Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2008 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2008 (1) TMI 435 - AT - Income TaxChargeability of receipts - Deemed income u/s 2(24) or Not - Nature of the receipt ''Capital or Revenue''- Payment to facilitate orderly transfer of DTTIs clients, files etc., to the DHS firm to be reconstituted - HELD THAT:- The scheme of section 2(24) read with sections 4 and 10, seems to be that given its ordinary natural meaning the word 'income' will take in any monetary return 'coming in'. It will take in voluntary and gratuitous payments, which are connected or linked with the office, vocation or occupation. The assessee received the payment to facilitate orderly transfer of DTTIs clients, files etc., to the DHS firm to be reconstituted. The same was measured in form of three times of net profit that the assessee will realize in connection with DTTI referred international work, i.e., the profit from that portion of work which is recurring and will be lost due to the withdrawal from DTTI. After the cessation of the association between the assessee and DTTI, it may be a case that DTTI will not refer its clients to the assessee but the assessee continues and is not prohibited from carrying on the profession of accountancy. The clients of the assessee remain with it and are not to be transferred to DTTI or its associate office in India namely DHS. The effect of new arrangement is that DTTI will not refer the clients and to facilitate the transfer of all referred clients, the assessee was compensated for probable loss in the form of non-receipt of the professional fees. Thus all these things put together will be part of the profession. Accordingly, it can be said that, though voluntarily, the payment came to the assessee in the course of carrying on the profession of accountancy. Such voluntary payments, which are connected with profession, will constitute income chargeable to tax. The payment has origin in the profession carried on which itself is a definite source of income and hence chargeable to tax. Serving the clients referred by DTTI cannot be considered as separate, distinct and definite source of income de hors the existing profession carried on. Each client if served does not become a separate and identifiable or distinct profession so as to say that if some of the clients cease, the receipt from them will be considered as capital. This fine distinction has always been upheld by various case laws cited by both the parties. In view of the above facts, we hold that the amount received by the assessee is arising in the course of carrying on profession and hence chargeable to tax as revenue receipt. We accordingly reverse the order of the learned CIT(A) and restore that of the Assessing Officer. In the result, the appeal is allowed.
|