GHANEKAR P D Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under s. 66(2) of the Indian IT Act, 1922. The question referred is :

(2.) ONE Dandekar was claiming a sum of Rs. 3,25,000 from M/s. H. Fischer and Co. Pvt. Ltd. In respect of that claim certain correspondence was exchanged between Dandekar and the company and/or their respective legal advisers, between the end of May and about the beginning of July, 1956. In the course of that correspondence the company disputed the claim and Dandekar threatened to file a suit for recovering his claim. Mr. Vartak was the chairman of the company and one S. G. Pradhan was its managing director at the relevant time. The assessee, Mr. Ghanekar, is a chartered accountant and has been practising as such. He, Mr. Vartak and Pradhan were well acquainted with each other. He had some acquaintance with Dandekar also. The company was desirous of avoiding litigation threatened by Dandekar. Some time before the 10th July, 1956, the company more or less decided ``to settle the claim of Dandekar amicably in a sum not exceeding Rs. 2,25,000''. The company requested the assessee to intervene in the dispute and he was informed that the company would be willing to settle the claim of Dandekar up to Rs. 2,25,000. A document was executed between Dandekar and the assessee dated the 10th July, 1956. It was executed in pursuance of an agreement arrived at between them shortly before the 10th of July, 1956. By that document Dandekar transferred and assigned his actionable claim against the company and/or its directors and shareholders to the assessee in consideration of the assessee paying to Dandekar a sum of Rs. 1,25,000. The sum was agreed to be paid in six quarterly instalments, but in any case not later than 31st Dec.,1967, without interest. After executing this document Dandekar, through his attorneys, gave a notice to the company of the fact of his having executed the said document of transfer and assignment. Thereafter, on the 14th of July, 1956, the assessee, in his turn, executed a deed of transfer and assignment in favour of Mr. Vartak of the said claim of Dandekar against the company. The consideration for this transfer was that Mr. Vartak agreed to pay to the assessee a sum of Rs. 2,10,000 in six quarterly instalments. This document recites the fact of the said document dated the 10th July, 1956, by which Dandekar had assigned and transferred his said claim to the assessee for the said sum of Rs. 1,25,000. It has to be noticed that the assignment by the assessee is in favour of Mr. Vartak personally and not in favour of the company. Mr. Vartak, however, was admittedly the chairman of the company at that time. The case appears to have proceeded on the footing that the assignment by the assessee in favour of Mr. Vartak was really in favour of the company, Mr. Vartak taking the assignment for and on behalf of the company. We will, therefore, proceed on the basis that the assignment by the assessee in favour of Mr. Vartak is an assignment in favour of the company itself.

(3.) IN order to fall within s. 4(3)(vii), so far as it is relevant to this case, this particular receipt of the assessee must be shown to be of a casual and non-recurring nature. There is no dispute, and the Tribunal has also held that this income is of a non-recurring nature. The only dispute is whether the income was casual. Now a judgment of Chagla, C.J., delivered on behalf of a Division Bench of this court in Surat District Cotton Dealers' Association vs. CIT (1959) 35 ITR 121 (Bom), lays down the test of casualness of a receipt to be ``not merely that it must be of a non-recurring nature, but it must also be casual'', that is, that :