COMMISSIONER OF INCOME TAX Vs. KAMLA DEVI KHAJANCHI

JUDGEMENT

(1.) THIS is an application by the Commissioner of Income-tax, Jodhpur, under Section 256(2) of the Income-tax Act, 1961, for calling for a reference.

(2.) WHILE proceeding with the assessment of income of the assessee relating to the assessment year 1967-68, the Income-tax Officer found that the assessee was paid a sum of Rs. 9,500 at the rate of Rs. 500 per painting as reproduction charges for allowing the Director of Advertising and Visual Publicity, Ministry of Information and Broadcasting, New Delhi, for taking photographs of 19 paintings. It appears that the assessee had a valuable collection of old paintings, some of which were selected for reproduction in the India Diary, 1966, published by the Government of India in the Ministry of Information and Broadcasting. A photographer from the photo division of the Ministry went to the residence of the assessee and took the photographs of 19 paintings, for which a sum of Rs. 9,500 were paid as mentioned above. The assessee claimed exemption in respect of the aforesaid income of Rs. 9,500 under Section 10(3) of the Income-tax Act. The Income-tax Officer did not accept the contention of the assessee and included the sum of Rs. 9,500 in the assessable income of the assessee, as computed by him by his order dated November 19, 1971.

(3.) AT this stage, this court is only called upon to consider as to whether a question of law arises out of the order passed by the Tribunal dated August 31, 1977, dismissing the appeal filed by the Department before it. It may be pointed out that while deciding the application filed before the Tribunal under Section 256(1) of the Act, the Tribunal considered the matter on merits as to whether the aforesaid income was received by the assessee as arising out of business, profession or vocation, but then the Tribunal proceeded to hold that the finding arrived at by the Tribunal was purely one of fact. The question whether, in the particular facts and circumstances of the case, the income arising to the assessee by way of reproduction fee amounted to income from business, profession or vocation or was an adventure in the nature of trade, is essentially a question of law. In our view, although the facts are well-established and there is no dispute about them that the income of Rs. 9,500 was received by the assessee by way of reproduction charges for allowing the representative of the Government of India to take photographs of his paintings for reproduction in the Pictorial India Diary published by the Government of India, yet the question as to whether such receipt in the hands of the assessee could be held to be exempt under Section 10(3) of the Act is essentially a question of law. Even after the facts found by the Tribunal are accepted, the application of legal principles to such facts as have been found to be proved is necessary for the purpose of coming to the conclusion as to whether the said income fell within the four corners of Section 10(3) of the Act, so that the same may be deducted from the assessable income of the assessee. It. is now well-established on the basis of several decisions of the Supreme Court that when an assessee carried on business, the question whether a certain transaction made by him was carried on in the course of business or whether such a transaction constituted an adventure in the nature of trade, implying the existence of certain elements in the adventure which in law would invest it with the character of trade, is essentially one of law, and that makes the question whether the particular transaction made by the assessee in the present case is in the nature of trade a mixed question of law and fact.