TMI Blog1967 (7) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1955-56 to 1958-59 (both inclusive) ? (2) If the answer to question No. 1 is in the affirmative, whether on the facts and in the circumstances of the case, the said amounts could be treated as income from other sources chargeable under section 12 of the Act, or income chargeable under the head " salaries " under section 7 of the Act ? (3) Whether, on the facts and in the circumstances of the case, the assessee was entitled to "earned income relief "in respect of the said amounts for any of the four assessment years ? " The facts leading to this reference are as follows : The assessee belongs to Amin family, which has a substantial interest in the Alembic Chemical Works Ltd. at Baroda and allied concerns. One of this group of concerns is a public limited company known as Alembic Glass Industries Ltd. and there is another limited company called Uday Ltd. Uday Ltd. are the managing agents of Alembic Glass Industries Ltd. On March 21, 1954, the Alembic Glass Industries Ltd., the managed company, passed a resolution of the board of directors appointing the assessee as Industrial Relations Officer (Social) of the managed company. Under the resolution, she was to be paid Rs. 1,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On behalf of the respondent, the learned Advocate-General has urged before us a preliminary objection regarding questions Nos. 1 and 2 out of the three questions referred to us. In this connection, the learned Advocate-General has pointed out to us that the Tribunal pronounced its order on appeal before it on July 17, 1964, and the orders passed by the Tribunal were received by the assessee on October 9, 1964. Within the period of 60 days counting from October 9, 1964, application for reference under section 66(1) of the Act were preferred to the Tribunal on December 5, 1964, and in each of these four applications only one question was asked for, viz.: " Whether the assessee was entitled to earned income relief on the salary and remuneration received by her from Alembic Glass Industries Ltd. and Uday Ltd. and which were assessed unter the head " salary " ? Question No. 3 which has been referred to us is substantially the same question which the assessee asked the Tribunal to refer to the High Court by her four applications, each for the different year of assessment. The applications for the reference were preferred in the Form R(T), which is the prescribed form for preferring a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its reply wanted the Tribunal to refer the second of the two questions and the Tribunal relying upon a decision of the Bombay High Court in Girdhardas Co. Ltd. v. Commissioner of Income-tax, referred both the questions to the High Court taking the view that the questions arose out of its order and the question which the assessee wanted to referred to the High Court was also one of law. The Madhya Pradesh High Court was unable to agree with the opinion of the Bombay High Court in the case of Girdhardas Co. Ltd.; and it held that the second question could not have been referred to the High Court without an application under section 66(1) duly made by the assessee and hence the High Court declined to answer the second question. The High Court also came to the conclusion that in the case before them they were not concerned with a winning party, which could never apply for a reference but the assessee had lost on the question which the assessee wanted the Tribunal to refer to the High Court and, therefore, under section 66(1) of the 1922 Act, the assessee before the Madhya Pradesh High Court was the losing party. In Girdhardas Co. Ltd.'s case a Division Bench of the Bombay High cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in Girdhardas Co. Ltd.'s case we hold that the questions Nos. 1 and 2 were properly referred to the High Court and that we have to deal with those questions in the course of this judgment. Coming now to question No. 1, it was urged on behalf of the assessee before us that in the assessment proceedings regarding Alembic Glass Industries Ltd. Uday Ltd., it was held that these payments made by these two companies to the assessee were gratuitous payments made by each of these two companies ; and it was further held that those payments were gratuitous payments in the sense that they were not for any services rendered. It was urged on behalf of the assessee that inasmuch as the payments by these two companies were gratuitous, they were gifts or payments without consideration and that since there was no obligation on either of these two companies to pay the amounts to the assessee, though these payments were made periodically from year to year, such payments did not amount to income. In H. H. Maharani Shri Vijaykuverba Saheb of Morvi v. Commissioner of Income-tax the question as to when a voluntary payment made without consideration can amount to income was considered by a D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th custom), as it is if it is made in pursuance of some binding obligation whether arising out of business dealings, out of an investment or out of some other enforceable obligation. And if the word ' return' had been used by Sir George Lowndes in the strict sense that nothing could be income in India which was not the result of some outlay, it would be difficult to see how anything could be taxable which was not the produce of some valuable consideration given by the recipient however binding might be the actual obligation under which it was paid." In the instant case, though no services were rendered by the assessee, as has been found as a matter of fact both by the Tribunal and by the revenue authorities, it is clear that the payments from the two companies were received by the assessee periodically and that these payments were received from definite sources. The resolutions passed by the two companies respectively were the genesis of these payments to the assessee and it was from a definite source that the assessee received these periodical payments and the systematic return, viz., these payments from the said two companies could be expected with regularity. Under these circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olutions was a camouflage which the paying companies appear to have put round the arrangement and the payments were nothing but transfer of profits to a person who was a member of the family controlling the companies. Under these circumstances, it cannot be said that the payments of these amounts were received by the assessee as salary. Under these circumstances, the Appellate Assistant Commissioner and the Tribunal were right in coming to the conclusion that the benefit of the Notification of 1922 could not be given to the assessee. Since the amount was not chargeable under the head " salaries" under section 7 of the Act, it can only be treated as income from other sources chargeable under section 12 of the Act. We may mention at this stage that, so far as the benefit of the of the Notification issued in 1922 was concerned, it could only have been given to the assessee for the assessment years 1955-56 and 1956-57 because the Notification had been repealed with effect from the commencemet of assessment year 1957-58. The third question is in connection with the earned income relief in respect of the amounts received by the assessee from these two companies for the assessment years i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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