MRIDULA A SARABHAI Vs. COMMISSIONER OF EXPENDITURE TAX

JUDGEMENT

(1.) THIS reference raises a question whether certain expenditure incurred by the assessee is exempt from expenditure tax under S. 5(a) of the Expenditure Act, 1957. The reference arises out of assessments to expenditure tax made on the assessee as an individual for the asst. yrs. 1958 59 and 1959 60, the corresponding accounting years being the financial years ended 31st March, 1958, and 31st March, 1959. The assessee during the relevant years of account was working chiefly for the emotional integration between the people of India and Kashmir and she incurred expenditure amounting to Rs. 1,06,420 in the first year of account and Rs. 96,474 in the second year of account on publication and distribution of educative and informative literature on the subject of emotional integration between the people of India and Kashmir. This expenditure in both the accounting years consisted of items such as postage and telegrams, cost of publication of literature in English, cost of publication of literature in Hindi, salaries of staff, legal expenses, travelling expenses and telephone expenses. The assessee had to borrow moneys for the purpose of meeting this expenditure and on the borrowings the assessee paid a sum of Rs. 2,200 by way of interest in the first year of account. The assessee in the course of her assessment to expenditure tax claimed that the expenditure of Rs. 1,06,420 and Rs. 2,200 in the first assessment year and Rs. 96,474 in the second assessment year was exempt from expenditure tax under S. 5(a) as it was incurred wholly and exclusively for the purpose of the vocation or occupation carried on by her and in support of that claim she filed an affidavit dated 30th September, 1959, giving detailed particulars of her activities since the last forty years with a view to showing that what she was doing constituted her vocation or occupation and that the expenditure incurred by her was in connection with the said vocation or occupation. The claim of the assessee to exemption was, however, negatived by the Expenditure tax Officer on the ground that there was no possibility of any income arising from the activities of the assessee and her activities were nothing but "propagation of the assessee's views or thoughts on political problems in which she was interested" and they could not, therefore, be regarded as vocation or occupation within the meaning of S. 5(a). The assessee thereupon preferred appeals to the AAC but the AAC took the same view as the Expenditure tax Officer and rejected the appeals. The assessee then carried the matters in appeal to the Tribunal, there being two separate appeals for the two assessment years. The Tribunal disagreeing with the view taken by the Revenue authorities observed 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 must be capable of producing income. The Tribunal held that the activities described in the affidavit of the assessee occupied her fully and she was completely dedicated to her work and her activities must, therefore, be considered to be her vocation or occupation within the meaning of S. 5(a). The Tribunal then proceeded to consider whether the expenditure in question was incurred by the assessee wholly and exclusively for the purpose of her vocation or occupation and came to the conclusion, that having regard to the magnitude of the expenditure, it was not possible to say that the expenditure was incurred by her in connection with her vocation or occupation but it was an expenditure of a "whole party or organization." The Tribunal accordingly negatived the claim for exemption and rejected the appeals for both the assessment years. The assessee thereupon applied for a reference and on the application of the assessee, the Tribunal referred for our opinion the following two questions :

(2.) THE assessee had of course asked for a reference only of the second question which was decided against her by the Tribunal but the CIT submitted that, if a reference was being made, the first question should also be referred and hence the two questions before us.

(3.) APPLYING this test we held in that case that the activity of the assessee's wife constituted her occupation within the meaning of S. 5(a). The same test must also be applied here and if we apply it to the facts of the present case, it is clear that the activities of the assessee must be held to be her "occupation" within the meaning of S. 5(a).