P VADAMALAYAN Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) THE assesses is a Doctor and a leading Surgeon who is practising his profession at Madurai and also maintaining and running a Nursing Home. In the year of account he installed a Combination Sterilizer at a cost of Rs. 16,090/-and an equipment called the Major Surgical Luminaire at a cost of Rs. 8,065/-, These new items of plant were wholly utilised by the 'assessee for the activities indulged in by him. He claimed development rebate under Section 10 (2) (vi) (b) of the Indian income-tax Act, 1922, in respect of the above plant. He was unsuccessful before the Revenue. The Tribunal on second appeal found that the assessee was running a Nursing Home as part of his profession and could not therefore, classify his income under the head 'income from business', held it was income from his profession and disallowed the claim for development rebate. On the assessee requiring the Tribunal to refer the question of law arising out of Its order, the following question has been referred to us to render our opinion thereat: "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to claim development rebate of Rs. 6,380/- under Section 10 (2) (vi) (b) of the income-tax Act, 1922?"

(2.) THE problem confronting us is indeed a nice one, at once interesting and attractive- No doubt, the learned professions of Medicine. Law and Theology enfold into their conclave only members who practise" such professions as a vocation and not as a trade. But in these days of advanced science and ebullient developments commensurate with the need of the community, society and country, a centrifuged activity though related to a profession as such, may not , in a given case be interpreted as a wooden exercise thereof, if other compelling and surrounding circumstances need an expansive understanding of it in a commercial way. An expert professionalist if he has the inclination capacity and zeal to expand his activities may do so. As a result whereof he might tread into the arena of business activity. Such a composite activity, is conceivable and indeed is plausible in modern days. No doubt, no decisive test can be laid down but the multitude of incidents haloing the same might reflect on the true nature of the vocation. If therefore, an expert equips himself, as in this case, with plant and machinery with which he. with the aid of his professional skill and in collaboration with qualified assistants, is able to turn out an activity which is not strictly a professional activity but savours of a commercial activity as well, is it to be understood still that he is mechanically exercising his profession. We think, not. Any kind of commercial activity telescoped to professional activity ought to be understood as a business, as is popularly, understood. In such circumstances, it may be that the business aspect of the activity springs from the professional activity of the person concerned and is irretrievably connected with it. Nevertheless, if it is, said that if there is an organic and composite activity and if there is a merger of professional skill with trading or business, the poser to be answered is whether the combined endeavour results in emoluments, though not strictly termable as profits, are really gains in the shape of profits. If the answer is in the affirmative, it is a business at it is the outcome of combined efforts. 'as Chagla, C. J. , said in C. I. T. v. Sri Homi Mehta's Executors, ". . . . . in trying to determine whether a certain transaction resulted in profits, we must come to a conclusion that the transaction resulted in real profit, profits which from the commercial point of view meant a gain to the person who entered Into the transaction, not profits from any narrow, technical or legalistic' point of view. " apart from this, if an assessee who is a professional and an expert, contemporaneously carries on a trade which is annexed to the exercise of such a profession and if by doing so. he can take advantage of a provision in the fiscal Act by claiming an allowance or rebate, and if such a claim carries a lighter burden of tax, then he has the right to take advantage of the same. '

(3.) ' The term 'business' as used in the fiscal statute, cannot ordinarily be understood in its etymological sense. 'business' has been defined in Section 2 (4)but not profession, though for fiscal purposes, a distinction is sought to be made in the Act. The definition of 'business' being an, inclusive definition 'and not being exhaustive, is indicative of extension and expansion and not restriction. According to the Shorter Oxford Dictionary, 'business' includes a stated occupation, profession or trade profession in a wide sense means any calling or occupation by which a person habitually earns his living. Even so, 'trade' is explained as the practice of some occupation, business or profession-habitually carried on. As is not unusual, several jurists and eminent Judges while attempt-Ing to define the limits of one or the other of the words business, profession and trade entered the "labyrinth together but made exits by different paths". The Supreme Court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, said that the word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. Venkatarama Aiyar, J. , speaking for the Court in Mazagaon Dock Ltd. v. Commissioner of Income-tax, explained 'business' as a word of wide import and In fiscal statutes it must be 'construed In a broad rather than a restricted 'sense. Held the Supreme Court in Lakshminarayan Ram Gopal v. Government of Hyderabad. "the activities which constitute carrying on business need not necessarily consist of activities by way of trade, commerce or manufacture or activities in the exercise of a profession or vacation. They may even consist of rendering services to others which services may be of a variegated character". Jessel, M. R. , in Smith v. Anderson, (1880) 15 Ch D 247 at p. 258 agreed with the dictionary meaning of the word as anything which occupies time and attention and labour of men for the purpose of profit or improvement. Rowlatt, J. , in Christopher barker and Sons v. Inland Revenue Commissioners, (1919) 2 KB 222 was of the view that all professions are businesses, but all businesses are not professions. Reviewing an analogous word 'undertaking' while construing the provisions of the industrial Disputes Act, the Supreme Court observed in the case popularly known as "hospital Mazdoor" case State of Bombay v. Hospital Mazdoor Sabha, "it is difficult to state definitely or exhaustively the possible attributes the presence of which makes an activity an undertaking within Section 2 (j); as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employees is an undertaking. Such an activity generally involves the co-operation of the employer and the employees; and its object is the satisfaction of material human needs. It must be organised or arranged in a manner in which trade or business is generally organised or arranged. It must not be casual nor must it be for oneself nor for pleasure. Thus the manner in which the activity in question is organised or arranged, the condition of the co-operation between employer and the employee necessary for its success and its object to render material service to the community can be regarded as some of the features which are distinctive of activities to which Section 2 (j) applies". Reiterating the above workable test, the Supreme Court in N. V. C. Employees v. Industrial Tribunal, stressed the heed for direct and essential nexus between the capital and labour to constitute industry and observed:-"in other words, the co-operation between capital and labour or between the employer and the employees which Is treated as a working test in determining whether any activity amounts to an industry, is the cooperation which is directly involved in the production of goods or in the rendering of service. It cannot be suggested that every form or aspect of human activity in which capital and labour co-operate or employer and employees assist each other is an industry. The distinguishing feature of an industry is that for the production of goods or for the rendering of service, co-operation between capital and labour or between the employer and his employees must be direct and must be essential. " thus a concerted continued activity to render service also would be an industry, analogous to trade or business.