1. These two appeals by the assessee for the assessment years 1982-83 and 1983-84 are directed against the orders of CIT(A). As common point is involved in both the assessment years, these appeals were heard together and are being disposed of by this common order.
2. The assessee firm in the period relevant to assessment years under consideration carried on business of "Hundi dalali". There is no dispute in respect of income computed by the revenue authorities. The assessee, however, claimed that it was entitled to benefit of lower rate of taxation as is applicable to registered firm deriving income from profession. There is no discussion in the order of the ITO but the CIT(A) rejected the above contention of the assessee and held that the assessee derived income from business activities.
3. Shri S.M. Kasbekar, the learned counsel for the assessee, submitted that the assessee carried on "its activities" without employing much capital and had exercised "intellectual skill" in earning its income.
The assessee did not purchase, manufacture or sell any commercial commodity. As partners of the assessee had sound knowledge of reputed parties where investment was safe and remunerative, persons interested in lending moneys on interest approached the assessee and the firm by employing its skill earned dalali receipt of more than Rs. 2 lacs in each of the two years under appeal. According to the learned counsel, the assessee firm possessed and used intellectual skill in earning dalali income and, therefore, the firm derived income from profession.
The learned counsel relied on decision of the Supreme Court in CIT v.Manmohan Das [1960] 59 ITR 699 and on the decision of the Allahabad High Court in Addl. CIT v. Ram Kripal Tripathi [1980] 125 ITR 408. The learned Departmental Representative brought to our notice observations made by Sampath Iyengar in "Law of Income-tax" 7th Edn., page 740 wherein the learned authors, after relying upon several Indian and English decisions, have observed that in deciding whether a person carried on profession or not, importance should be attached to whether he is a member of any organised profession with recognised standard of ability enforced before he can enter it and recognised standard of conduct in force while he is practising in it. The learned Departmental Representative cited example of Durant v. IRC 12 TC 245 (CA) where a person, specialised in preparing income-tax returns and getting refunds, was held to be carrying on "business" and not "profession".
Similarly, he cited example of surveyers who were rendering advise to the owners and to insurance companies. These persons were also held to be carrying on business and not "profession". As per the learned Departmental Representative, the decision of the Supreme Court cited by the assessee supported the case of the revenue that assessee did not carry any profession.
4. We have heard the parties and examined the material placed cm record and the case law cited before us. In support of the claim apart from the case law, the assessee has filed before us, copy of profit and loss account relevant to the A.Y. 1982-83 where it has shown gross receipt from dalali at Rs. 2,22,277 and net profit credited to partner's account after deducting certain establishment expenses at Rs. 1,65,465.
Similar is the position in the A.Y. 1983-84. The assessee firm in both the years comprised of 8 partners. As stated earlier, as per the rate schedule pf taxation annexed to Finance Acts, concessional treatment has been given to the registered firm "whose total income includes income derived from a profession carried on by it and the income so included is not less than 51% of such total income". Such concessional treatment for example is given under Sub-paragraph II of paragraph 'C' of first schedule annexed to Finance Act, 1982. The assessee has claimed that in the relevant period it derived income from a profession carried on by it.
To determine the controversy in appeals, it is necessary to consider1 as to "what is income derived from profession" or in other words, whether dalali receipts in the hands of the assessee can be termed as income derived from professional activities. The terms "business" and "profession" are defined as per Section 2(13) and (36) of the Income-tax Act as under :-- 2(13)-- "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.
The above inclusive definitions of expressions "business" and "profession" are not of much help nor they bring about the distinction between the two terms to resolve the controversy before us. We must, therefore, keep common, natural and ordinary meaning of term "profession" in mind while deciding these appeals. The object of the schedule providing for lower rate of taxes in case of a firm deriving income from "profession" is also to be kept in view. Divinity, law and medicine are treated learned "professions" since the ancient times. In modern times, persons in several other branches of art, science and humanity because of their specialised study, training and indepth knowledge; of various subjects claim and are treated as learned professionals. It is not necessary that a person to be a professional must be member of some organisation. We feel it is impossible to lay down any strict legal definition of term "profession". In some cases attempts have been made to define what broadly be the meaning of expression 'profession'. In Ram Kripal Tripathi's case (supra) their Lordships of the Allahabad High Court defined the word "profession" as under :-- The expression 'profession' thus involves the idea of an occupation requiring purely intellectual skill or manual skill controlled toy the intellectual skill of the operator, as distinguished from an occupation or business which is substantially the production or sale, or arrangements for the production or sale, of commodities.
In Manmohan Das' case (supra) on which both the parties before us relied, their Lordships of the Supreme Court have made the following observations :-- It is difficult to regard the occupation of the treasurer under the agreement as a profession for a profession involves occupation requiring purely intellectual or manual skill and the work of the treasurer under the contract cannot be so regarded. Occupation of a treasurer is not one of the recognized professions, nor can it be said that it partakes of the character of a business or trade.
In the above case a treasurer was held to be following a vocation.
There is thus agreement between the parties before us that "profession" involves occupation requiring purely intellectual skill or manual skill controlled by intellectual skill of the operator. In other words, to carry on a profession, it is essential to possess and employ some intellectual skill or manual skill controlled by intellectual skill. It is difficult to accept that every kind of knowledge or information ordinarily acquired in a day or a week can be termed as a "intellectually skilled" or "professional" knowledge. "Skilled intellectual knowledge" require training, study and/or practice for a length of time. Forwarding agent having knowledge of railway forms, Chemists and Compounders possessing some knowledge of medicines, Clerks of Lawyers possessing knowledge of procedure followed by courts, in spite of their more than ordinary knowledge, cannot be called "professionals" because they lack "skilled intellectual knowledge".
They do not know scientist legal basis of matter or procedure. As to what standard or degree of knowledge of subject would qualify as "professional" would depend upon facts and circumstances of each case.
The assessee firm of 8 partners maintained an establishment for carrying on its dalali activities in the two years under consideration.
The firm invited borrowers as also lenders and effected match of parties and earned dalali/commission from both of them. There is no material on record to show that partners or the employees of assessee firm possessed any specialised knowledge of safe reputed investors and gross dalali receipts shown by the assessee are attributable to any special knowledge. Assuming for the sake of arguments that the partners of the assessee firm or people employed by it have some knowledge of the safe investment, the above cannot be termed to be a skilled knowledge. What is the training required for acquiring the knowledge and information claimed to be used by the assessee in services rendered for earning dalali income The assessee, in our opinion, only rendered services of commercial nature and not professional services. We are not in a position to hold that the assessee firm or its partners possessed any intellectual skill which was used in earning the dalali income. The assessee firm, in our opinion, carried only business activity and not any professional. In the circumstances, the assessee was rightly charged income-tax as per schedule applicable to the firms carrying on business and not profession.