.