COMMISSIONER OF INCOME TAX Vs. NAR HARI DALMIA

JUDGEMENT

(1.) The Respondent 1n this case was a Director of M/s. Hari Brothers (P) Ltd., a private limited company. He undertook a foreign tour accompanied by his wife, the cost of which amounting to Rs. 29,793.00 was borne by the Company. This amount was claimed by the company as an expenditure incurred by it for and in the course of its business in the return filed by it for the Assessment Year 1957-58, the relevant accounting year being 1-4-1956 to 31-3-1957. The amount was not allowed as an expenditure incurred by the company and that order became final. The information about this amount not being allowed as an expenditure of the company and as having been held to be an amount paid to the respondent was sent to the Income-tax Officer who assessed the respondent as an individual. As a consequence of this information received by the Income-tax Officer in regard to the respondent, action under section 34(1) of the Income-tax Act, 1922 was initiated against the respondent wherein it was alleged that this amount of Rs. 29,793.00 was taxable in the hands of the respondent but had escaped assessment inasmuch as in the return filed by the respondent for the relevant year as an in dividual the receipt of this amount had not been shown. The Income-tax Officer by his order dated 31st January 1962 taxed this amount in the hands of the respondent holding that it was his income within the meaning of Section 2(6C) (iii) of the Income-tax Act, 1922. The Income-tax Officer repelled the cointention of the respondent that the provisions of Section 2(6C)(iii) were not attracted unless the Director concerned holds substantial interest in the company. Aggrieved by this assessment the respondent filed an appeal which was disposed of by order dated 5th October, 1962 passed by the Appellate Assistant Commissioner of Income-tax, D-Range New Delhi. Before the Appellate Assistant Commissioner two contentions were raised on behalf of the respondent, viz. that the Income-tax Officer was wrong in assessing this income in pursuance of notice under section 34 and that without prejudice to the first contention the expenditure relating to the respondent's wife could not be included in the income of the respondent. Both contentions were repelled and the assessment order was upheld. The respondent then filed an appeal to the Income-tax Appelate Tribunal, Delhi Bench 'C.'. New Delhi. Before the tribunal the contention raised was that the incomes sought to be taxed did not fall under the provisions of Section 2(6C) (iii) of the Act as it was neither a benefit nor perquisite and that even if it is income it was exempt from taxation under the provisions of Section 4(3) (vii) of the Act. The Tribuna held that the amount in question was income in the hands of the assessee under the provisions of Section 2(6C) (iii) but the assessee could avail of the exemption provided by section 4(3)(vii) of the Income-tax Act, 1922. Accordingly, the appeal was accepted and the assessment was set aside. Thereupon the department claimed a reference and the following question has been referred to the High Court:-

(2.) The statement of case as sent to this Court is not very clear or precise. All the same certain admitted facts can bs discerned from the record placed before us. These are as follows :-

(3.) Mr. A. N. Kirpal, the learned counsel for the Revenue has urged two points before us. His contentions are (a) that on the amitted facts the amount of Rs. 29,793.00 must be regarded as income of the respondent within the meaning of Section 2(6C) (iii) of the Act of 1922; and (b) that the receipt of Rs. 29,793.00 in the hands of the respondent being a receipt arising from business or the exercise of a profession, vocation or occupation would not attract the exemption contemplated by section 4(3)(vii) of the Act. The contention of Mr. S. K. Mitra, the learned counsel for the Respondent 1s that neither is this amount income as contended by Mr. Kirpal and that even if it is income it was not derived by the exercise of a profession, vocation or occupation and must be treated to be of a casual and non-recurring nature and so would be exempt from taxation.