K. George Thomas Vs. Commissioner of
Income-Tax, Kerala [1986] INSC 99 (30 April 1986)
PATHAK, R.S. PATHAK, R.S. MUKHARJI,
SABYASACHI (J)
CITATION: 1986 AIR 1661 1986 SCR (2) 874 1986
SCC Supl. 269 1986 SCALE (1)1296
ACT:
Income Tax Act, 1961, v. 10(3)/ Income Tax
Act, 1922 s. 4(3) (vii) - Business income - Receipts from abroad - whether of
casual or non-recurring nature - Whether assessable as business income.
HEADNOTE:
The appellant is assessed to income tax in
the status of an individual. He runs a printing press and a daily language
newspaper. For the year 1962-63, he filed a return of income showing a loss.
The Income-tax Officer discovered that various remittances from abroad had been
received by the assessee as Vice-President of the India Gospel Mission.
On an enquiry he found that a major part of
the funds credited to the account maintained by the assessee in the name of the
Mission had been turned over to the newspaper and a sizeable part of it had
been utilised for his household expenses. He rejected the claim of the assessee
that the newspaper had been taken over by the Mission or that the drawings from
the account, on which no interest had been charged, constituted loans taken by
him in his individual capacity to be repaid in subsequent years, and being of
the view that the remittances had been made to the assessee entirely because of
his business and personal activities and that the funds of the Mission and the
newspaper had all been mixed up and treated together as one unit, and the assessee
had been operating upon all these funds as the individual owner of both the
newspaper and the funds, held that the entire receipts of cash from abroad were
relatable to the business activities of the assessee and were assessable to tax
as his income.
The Appellate Assistant Commissioner allowing
the assessee's appeal observed that the amounts withdrawn from the funds were
merely loans repayable by the assessee to the Mission, without however
recording any definite finding on that question or as to whether the
remittances constituted income of the assessee.
875 The Appellate Tribunal confirmed this
order in appeal by the Revenue holding that the receipts did not constitute
income of the assessee.
The High Court, following its decision in
C.I.T. v. Dr. K. George Thomas, [1974] 94 I.T.R., 11, answered the Reference in
favour of the Revenue and against the assessee holding that the amount was
assessable as the income of the assessee.
Similar questions were raised in Appeal Nos.
2918 and 2919 of 1977 in respect of the assessment years 1963-64 and 1964-65
respectively, and Appeal No. 2917 of 1977 assailed the legality and correctness
of the levy of penalty for not having submitted a return for the assessment
year 1962-63, but no separate submissions were made in those appeals.
Dismissing the appeals by certificate, the
Court, ^
HELD: 1. The receipts cannot be regarded as
of casual and non-recurring nature not arising from the assessee's business or
the exercise of his profession or occupation within the meaning of s. 10(3) of
the Income Tax Act, 1961 for the reasons set forth in Dr. K. George Thomas v.
C.I.T. Kerala, [1985] 156 I.T.R. 412 and are assessable to tax as the
assessee's income. [879 G-H] P. Krishna Menon v. Commissioner of Income-tax,
[1959 35 I.T.R. 48, referred to.
The distinction sought to be drawn between
the case for the assessment year 1960-61 and 1961-62 and the case for the
assessment year 1962-63 on the factum that in the former the remittances were
entered in the personal name of the assessee while in the latter the
remittances have been shown in a separate account standing in the name of the
India Gospel Mission is wholly without substance. [879 D-E] In the instant
case, the assessee had treated both the accounts as his personal accounts from
which heavy drawings were made from time to time entirely for his personal
objectives. The drawings from the account in the name of the Mission did not
constitute loans. The assessee had treated that account as an intimate part of
his personal funds. [879 E-G] 876
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
2916 A of 1977.
From the Judgment and Order dated 3.2.1977 of
the Kerala High Court in I.T.R. Case Nos. 22 to 25 of 1975.
Devi Pal, Ms. A.K. Verma and Sukumaran for
the Appellant.
K.C. Dua and Ms. A. Subhashini for the
Respondent.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by certificate granted by the Kerala High Court and
directed against the judgment of that High Court answering the questions
referred to it by the Income-tax Appellate Tribunal in favour of the Revenue
and against the appellant.
The assessee, who is the appellant before us,
is assessed to income-tax in the status of an individual. He runs a printing
press known as 'Kerala Dwani' and also a Malayalam daily newspaper of the same
name. For the assessment year 1962-63, he filed a return of income showing a
loss of Rs.3,37,183. The Income-tax Officer found that various remittances from
the United States of America had been received by him, ostensibly in his
capacity as Vice- President of the India Gospel Mission. The assessee
maintained two bank accounts with the Indian Overseas Bank, Kottayam. One
account was in the name of the assessee and the other in the name of the India
Gospel Mission. A credit of Rs.5,85,637 appeared in the account of the India
Gospel Mission. The Income-tax Officer enquired into the utilisation of the
funds credited in that account, and on examination of the material before him
he found that the major part of the funds had been turned over to the newspaper
'Kerala Dwani' and a sizeable part had been utilised for household expenses by
the assessee, such as the purchase of a cow, payment of house rent of his
father, personal trips to Bombay, purchase of property by the assessee, and
providing loan facilities to the assessee's close relatives including his
father, brothers and others without interest. The personal expenses met from
out of these 877 funds and the amount utilised for the purchase of properties A
in the name of the assessee and his five brothers were claimed by the assessee
as representing loans taken by him in his individual capacity to be repaid in
subsequent years.
The Income-tax Officer found that no interest
had been charged on those drawings and that the account showed that the
assessee had been operating on those funds in his complete discretion without
regard to any stipulated principles or directions. He found that the purchases
and the advances made for the purchase of properties found a place in the
Balance Sheet prepared for the India Gospel Mission. He rejected the claim of
the assessee that the newspaper, 'Kerala Dwani' had been taken over by the
India Gospel Mission and that the assessee had nothing to do with it. He found
that the statutory declarations required to be published by the newspaper
annually showed that the assessee in his individual capacity was the owner of
the press and the newspaper, and that no where was the India Gospel Mission
shown as having any connection with them as such or through him as
Vice-President of the India Gospel Mission.
The Income-tax Officer came to the conclusion
that on the examination of the entire material it was clear that the funds had
been received mostly for assisting the assessee in running the newspaper, and that
funds of the India Gospel Mission and the newspaper 'Kerala Dwani' had all been
mixed up and treated together as one unit and the assessee had been operating
upon all these funds as the individual owner of both the newspaper and the
funds. The Income-tax Officer observed that the remittances had been made to
the assessee entirely because of his business activities and had been utilised
by him for his business and personal activities. He held that the entire
receipts of cash from the United States of America were relatable to the
business activities of the assessee and were assessable to tax as the
assessee's income. He rejected the explanation of the assessee that the
drawings constituted loans taken from himself in his personal capacity and paid
to himself as Vice-President of the India Gospel Mission. Following the
decision in P. Krishna G Menon v. Commissioner of Income-tax, [1959] 35 I.T.R.
48 he brought the amount of Rs.5 India Gospel Missi n t ta as the in On appeal
by the assessee, the Appellate Assistant 878 Commissioner observed that the
amounts withdrawn from the funds were merely loans repayable by the assessee to
the India Gospel Mission but no definite finding was given on that question nor
did he render any finding on the question whether the receipt of Rs. 5,85,637
in the name of the India Gospel Mission constituted the income of the assessee.
The Appellate Assistant Commissioner relied essentially on an earlier order
made by the Income Tax Appellate Tribunal in the appeals arising out of the
assessments made for the assessment years 1960-61 and 1961-62, in which years
similar remittances to the assessee had been held by the Appellate Tribunal to
be not taxable.
The Income-tax Officer appealed to the
Income-tax Appellate Tribunal, and the Appellate Tribunal dismissed the appeal
because it preferred to follow its earlier order relating to the assessment
years 1960-61 and 1961-62 wherein it had held that the receipts from abroad did
not constitute the income of the assessee, and that even if they were assumed
to constitute his income they were receipts of a casual and non-recurring
nature not arising from business or the exercise of a profession or occupation
and, therefore, not taxable.
At the instance of the Revenue the Appellate
Tribunal referred the following two questions to the High Court of Kerala for
its opinion:
"(1) Whether, on the facts and
circumstances of the case, the Tribunal was right in finding that the amount of
Rs. 5,85,637 assessed by the Income- tax Officer was not assessable as the
income for the assessment year 1962-63? (2) Whether, on the facts and
circumstances of the case, the Tribunal was right in finding that the amount of
Rs. 5,85,637 are receipts of a casual and non-recurring nature not arising from
business or the exercise of a profession or occupation within the meaning of
section 10(3) of the Income- tax Act, 1961?" This reference was numbered
as Reference No. 22 of 1975 in the High Court.
879 By its judgment dated February 3, 1977,
the High Court held that the amount of Rs. 5,85,637 was assessable as the
income of the assessee for the assessment year 1962-63 and that the receipts
were not of a casual and non-recurring nature. A reference made to the High
Court against the order of the Appellate Tribunal for the assessment years
1960-61 and 1961-62, of which mention has been made earlier, had already been
answered by the High Court in favour of the Revenue and against the assessee.
That judgment has been reported as Commissioner of Income-tax v. Dr. K. George
Thomas, [1974] 97 I.T.R. 111. We may point out that that judgment of the High
Court was brought in appeal to this Court and was upheld by a Division Bench of
this Court, of which one of us (Sabyasachi Mukharji, J) was a member, and the
judgment of this Court has since been reported in Dr. K. George Thomas v.
Commissioner of Income Tax, Kerala, [1985] 156 I.T.R. 412. Upon that it is
clear that the basis on which the Appellate Tribunal proceeded to decide the
case in favour of the assessee stands displaced. Learned counsel for the
assessee contends, however, that there is a material difference between the
case for the assessment years 1960-61 and 1961-62 and the case for the
assessment year 1962-63 inasmuch as in the former case the remittances were
entered in the personal name of the assessee while in the present case the
remittances have been shown in a separate account standing in the name of the
India Gospel Mission. To our mind the distinction sought to be drawn is wholly
without substance, having regard to the overwhelming material on the record
showing that the assessee had treated both the accounts as his personal
accounts from which heavy drawings were made from time to time entirely for his
personal objectives. The case that the drawings from the account in the name of
the India Gospel Mission constituted loans is not supported by the evidence on
the record, and it is clear that the entire fund was treated as an intimate
part of the assessee's personal funds. That being so, the High Court is plainly
right in holding that the amount of Rs. 5,85,637 is assessable as the income of
the assessee for the assessment year 1962-63. It is also apparent that the
receipts cannot be regarded as of casual and non-recurring nature not arising
from the assessee's business or the exercise of his profession or occupation
within the meaning of s. 10(3) of the Income-tax Act. The decision of this
Court in P. Krishna Menon (supra) supports that conclusion. Indeed both the
questions arising 880 before us for the assessment year 1962-63 were, as we
have mentioned earlier, examined by this Court on corresponding facts relating
to the assessment years 1960-61 and 1961-62, and we cannot do better than adopt
the reasons set forth in that judgment in this case. This appeal, therefore, fails.
The other appeals before us arising out of
Reference No. 23 of 1975 raise the question of the legality and correctness of
the levy of penalty on the assessee for not having submitted a return for the
assessment year 1962-63, and Reference No. 24 of 1975 and Reference No. 25 of
1975 which raise similar questions for the assessment year 1963- 64 and 1964-65
respectively as in the Reference we have dealt with above. No separate
submissions have been made by learned counsel for the assessee on these appeals
and they must also fail.
In the result the appeals are dismissed with
costs.
P.S.S. Appeals dismissed.
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