COMMISSIONER OF INCOME TAX Vs. K R HONNAPPA

JUDGEMENT

(1.) This is a reference under Section 256(1) of the Income Tax Act 1961. The question of law referred for our opinion is as follows :

(2.) The assessee was a member of the Karnataka Legislative Assembly during the accounting year relevant to the assessment year 1976-77. For that year, the Income-Tax Officer included a sum of Rs. 37,500/- to his income, which amount was the contribution collected by the admirers of the assessee and handed over to him for the purchase of a car. It was found by him that this payment was made on account of the admiration that the contributors had towards him for the service he rendered to the people of his constituency. The I.T.O. held that as this amount was in token of the gratitude for the service done by the assessee to the people of his constituency the same could not be treated as gratuitous payment without any consideration and was therefore includible in the total income of the assessee.

(3.) The assessee appealed unsuccessfully. The appellate authority held, while confirming the order of the I.T.O., thai it was because of his services to the people of the constilutency in the capacity as a member of the legislative assembly that the assessee was remunerated by way of a car and it constituted income within the meaning of Section 2(24)(va) of the Income-tax Act. On further appeal to the Tribunal, it was held that the car presented to the assessee amounted to a personal gift for his personal qualities and esteem and could not be subject to tax. The Tribunal also held that at best it could only be treated as gift and not as income of the assessee. At the instance of the Revenue, the question of law set forth above has been referred to us u/Section 256(1) of the Income-tax Act, with a statement of the case.