1988 (2) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of the sum of Rs. 30,000 received by the assessee.
2. Whether the sum qualifies as professional income or a personal gift.
3. Applicability of section 10(3) of the Income-tax Act, 1961.

Summary:

1. Taxability of the Sum of Rs. 30,000:
The primary issue was whether the sum of Rs. 30,000 received by the assessee, a professional musician, on the occasion of completing 30 years of service to Carnatic music, was taxable. The Income-tax Officer treated this amount as professional income and brought it to tax. However, the Appellate Assistant Commissioner held the payment to be a testimonial and personal gift, not taxable, and alternatively, even if considered as income, it would be exempt u/s 10(3) of the Act as it was casual and non-recurring.

2. Professional Income or Personal Gift:
The Tribunal concluded that there was no direct nexus between the receipt of Rs. 30,000 and any specific performance by the assessee, thus it could not be treated as professional income. The Tribunal further held that the receipt was exempt from tax as it was casual and non-recurring. The Revenue contended that the amount should be treated as income from profession, relying on the Supreme Court decision in P. Krishna Menon v. CIT and the Court of Appeal decision in Moorhouse (Inspector of Taxes) v. Dooland. However, the court found that the amount was given out of esteem and goodwill, not as remuneration for services rendered.

3. Applicability of Section 10(3):
The court referred to several precedents, including Seymour v. Reed, CIT v. S. A. Rajamanickam, and other relevant cases, to determine the nature of the receipt. The court observed that the amount was a personal gift, not remuneration, and thus not taxable. The court emphasized that the payment was an expression of goodwill and respect, not directly linked to the assessee's professional services.

Conclusion:
The court answered the question in the affirmative, holding that the sum of Rs. 30,000 received by the assessee was not taxable as it was a personal gift and not professional income. The Revenue was directed to pay the costs of the reference, amounting to Rs. 500.