Full Judgment Text
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PETITIONER:
P. KRISHNA MENON
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAX, MYSORE, TRAVANCORE-COCHIN
DATE OF JUDGMENT:
07/10/1958
BENCH:
SARKAR, A.K.
BENCH:
SARKAR, A.K.
AIYYAR, T.L. VENKATARAMA
GAJENDRAGADKAR, P.B.
CITATION:
1959 AIR 75 1959 SCR Supl. (1) 133
CITATOR INFO :
D 1961 SC 946 (15,20,21)
R 1986 SC 98 (14)
R 1986 SC1661 (26)
ACT:
Income-tax-Assessee leaching Vedanta without object of mak-
ing profit-If carrying on a vocation-Disciple making gift of
money-Whether-receipt amounts to income from vocation-Indian
Income-tax Act, 1922 (XI Of 1922), S. 10.
HEADNOTE:
The assessee was teaching his disciples Vedanta philosophy
without any motive or intention of making a profit out of
such activity. One of his disciples made gifts of money to
him on several occasions. It was contended by the assessee
that he was not liable to tax on the amounts received as he
was not carrying on any vocation and as the receipts were
not profits or gains.
Held that, in teaching Vedanta the assessee was carrying on
a vocation. It is not necessary for an activity to be a
vocation
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that it should be an organised activity or that it should be
practiced with a motive for making profit.
Commissioner of Inland Revenue v. Incorporated Council of
Law Reporting, (1888) 3 Tax Cas. 105, 113, followed.
Held, further, that the payments made by the disciple, were
income received by the assessee from his vocation. In the
case of a voluntary payment, no tax can be levied on it if
it had been made for reasons purely personal to the donee
and unconnected with his office or vocation but it will be
taxable if it was made because of the office or the vocation
of the donee. The question is not what the donor thought he
was doing but why the donee received it. In the present
case it is plain that it was because of the teaching that
the gift had been made.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 401 of 1956.
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Appeal by special leave from the judgment and order dated
March 8, 1956, of the Travancore-Cochin High Court at
Ernakulam in I.T.R. No. 24 of 1954.
A. V. Viswanatha Sastri, S. R. Ganapathy Iyer, J. B.
Dadachanji and G. Gopalakrishna, for the appellant.
K. N. Rajagopala Sastri, R. H. Dhebar and D. Gupta, for
the respondent.
1958. October 7. The Judgment of the Court was delivered by
SARKAR J.-The appellant who was a Superintendent of Police
in the service of the former Travancore State, retired
sometime in 1940. After retirement he was spending his time
in studying Vedanta philosophy and expounding the same to
such persons as were keen on understanding it. He soon
gathered about him a number of disciples, one of whom was J.
H. Levy of London, U.K. Levy along with others used to
receive instructions in Vedanta from the appellant. He used
to come to Travancore from England at regular intervals and
stay there for a few months at a time and attend the
discourses given by the appellant and so had the benefit of
his teachings on Vedanta.
Levy had an account in Lloyd’s Bank at Bombay. On December
13, 1941, Levy transferred the entire balance standing to
his credit in this account amounting to Rs. 2,41,103-11-3,
to the credit of an account which he got the appellant to
open in his name in the
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same bank. Thereafter, from time to time Levy put in
further sums into the appellant’s aforesaid account in
Lloyds Bank, Bombay. It appears that the payments so made
up to August 19, 1951, amounted to about Rs. 4,50,000/-.
From time to time the appellant got moneys transferred from
his account at the Lloyd’s Bank, Bombay, to his account in a
bank at Trivandrum in Travancore.
This appeal arises out of orders for assessment to income-
tax passed against the appellant for the assessment years
1122, 1123 and 1124, all according to the Malayalam era.
The respective accounting periods according to the Gregorian
calendar were from August 17, 1945, to August 16, 1946,
August 17, 1946, to August 16, 1947, and August 17, 1947, to
August 16, 1948. It appears that during these periods Levy
bad deposited in the appellant’s account at Lloyd’s Bank in
Bombay the following respective sums: Rs. 13,304/-, Rs.
29,948/- and Rs. 19,983/-. During the same periods the
appellant had obtained transfers of the following respective
sums from his Bombay account to his Trivandrum account: Rs.
81,200/-, Rs. 47,000/- and Rs. 37,251/-. The Income-tax
Officer, Trivandrum, assessed the appellant to tax on the
latter amounts as foreign income, i.e., income arising in
India, and brought into Travancore State in the relevant
periods. We are not concerned in this case with the
assessment made on other income of the appellant. Tile
appellant appealed from these assessment orders to the
Appellate Assistant Commissioner who consolidated them into
one appeal. The Appellate Assistant Commissioner dismissed
the appeal and confirmed the orders of the Income-tax
Officer. The appellant then went up in appeal to the
Appellate Tribunal but that appeal also failed.
The appellant thereafter obtained an order from the Tribunal
referring the following Questions to the High Court of
Travancore-Cochin for decision:
(i) Whether the aforesaid receipts from John H. Levy
constitute income taxable under the Travancore Income-tax
Act, 1121 ? and
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(ii) Whether there are materials for the Tribunal to hold
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that the deposits into the assessee’s bank. account in
Bombay by John H. Levy from 1941 as aforesaid represented
income that accrued to the assessee outside Travancore State
? "
The High Court answered the first question in the
affirmative. It however answered the second question in
favour of the appellant, holding that he was carrying on a
vocation or occupation in that State and the income derived
therefrom should be considered as having arisen in
Travancore, and that therefore the appellant was liable to
be taxed not on the amounts which he brought into Travancore
but on the amounts which had been paid to the credit of his
account at Bombay by Levy during the relevant periods. The
appellant has now come up to this Court in appeal by special
leave against the answer given -by the High Court to the
first question. We are not concerned in this appeal with
the answer given to the second question as it had been
decided in favour of the appellant and there has been no
appeal against it by the revenue authorities.
We do not think that the case presents any difficulty. It
has to be decided on the terms of the Travancore Income-tax
Act, 1121 (Malayalam Era), but as the provisions of that Act
are, for. the present purpose, identical-with those of the
Indian Income-tax Act, 1922 , it would be more convenient to
refer to the provisions of the latter.
Mr. Sastri, appearing for the appellant, has stated that the
case involves really two points. First, was the appellant
carrying on a vocation ? And secondly, if he was, can the
amounts with which we are concerned, be said to be profits
or gains of the vocation ? We agree with his view of the
case and proceed to discuss these points.
The first question is, whether the appellant was carrying on
a vocation. Under s. 10 of the Income-tax Act, 1922, tax is
payable by an assessee in respect of the profit or gains of
any profession or vocation carried on by him. The facts
found are that the appellant was studying Vedanta philosophy
himself and
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imparting the knowledge acquired by him as a result of his
studies to such as cared to come and imbibe it. There is no
evidence to show, that the appellant had made it a condition
that he would impart such knowledge only to those who were
prepared to pay for it. We have therefore to proceed on the
basis that the appellant was teaching his, disciples Vedanta
without any motive or, intention of making a profit out of
such activity.
We find no difficulty in thinking that teaching is a
vocation if not a, profession.. It is plainly so and it is
not necessary to discuss the various meanings of the word.
’vocation’ for the purpose or to cite authorities to support
this view. Nor do we find any reason why, if teaching is a
vocation, teaching of Vedanta is not. It is just as much
teaching, and therefore, a vocation, as any other teaching.
It is said that in teaching Vedanta the appellant was only
practicing religion. We are unable to see why teaching of
Vedanta as a matter of religion is not carrying, on of a
vocation. In any case the question does not really arise,
for, Whether the appellant was, in teaching Vedanta,
practicing religion, is of course a finding of fact. It may
be that Vedanta could be taught as a practice of religion
but it could of course also be taught as any other philo-
sophy or school of thought. The statement of case in this.
case does not contain any finding that in teaching Vedanta
the appellant was practicing religion.
It is said that in order that an activity may be called a
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vocation for the purposes of the Act, it has to be shown
that it was an organised activity and that it was indulged
in with a motive of making profit ; that as the appellant’s
activity in teaching Vedanta was neither organised nor
performed with a view to making profit, he could not be said
to. be carrying on a vocation. It is said that as the word
’vocation’ has been used along with the words ’business and
profession’ and the object of a business and a profession is
to make a profit, only such activities can be included in
the word ’vocation’ the object of which likewise is to make
a profit. We think that these contentions
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138
lack substance. We do not appreciate the significance of
saying that in order to become a vocation an activity must
be organised. If by that a continuous, or as was said, a
systematic activity, is meant, we have to point out that it
is well-known that a single act may amount to the carrying
on of a business or profession. It is unnecessary to
discuss this question further as we find no want of system
or continuity in the activity of the appellant. He had
gathered a large number of disciples around him and was
instructing them in Vedanta regularly. Levy came all the
way from England at regular intervals to obtain such
instructions. All this clearly indicates Organisation and
system.
Again, it is well-established that it is not the motive of
the person doing an act which decides whether the act done
by him is the carrying on of a business, profession or
vocation. If any business, profession or vocation in fact
produces an income, that is taxable income and none the less
because it was carried on without the motive of producing
any income. This, we believe, is too well-established on
the authorities now to be questioned. It was decided as
early as 1888 in the case of the Commissioner of Inland
Revenue v.
Incorporated Council of Law Reporting(1) and followed ever
since, that " it is not essential to the carrying on of a
trade that the people carrying it on should make a profit,
nor is it even necessary to the carrying on of the trade
that the people carrying it on should desire or wish to make
a profit". If that were not so, a person carrying on what
otherwise would be a business, may say that he did not carry
on a business because it was not his intention to make any
income out of it. That would, of course, be absurd. The
question is, whether the activity has actually produced an
income and it matters not whether that activity is called by
the name of business, profession, vocation or by any other
name or with what intention it was carried on. The
observation of Rowlatt, J., in Stedeford v. Beloe (2) to
which we were referred by Mr. Sastri, that there could be no
tax on pension granted to a retired
(1) (1888)3 Tax Cas. 105, 113. (2) (1930) 16 Tax Cas. 505.
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headmaster as "there is no background of business in it ",
was clearly not intended to lay down that without a profit
motive there could be no business, profession or vocation.
The pension could be taxed only if it had arisen out of the
office and the only point decided was that it had not so
arisen as the headmaster held no office, having retired
earlier, at the date the pension had been granted: see the
same case in the House of Lords(1). We think therefore that
the teaching of Vedanta by the appellant in this case can
properly be called the carrying on of a vocation by him.
Then the other point to be decided is, whether the payments
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made by Levy were income received by the appellant from his
vocation of teaching Vedanta. A very large number of
authorities, both Indian and English, have been pressed upon
us in tile course of the argument. These cases illustrate
the application of the well-settled principle that in the
case of a voluntary payment, no tax can be levied on it if
it bad been made for reasons purely personal to the donee
and unconnected with his office or vocation while it will be
taxable if it was made because of the office or vocation of
the donee. We do not consider it profitable to discuss them
in this case. Also it seems to us that the present case is
too plain to require any authority. The only point is,
whether the moneys were received by the appellant by virtue
of his vocation. Mr. Sastri contended that the facts showed
that the payments were purely personal gifts. He drew our
attention to the affidavit of Levy where it is stated " all
sums of money paid into his account by me have been gifts to
mark my esteem and affection for him and for no other
reason". But Levy also there said, " I have had the benefit
of his teachings on Vedanta ". It is important to remember
however that the point is not what the donor thought he was
doing but why the donee received it. So Collins M. R. in
Herbert v. McQuade referring to Inland Revenue v. Strong
said at p. 649:
" Now that judgment,. whether or not the
(1) (1932) A. C. 388. (2) (1902) 2 K.B. 631.
(3) (1878) 1 Tax CaS. 207.
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particular facts justified it, is certainly an affirmation
of a principle of law that a payment may be liable to
income-tax although it is voluntary on the part of the
persons who made it, and that the test is whether, from the
standpoint of the person who receives it, it accrues to him
in virtue of his office ; if it does, it does not matter
whether it was voluntary or whether it was compulsory on the
part of the persons who paid it. That seems to me to be the
test; and if we once get to this-that the money has come to
or accrued to, a person by virtue of his office-it seems to
me that the liability to income tax is not negatived merely
by reason of the fact that there was no legal obligation on
the part of the persons who contributed the money to pay
it."
It is well established that in cases of this kind the real
question is, as Rowlatt J. put it in Reed v. Seymour (1), "
But is it in the nature of a personal gift or is it a
remuneration?", an observation which was quoted with
approval by Viscount Cave, L. C. when the case went up to
the House of Lords with the addition " If the latter, it is
subject to the tax ; if the former, it is not ": see Seymour
v. Reed (2). We find it impossible to hold in this case
that the payments to the appellant had not been made in
consideration of the teaching imparted by him. Levy
admitted that he had received benefit from the teaching of
the appellant. It is plain to us that it was because of the
teaching that the gift had been made. It is true that Levy
said that he made the gifts to mark his esteem and affection
for the appellant. But such emotions and therefore the
gifts, were clearly the result of the teaching imparted by
the appellant. Mr. Sastri contends that that may be so, but
we have no right to follow the successive causes and as a
result thereof link the gift with the teaching. An argument
of this kind seems to have been advanced in Blakiston v.
Cooper (3) and dealt with by Lord Ashbourne in the following
words: "It was suggested that the offerings, were made as
personal gifts to the Vicar as marks of esteem and
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(1) (1926) 1 K.B. 588. (2) (1927) A.C. 554.
(3) (1909) A.C. 104.
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respect. Such reasons no doubt played their part in
obtaining and increasing the amount of the offerings, but I
cannot doubt that they were given to the vicar as vicar. and
that they formed part of the profits accruing by reason of
his office." We have no doubt in this case that the
imparting of the teaching was the causa causans of the
making of the gift; it was not merely a causa sine qua non.
The payments were repeated and came with the same regularity
as Levy’s visits to the appellant for receiving instructions
in Vedanta. We do not feel impressed by Mr. Sastri’s
contention that the first payment of Rs. 2,41,103-11-3 was
too large a sum to be paid as consideration. In any case we
are not concerned in this case with that payment. We are
concerned with payments which are of much smaller amounts
and as to which it has not been -said that they were too
large to be a consideration for the teaching. And one must
not forget, that these are cases of voluntary payments and
the question of the appraisement of the value of the
teaching received in terms of money is not very material.
If the first payment was too big to have been paid for the
teaching received, it was too big to; have been given purely
by way of gift.
In the view that we take, namely, that the payments with
which we are concerned, were income, arising from the
vocation of the appellants a teacher of Vedanta, no question
of exemption under s. 4(3)(vii) of the Act arises. In order
that a payment may be, exempted under that section, it has
to be shown that it did not arise from the exercise of a
vocation.
In the result, we have come to the conclusion that this
appeal fails and it is dismissed with costs in this Court.
Appeal dismissed.
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