CET Vs. AMBALAL SARABHAI

JUDGEMENT

(1.) THIS reference raises a short question of law relating to the applicability of S. 5(a) of the Expenditure tax Act, 1957. The question is whether a certain amount expended by the assessee's wife for the purpose of attending meetings of four institutions of social welfare is exempt from expenditure tax under that provision. The reference arises out of assessment of the assessee as an individual for the asst. year 1959 60, the relevant accounting year being the financial year 1958 59. The assessee's wife was, during the relevant year of account, associated in different capacities with about twenty four institutions and organizations engaged in social welfare work and she was also connected with certain other institutions and organizations with which she had to carry on correspondence during the relevant year of account. Out of these twenty four institutions with which she was associated in one capacity or the other, there were four whose meetings were held outside Ahmedabad and they were (1) Kasturba Gandhi National Memorial Trust, (2) National Council of Women, (3) Bombay State Welfare Board, and (4) Nutan Bagh Shiksha Sangh. The assessee's wife incurred an expenditure of Rs. 5,182 for attending the meetings of these four institutions during the relevant year of account. The expenditure of the assessee's wife was included for the purpose of computation in the taxable expenditure of the assessee under S. 4(ii) and the question, therefore, arose whether the expenditure of Rs. 5,182 incurred by the assessee's wife was taxable as expenditure of the assessee or was exempt from expenditure tax. The assessee claimed that this expenditure was incurred by his wife wholly and exclusively for the purpose of her vocation or occupation of social service carried on by her and it was, therefore, exempt from expenditure tax under S. 5(a). The claim to exemption was negatived by the Expenditure tax Officer on the ground that there was no possibility of any income arising from the activity of the assessee's wife and it could not, therefore, be regarded as a vocation or occupation within the meaning of S. 5(a). The assessee there upon preferred an appeal to the AAC but the AAC took the same view as the Expenditure tax Officer and the appeal was unsuccessful. The assessee then carried the matter in appeal to the Tribunal and before the Tribunal the fortunes were reversed : the assessee succeeded in establishing his claim to exemption under S. 5(a). The Tribunal took the view that, in order that an activity should be a vocation or occupation within the meaning of S. 5(a), it was not necessary that there should be any element of profit making motive in it or that it should be carried on by the assessee with intent to make profit. The Tribunal pointed out that the assessee had furnished a list of various institutions and organizations with which his wife was connected in different capacities and observed that it was, therefore, evident that the assessee's wife was a woman who was dedicated to social and constructive work and, in the circumstances, the activity of the assessee's wife must be held to be a vocation or occupation of a social worker within the meaning of S. 5(a). The Tribunal also held that the expenditure in question was incurred by the assessee's wife in connection with her vocation or occupation of a social worker and the expenditure was, therefore, exempt from tax, even though in carrying on the activity she was not actuated by any profit making motive. The Tribunal rejected the contention of the Revenue that under S. 5(a) the only expenditure which was eligible to exemption was expenditure incurred by the assessee and since the expenditure in the present case was an expenditure incurred by the assessee's wife, no exemption could be claimed in respect of it under s. 5(a). The Tribunal pointed out that it would be highly inequitous if the benefit of the exempting provisions contained in S. 5 was held restricted only to expenditure actually incurred by the assessee and was not extended to expenditure which, though not actually incurred by the assessee, was yet includible in the taxable expenditure of the assessee. The Tribunal accordingly held that the expenditure incurred by the assessee's wife was exempt under S. 5(a). This view taken by the Tribunal is challenged before us in the present reference made at the instance of the Commr. of Expenditure tax.

(2.) TWO questions are referred to us for our opinion and they are :

(3.) THE Revenue contended that, in order that an activity may be a vocation or occupation within the meaning of S. 5(a), it must be shown that it was indulged in with a motive of making profit ; that, as the activity of social service carried on by the assessee's wife was not performed with a view to making profit and there was no element of profit making motive in it, the assessee's wife could not be said to be carrying on a vocation or occupation within the meaning of that section. The Revenue relied strongly on the context in which the words "vocation or occupation" occur in the section and particularly the juxtaposition of the words "for the purpose of earning income from any other source" as indicating the legislative intent that vocation or occupation must also be an activity calculated to produce income. But this contention can no longer be accepted in view of the decision of the Supreme Court in P. Krishna Menon vs. CIT (1959) 35 ITR 48 (SC). The assessee in that case was teaching his disciples Vedanta without any motive or intention of making profit out of such activity and the question was whether, in the absence of profit making motive or intent, the activity could be regarded as a vocation. The Supreme Court held :