C LAKSHMI RAJYAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, an actress, was engaged to to take the part of heroine in a cinematograph film entitled Samsaram produced by a firm of partners, carrying on business in the name of Sadhana Pictures. THEre was no dispute that the assessee had been paid all that was due to her under the contract of service. THE picture, which was released to the public, in December, 1950, was a great success. On May 5, 1951, Ranganatha Dass, who had half a share in the Sadhana Pictures executed a document in favour of the assessee, agreeing to pay her a fourth of his share of the realisations from the picture the assessee was to have no liability, if it were to turn out that there was a loss in the picture. THE agreement to pay a share in the future realisations from the picture was purely a gratuitous and Voluntary act on the part of Ranganatha Dass. Two months later, he married the assessee. That circumstance, however, is mentioned only to be dismissed as having no bearing on the question of the motive or reason which induced the agreement, whereby the assessee obtained a share in the realisations of the film. THE preamble to the document, the relevant portion of which is extracted below, contains a statement of the purpose, for which the gift was made to the assessee "Whereas the party of the second part (assessee) is featured 'in the chief heroine's role in the picture, and she has acquitted herself in the said role most creditably, and contributed to the unique success of the picture to a very great extent

(2.) AND whereas in consideration of the whole-hearted help, co-operation and valuable services rendered by the party of the second part, in respect of the production and completion of the picture the party of the first part (Ranganatha Dass) has undertaken to give her from his share of the realisations of the picture a special remuneration in addition to the fixed remuneration paid by the firm for her services as artist in the pictureBy virtue of the agreement referred to above, the assessee received two sums of Rs. 63, 258 and Rs. 10, 362, during the two years of account corresponding to the assessment years 1952-53 and 1953-54 (the assessee's year of account being the financial year). The Income-tax Officer included those amounts in the assessment of the assessee to tax for the respective years the assessment was upheld on appeal by the Appellate Assistant Commissioner, and also by the Appellate Tribunal. The following question has been referred under section 66(1) of the Indian Income Tax Act, 1961

(3.) AN emolument, or perquisite of an employee may be paid to him under a contract it is also possible to conceive of cases, where there may be customary presents attached to an employment. AN employer may also remunerate the services of an employee by a voluntary gift either because there are no emoluments attached to the employment, or because he wants to give him something over and above his contractual remuneration. In all such cases, the amounts received will be the income of the profession or vocation of the employee. It is also possible that an employee may get gift from his master, without it being intended as additional remuneration to the employee, though it might be that what induced the gift was the loyal services of the latter. It cannot be said that, in such a case, what was given was remuneration for the serviceWhere a payment is not gratuitous, but made under a contract for remunerating the services, there would be no doubt about the nature of the receipt. But, where the payment made to an employee was purely voluntary and gratuitous, the question would arise whether it was intended as an addition to his remuneration or whether it was purely a testimonial gift for his past services, that is, a gift of money presented as a mark of esteem or acknowledgment of his services. In the latter case, the amount will not be liable to tax