PETITIONER:
K. GEORGE THOMAS
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, KERALA
DATE OF JUDGMENT30/04/1986
BENCH:
PATHAK, R.S.
BENCH:
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assessee's appeal observed that the amounts withdrawn from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
JUDGMENT:
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.
881