R. Parthepan Vs. Income Tax Officer - Court Judgment

Excerpt:
1. this appeal by the assessee relates to asst. yr. 1990-91 and arises out of the order of the cit(a)-viii, madras. the assessee is a cine actor.2. in response to notice of hearing dt. 17th december, 1998, sent by r.p.a.d. fixing the hearing of the appeal on 24th february, 1999, the assessee sent a letter dt. 28th january, 1999, praying that the appeal be disposed of on the basis of submissions made in the grounds of appeal. the ground raised by the assessee in this appeal is to the effect that the cit(a) has misdirected herself in holding that the personal gifts of rs. 2,07,000 received by the assessee from his relatives, friends and fans, for enabling him to buy a house, as professional receipts. we have heard the learned departmental representative and considered the grounds raised by the assessee.3. the brief facts of the case are that the assessee received a sum of rs. 2.07 lakhs on the 100th day celebration of his first film 'pudhiya pathai'. before the ao the assessee filed a paper cutting which says that a cheque from the fans association, etc. was handed over by the then chief minister to the assessee. the assessee claimed that the sum of rs. 2.07 lakhs so received by him was merely a gift and not chargeable in his hands. the ao, however, considered there is a direct nexus between the receipt of the money and the professional activities of the assessee, moreso considering the fact that this has been given to him only for his acting in the film 'puthiya pathai'. the ao, therefore, added the said sum of rs. 2.07 lakhs as assessee's professional receipts. in first appeal, the cit(a) considered that the amount of rs. 2.07 lakhs is includible in the assessee's total income under s. 28(iv) of the it act, 1961. she, therefore, confirmed the order of the ao in this regard. hence the assessee is in further appeal before the tribunal.4. the learned departmental representative referred to the assessment order and p. 2 of the order of the cit(a) and argued that the receipt of rs. 2.07 lakhs by the assessee from the fans association, etc. on the 100th day celebration of the film is closely connected with the profession of the assessee and was in recognition of his professional activity. in support of this contention the learned departmental representative referred to the following decisions : 5. we have carefully considered the facts of the case, grounds of appeal, arguments of the learned departmental representative and the case law cited. it is for the it authorities to prove that a particular receipt is taxable. the word "income" as used in the it act is wide and vague in its scope. it is a word of elastic import. normally the word 'income' in the act connotes a periodical monetary return coming in with some sort of regularity or expected regularity from a definite source. but whatever may be the concept of "income" under the act, voluntary payments made even for a longer period of time without consideration and without any source of income depending entirely on the whims of giver are not income. all receipts by an assessee cannot necessarily be deemed to be the income of the assessee for the purpose of income-tax and whether any particular receipt is income or not depends on the nature of the receipt. the it authorities cannot assess all receipts and they could assess only those receipts that amount to income. in the present assessee's case before us it is clear that the amount of rs. 2.07 lakhs was received by him from fans association and the cheque was handed over by the then chief minister to the assessee at the time of 100th day celebrations of the firm 'puthiya pathai', as mentioned by the ao at p. 2 of the assessment order. the amount of rs. 2.07 lakhs was contributed by the fans association at the time of 100th day celebration of the film. it was purely a voluntary payment made by the fans association and there is no evidence on record that it was a continuous source of income. for acting in the films the assessee receives amounts from the film producers as professional receipts. the receipt from the fans association which was voluntarily given to the assessee may be in appreciation of the services of the assessee as a professional artiste, but it was not income of the assessee in the sense that the receipt of rs. 2.07 lakhs was not professional receipt of the assessee but only a voluntary contribution by the fans association. the payment of rs. 2.07 lakhs was entirely dependent on the whims of the fans association and they were not obliged to give any contribution to the assessee. we are therefore, of the opinion that since the receipt of rs. 2.07 lakhs was purely voluntary payment made by the fans association it was not in the nature of 'income' liable to tax under the it act.6. the learned departmental representative relied on the calcutta high court's decision in the case of david mitchell vs. cit (supra). but the facts in that case are entirely different from those in the present assessee's case. in the case of david mitchell (supra) the assessee was an accountant by profession and a partner in a firm of chartered accountants. some time before 1946 the promoters of a company engaged the services of this firm to assist them in the floatation of the company, and the assessee, as a partner of the firm attended to this work. after the company was floated and the firm was paid in full for their services one of the promoters "as a token of appreciation for the assistance rendered to him by the assessee in connection with the floatation of the company made an unsolicited gift of 2,500 shares in the company" to the assessee. the issue was whether the receipt of 2,500 shares in the company constituted assessee's income. the hon'ble calcutta high court held that the payment was made in appreciation of the professional services rendered by the assessee and in order to give him an extra profit over and above the share of the profit he may get from the firm, and the value of the shares was, therefore, assessable as the income of the assessee under s. 10 of the indian it act, 1922.the facts remains that in that case 2,500 shares were given to the assessee in appreciation of the professional services rendered by him by the promoter of the company. but in the assessee's case before us the payment of rs. 2.07 lakhs was contributed by the fans association to whom no services were rendered by the assessee. therefore, the facts in the case of david mitchell (supra) are not applicable to the facts of the present assessee's case.7. in the case of govindlalji ranchhodlalji vs. cit (supra) relied on by the learned departmental representative the assessee, who was a direct descendant of the original founder of a religious faith, received offerings made to him from time to time by his devotees. it was held by their lordships of the bombay high court that the income from the gifts was taxable under the it act because the gifts were made to the assessee not because of his personal characteristics but because he was the head of the religious sect, and the assessee held an office and it was only that office that induced his disciples to make the gifts. in that case their lordships of the bombay high court considered that even a practice of religion could become a vocation and more so, when it brought in a steady income. but in the present assessee's case though the assessee was following a profession of acting in the films, there was no practice of receiving voluntary contributions from the fans association regularly. in the case of govindlalji ranchhodlalji (supra) decided by the bombay high court the assessee was holding an office and it was only that office that induced his disciples to make the gifts. in the present case no such office is held by the assessee which induced the fans to make gifts to the assessee.8. the learned departmental representative also relied on the decision of the hon'ble supreme court in p. krishna menon (supra). in that case the assessee after his retirement from government service, was spending his time in studying and teaching vedanta philosophy. one mr. j. h.levy of london, who was one of his disciples, used to come from england at regular intervals to trivandrum, where the assessee resided, and stay there for a few months at a time and attend his discourses, and so received instructions in vedanta and had the benefit of his teachings.mr. j. h. levy transferred the entire balance standing to his credit in his own account at bombay, amounting to more than rs. 2 lakhs, to the account of the assessee opened in the latter's name in the same bank at bombay. thereafter, from time to time, mr. levy put in further sums into the assessee's account in bombay. the question was whether the receipts from mr. levy constituted income of the assessee taxable under the travancore it act, 1121. it was held by their lordships of the supreme court, that teaching was a vocation, if not profession, and teaching vedanta was just as much teaching as any other teaching, and therefore, a vocation. it was further held that teaching of vedanta by the assessee was the carrying on of a vocation by him and that the imparting of the teaching was the causu causans of the making of the gifts by mr. j. h. levy. in this case their lordships considered that the payments to the assessee were made in consideration of the teaching imparted by him and, therefore, were income arising from vocation of the assessee. but in the present case before us, the assessee has not rendered any service to the fans association directly or indirectly.the fans association has also not made payments to the assessee in consideration of any services rendered to them. therefore, the facts in the case of p. krishna menon (supra) are clearly distinguishable. as the payment of rs. 2.07 lakhs to the assessee by the fans association was voluntary, the same was not in the nature of income. we, therefore, reverse the findings of the authorities below on this issue and allow the ground raised by the assessee.9. the learned cit(a) has included the amount of rs. 2.07 lakhs under the provisions of s. 28(iv) of the act. under this section the value of any benefit or perquisite, whether convertible into money or not, arising from the business or the exercise of profession, is chargeable to tax under the head "profits and gains of business or profession".the words "benefit or perquisites" were considered by the hon'ble supreme court in the case of cit vs. mafatlal gangabhai & co. (p) ltd. (1996) 219 itr 644 (sc) in the context of provisions of s. 40a(5). it was held on interpretation of word "perquisite" in cl. (b) of expln. 2 to sub-s. (5) of s. 5 that the language employed in sub-clause of sub-s. (5) of s. 40a(5); "whether convertible into money or not" following the words "any benefit or amenity or perquisite" is not capable of taking within its ambit cash payments. in that case though cash payments for h.r.a., conveyance allowance, furniture allowance, etc. were held as forming part of the salary paid to the employees, because those cash payments in respect of h.r.a. conveyance allowance, etc. were received by the employees from the employer. similar language has been used in s. 28(iv) of the act and, therefore, the value of any benefit or perquisite, whether convertible into money or not, will not take within its ambit cash payments made to the assessee by the fans association. the value of any benefit or perquisite whether, convertible into money or not, as mentioned in s. 28(iv) should arise from the exercise of a profession. in other words, the value of benefit or perquisite should arise from the producers of the films to whom services are rendered by the assessee. therefore, in our view the provisions of s. 28(iv) are not applicable in the assessee's case in respect of cash gifted to him by the fans association.

Judgment:
1. This appeal by the assessee relates to asst. yr. 1990-91 and arises out of the order of the CIT(A)-VIII, Madras. The assessee is a cine actor.

2. In response to notice of hearing dt. 17th December, 1998, sent by R.P.A.D. fixing the hearing of the appeal on 24th February, 1999, the assessee sent a letter dt. 28th January, 1999, praying that the appeal be disposed of on the basis of submissions made in the grounds of appeal. The ground raised by the assessee in this appeal is to the effect that the CIT(A) has misdirected herself in holding that the personal gifts of Rs. 2,07,000 received by the assessee from his relatives, friends and fans, for enabling him to buy a house, as professional receipts. We have heard the learned Departmental Representative and considered the grounds raised by the assessee.

3. The brief facts of the case are that the assessee received a sum of Rs. 2.07 lakhs on the 100th day celebration of his first film 'Pudhiya Pathai'. Before the AO the assessee filed a paper cutting which says that a cheque from the fans association, etc. was handed over by the then Chief Minister to the assessee. The assessee claimed that the sum of Rs. 2.07 lakhs so received by him was merely a gift and not chargeable in his hands. The AO, however, considered there is a direct nexus between the receipt of the money and the professional activities of the assessee, moreso considering the fact that this has been given to him only for his acting in the film 'Puthiya Pathai'. The AO, therefore, added the said sum of Rs. 2.07 lakhs as assessee's professional receipts. In first appeal, the CIT(A) considered that the amount of Rs. 2.07 lakhs is includible in the assessee's total income under s. 28(iv) of the IT Act, 1961. She, therefore, confirmed the order of the AO in this regard. Hence the assessee is in further appeal before the Tribunal.

4. The learned Departmental Representative referred to the assessment order and p. 2 of the order of the CIT(A) and argued that the receipt of Rs. 2.07 lakhs by the assessee from the fans association, etc. on the 100th day celebration of the film is closely connected with the profession of the assessee and was in recognition of his professional activity. In support of this contention the learned Departmental Representative referred to the following decisions : 5. We have carefully considered the facts of the case, grounds of appeal, arguments of the learned Departmental Representative and the case law cited. It is for the IT authorities to prove that a particular receipt is taxable. The word "income" as used in the IT Act is wide and vague in its scope. It is a word of elastic import. Normally the word 'income' in the Act connotes a periodical monetary return coming in with some sort of regularity or expected regularity from a definite source. But whatever may be the concept of "income" under the Act, voluntary payments made even for a longer period of time without consideration and without any source of income depending entirely on the whims of giver are not income. All receipts by an assessee cannot necessarily be deemed to be the income of the assessee for the purpose of income-tax and whether any particular receipt is income or not depends on the nature of the receipt. The IT authorities cannot assess all receipts and they could assess only those receipts that amount to income. In the present assessee's case before us it is clear that the amount of Rs. 2.07 lakhs was received by him from fans association and the cheque was handed over by the then Chief Minister to the assessee at the time of 100th day celebrations of the firm 'Puthiya Pathai', as mentioned by the AO at p. 2 of the assessment order. The amount of Rs. 2.07 lakhs was contributed by the fans association at the time of 100th day celebration of the film. It was purely a voluntary payment made by the fans association and there is no evidence on record that it was a continuous source of income. For acting in the films the assessee receives amounts from the film producers as professional receipts. The receipt from the fans association which was voluntarily given to the assessee may be in appreciation of the services of the assessee as a professional artiste, but it was not income of the assessee in the sense that the receipt of Rs. 2.07 lakhs was not professional receipt of the assessee but only a voluntary contribution by the fans association. The payment of Rs. 2.07 lakhs was entirely dependent on the whims of the fans association and they were not obliged to give any contribution to the assessee. We are therefore, of the opinion that since the receipt of Rs. 2.07 lakhs was purely voluntary payment made by the fans association it was not in the nature of 'income' liable to tax under the IT Act.

6. The learned Departmental Representative relied on the Calcutta High Court's decision in the case of David Mitchell vs. CIT (supra). But the facts in that case are entirely different from those in the present assessee's case. In the case of David Mitchell (supra) the assessee was an accountant by profession and a partner in a firm of chartered accountants. Some time before 1946 the promoters of a company engaged the services of this firm to assist them in the floatation of the company, and the assessee, as a partner of the firm attended to this work. After the company was floated and the firm was paid in full for their services one of the promoters "as a token of appreciation for the assistance rendered to him by the assessee in connection with the floatation of the company made an unsolicited gift of 2,500 shares in the company" to the assessee. The issue was whether the receipt of 2,500 shares in the company constituted assessee's income. The Hon'ble Calcutta High Court held that the payment was made in appreciation of the professional services rendered by the assessee and in order to give him an extra profit over and above the share of the profit he may get from the firm, and the value of the shares was, therefore, assessable as the income of the assessee under s. 10 of the Indian IT Act, 1922.

The facts remains that in that case 2,500 shares were given to the assessee in appreciation of the professional services rendered by him by the promoter of the company. But in the assessee's case before us the payment of Rs. 2.07 lakhs was contributed by the fans association to whom no services were rendered by the assessee. Therefore, the facts in the case of David Mitchell (supra) are not applicable to the facts of the present assessee's case.

7. In the case of Govindlalji Ranchhodlalji vs. CIT (supra) relied on by the learned Departmental Representative the assessee, who was a direct descendant of the original founder of a religious faith, received offerings made to him from time to time by his devotees. It was held by their Lordships of the Bombay High Court that the income from the gifts was taxable under the IT Act because the gifts were made to the assessee not because of his personal characteristics but because he was the head of the religious sect, and the assessee held an office and it was only that office that induced his disciples to make the gifts. In that case their Lordships of the Bombay High Court considered that even a practice of religion could become a vocation and more so, when it brought in a steady income. But in the present assessee's case though the assessee was following a profession of acting in the films, there was no practice of receiving voluntary contributions from the fans association regularly. In the case of Govindlalji Ranchhodlalji (supra) decided by the Bombay High Court the assessee was holding an office and it was only that office that induced his disciples to make the gifts. In the present case no such office is held by the assessee which induced the fans to make gifts to the assessee.

8. The learned Departmental Representative also relied on the decision of the Hon'ble Supreme Court in P. Krishna Menon (supra). In that case the assessee after his retirement from Government service, was spending his time in studying and teaching Vedanta philosophy. One Mr. J. H.Levy of London, who was one of his disciples, used to come from England at regular intervals to Trivandrum, where the assessee resided, and stay there for a few months at a time and attend his discourses, and so received instructions in Vedanta and had the benefit of his teachings.

Mr. J. H. Levy transferred the entire balance standing to his credit in his own account at Bombay, amounting to more than Rs. 2 lakhs, to the account of the assessee opened in the latter's name in the same bank at Bombay. Thereafter, from time to time, Mr. Levy put in further sums into the assessee's account in Bombay. The question was whether the receipts from Mr. Levy constituted income of the assessee taxable under the Travancore IT Act, 1121. It was held by their Lordships of the Supreme Court, that teaching was a vocation, if not profession, and teaching Vedanta was just as much teaching as any other teaching, and therefore, a vocation. It was further held that teaching of Vedanta by the assessee was the carrying on of a vocation by him and that the imparting of the teaching was the causu causans of the making of the gifts by Mr. J. H. Levy. In this case their Lordships considered that the payments to the assessee were made in consideration of the teaching imparted by him and, therefore, were income arising from vocation of the assessee. But in the present case before us, the assessee has not rendered any service to the fans association directly or indirectly.

The fans association has also not made payments to the assessee in consideration of any services rendered to them. Therefore, the facts in the case of P. Krishna Menon (supra) are clearly distinguishable. As the payment of Rs. 2.07 lakhs to the assessee by the fans association was voluntary, the same was not in the nature of income. We, therefore, reverse the findings of the authorities below on this issue and allow the ground raised by the assessee.

9. The learned CIT(A) has included the amount of Rs. 2.07 lakhs under the provisions of s. 28(iv) of the Act. Under this section the value of any benefit or perquisite, whether convertible into money or not, arising from the business or the exercise of profession, is chargeable to tax under the head "profits and gains of business or profession".

The words "benefit or perquisites" were considered by the Hon'ble Supreme Court in the case of CIT vs. Mafatlal Gangabhai & Co. (P) Ltd. (1996) 219 ITR 644 (SC) in the context of provisions of s. 40A(5). It was held on interpretation of word "perquisite" in cl. (b) of Expln. 2 to sub-s. (5) of s. 5 that the language employed in sub-clause of sub-s. (5) of s. 40A(5); "whether convertible into money or not" following the words "any benefit or amenity or perquisite" is not capable of taking within its ambit cash payments. In that case though cash payments for H.R.A., conveyance allowance, furniture allowance, etc. were held as forming part of the salary paid to the employees, because those cash payments in respect of H.R.A. conveyance allowance, etc. were received by the employees from the employer. Similar language has been used in s. 28(iv) of the Act and, therefore, the value of any benefit or perquisite, whether convertible into money or not, will not take within its ambit cash payments made to the assessee by the fans association. The value of any benefit or perquisite whether, convertible into money or not, as mentioned in s. 28(iv) should arise from the exercise of a profession. In other words, the value of benefit or perquisite should arise from the producers of the films to whom services are rendered by the assessee. Therefore, in our view the provisions of s. 28(iv) are not applicable in the assessee's case in respect of cash gifted to him by the fans association.