COMMISSIONER OF INCOME TAX Vs. UDAYAKUMAR RAJAH

JUDGEMENT

(1.) ONE H.D. Rajah, father of the assessee, entered into an agreement with M/s, Essen (P.) Ltd., under which he agreed to render assistance in the promotion and formation of a cement company known as India Cements Ltd., and canvassed and obtained subscriptions for shares of the face value of at least Rs. 12 1/2 lakhs. Essen (P.) Ltd. were the managing agents of India Cements Ltd. In consideration of the assistance to be rendered by the said H. D. Rajah, Essen (P.) Ltd. agreed to give a share of the managing agent's commission to H. D. Rajah. The right to receive this commission was assigned on August 11, 1956, by H. D. Rajah in favour of his son, the assessee. During the assessment years 1959-60, 1961-62 and 1962-63, the assessee received Rs. 29,350, Rs. 34,845 and Rs. 20,083, respectively, from the managing agents as per the agreement entered into by them with H. D. Rajah. The Income-tax Officer treated this as the income of the assessee during the said assessment years but refused to consider the claim of the assessee that it was an earned income, and, therefore, entitled to relief as an earned income. On a further appeal, the Appellate Assistant Commissioner was of the view that the amount in the hands of even H. D. Rajah would not have been earned income, much less in the hands of the assignee, and in that view the appeals also were dismissed. On a further appeal, the Tribunal held that the income received by the assessee was chargeable to tax under the head "other sources" and that in view of the definition of "earned income" in Section 2(6AA)(c) of the Indian Income-tax Act, 1922, even in the hands of the assessee it would be an earned income. The Tribunal accordingly accepted the assessee's contention and treated the disputed amount as earned income. Revenue filed three reference applications in respect of these assessment years. The Tribunal had referred a consolidated question which reads as follows:

(2.) IT is stated that the father of the assessee, H. D, Rajah, died even before the assessment years in question.