Decided on March 30,1978

K. SANKARAN Appellant


Gopalan Nambiyar, J. - (1.) THESE references are by the IT Appellate Tribunal, Cochin Bench, under Section 256(2) of the I.T. Act, 1961. The question of law referred for determination is ; " Whether the circumstances, under which the arbitration work together with the fee offered was quite unexpectedly thrust upon the petitioner -assessee, made the fee in question casual and non -recurring in Mature, not arising from business or the exercise of a profession or occupation and as such falling within the exemption provided for in Clause (3) of Section 10 of the I.T. Act) "
(2.) THE assessee was the Chief Justice of this court who retired in the year 1960. THE question raised in these references is the assessability to tax of the remuneration received by the assessee for his work either as arbitrator or as commission in certain Commissions of Enquiry, for settling disputes or investigating into facts. In the statement of the case sent up by the Tribunal it has furnished a tabular statement showing the assessment years during which the engagements in question were undertaken, the amounts received by the assessee, and the nature of the assignments. For the sake of convenience, we reproduce the said tabular statement : It was noticed that the question of law referred by the Tribnal is somewhat inappropriate to cover the cases other than the first of the assignments, viz., the arbitration dispute between the Kerala Government and the Cannanore -Tellicherry Electricity undertaking. But in paragraph 8 of its statement of the case, the Tribunal somewhat broadly stated that the question of law formulated by it, arises for each of the ten assessment years, 1962 -63 and 1964 -65 to 1972 -73, both years inclusive. It may, therefore, l(g taken that the question arises, mutatis mutandis, in regard to the assessment years and in respect of the assignments undertaken by the assessee during the said period. We may briefly notice the facts relating to the nature Of the assign ments as found by the Tribunal and incorporated in the statement of the case. (i) Arbitration in the dispute between Cannanore -Tellicherry Electricity Undertaking and the Government of Kerala - -Assessment year 1962 -63. Section 13 of the Madras Electricity Undertaking (Acquisition) Act, 1954, provides for the appointment of an arbitrator who shall be a District Judge or a Retired High Court Judge. Section 21 provides for Rules to be made to provide for remuneration to the arbitrator. In the light of the above provisions, the assessee's name was in the panel of five names proposed for appointment as arbitrator. The assessee was chosen by the Government. Thereafter, there was consultation between the Government Secretary and the assessee, in respect, inter alia, of the remuneration payable for the arbitration work. By order dated January 3, 1961, the assessee was appointed arbitrator as agreed to. On May 19, 1961, the Government wrote to/the accredited representative that they proposed to fix the remuneration of the arbitrator at Rs. 12,000 which had to be borne by the parties to the dispute in equal halves. It was stated that the Government was inviting the consent of the arbitrator. On June 30, 1961, the Government passed orders fixing the arbitrator's remuneration as Rs. 12,000 as agreed to by him and the accredited representative. The order referred to a letter dated June 1, 1961, from the assessee to the Government. The Tribunal stated that the copy of the letter was not produced and that the same was probably a consent letter about the remuneration, to which there, was express reference in the Government order. The work commenced in 1961 and was completed before April, 1962. The remuneratipn was paid in the financial year 1961 -62. (ii) Gwalior Rayons Arbitrations -Assessment years 1964 -65 to 1966 -67 - -I.T.A. Nos. 560, 561 and 562/Cochin/72 -73. The assessee bad been appointed by the Government of India as Chairman of the Railway Rates Tribunal, on a salary of Rs. 3,000 per month, for a period of three years. He assumed duty at Madras on April 2, (962, and held the post till April 1, 1965. It was in January, 1963, that a dispute between the Gwalior Rayons (P.) Ltd. and one of their contractors arose for settlement by arbitration, The advocate for the company suggested the name of the assessee, who eventually at the persuasion of the advocate, agreed to accept the appointment as arbitrator on a remuneration of Rs. 15,000 calculated at Rs. 1,500 per sitting, on the assumption that the work would be finished in ten sittings. The Railway Board granted permission for the work as requested by the assessee by his letter dated March 14, 1963. A retired pursue judge of the Madras High Court was the nominee of the other party to the dispute ; and Dr. P. V. Raja -mannar. Retired Chief Justice of the Madras High Court was the umpire. The arbitration work commenced in May, 1963 ; but could not be finished in ten sittings. By agreement with the company and the assessee the . remuneration for the additional sittings was fixed at Rs. 750 per sitting beyond the first ten sittings, and the work was completed in May, 1965. The assessee received Rs. 27,375 during the assessment year 1964 -65; Rs. 18,375 during the assessment year 1965 -66 and Rs. 1,500 during the assessment year 1966 -67. There were forty -three additional sittings over and above the ten sittings for which remuneration at Rs. 1,500 per day had been stipulated. (iii) Revision of stage carriage fares - -Assessment years 1967 -68 and 1968 -69. By Government order dated December 17, 1966, a " Three man Committee " was constituted with the assessee as its chairman to consider certain questions referred to the Committee and offer its recommendations in regard to the question of fare structure of stage carriages. On the same day by another Government order, Rs. 1,000 per month was fixed as honorarium for the chairman, besides travelling allowance at the scale available to the High Court Judge, free use of the State -car for work connected with the duty, reimbursement of telephone bills and staff. The work commenced on December 22, 1966, and was completed on October 20, 1967. The appointment had been preceded by correspondence between the assessee and the Government and was discussed between the Chief Secretary and the assessee. These related, inter alia, to the honorarium and allowance of the assessee. The assessee received a sum of Rs. 2,323 as honorarium during the assessment year 1967 -68, and Rs. 7,645 during the assessment year 1968 -69. (iv) Engineering Employees' Association - -and the Kerala State Electri city Board - -Assessment year 1968 -69. The above dispute related to service conditions of the engineering employees of the Board. As a result of. the Government's intervention there was a settlement on October 15, 1966, at which it was decided to refer the dispute to an arbitrator who" shall be a retired High Court Judge. The assessee was then at Bangalore and was contacted over, the telephone by the Chief Secretary to Government and pressed and pursuaded to serve as arbitrator. On his return from Bangalore, he was met by the chairman of the Electricity Board and offered Rs. 15,000 as remuneration which was agreed to by the assessee. The order of appointment was issued by the Board on October 27, 1966, and on the same day followed another order fixing the remuneration of Rs. 15,000 and providing for appointment of the staff of the arbitrator. The work commenced on October 27, 1966, and was completed on April 6, 1967. The remuneration was received during the assessment year 1968 -69. (v) Enquiry into the irregularities in awarding contract in the Kerala State Electricity Board - -Assessment years 1968 -69 and 1969 -70. By Government orders dated May 19, 1965, the assessee was constituted as the Commission of Enquiry under the Commission of Enquiries Act, 1952, to enquire into the above irregularities. By a separate order, of even date, the assessee's remuneration was fixed at Rs. 15,000 per month as honorarium besides travelling allowance at the rates applicable to the High, Court Judges and use of a State car within the city limits of Trivandrura. The orders were preceded by consultations between the Minister -in -charge of Electricity and the assessee. The work started on June 22, 1967 and was completed by the end of January, 1969. Remuneration was received during the assessment year 1969 -70. (vi) Dispute,between the Kerala State Electricity Board and its Ministerial Gazetted Officers - -Assessment year 1969 -70. The chairman of the Board fixed up the assessee as the one -man commission to go into the above dispute on a remuneration of Rs. 10,000. A letter dated June 13, 1967, was sent by the chairman containing his offer of appointment. The assessee accepted the appointment by his reply dated June 23, 1967. The order of appointment of the Commission followed on June 30, 1967. On August 10, 1967, an order was issued fixing the remuneration of the assessee at Rs. 10,000 and providing for the staff and office equipments of the Commission. The work commenced on August 10, 1967, and was completed in April, 1968. The remuneration was received during the assessment year 1969 -70. (viii) Allegations against the President and another Member of the Travancore Devaswom Board and counter -allegations made by them - -Assessment years 1970 -71, 1971 -72 and 1972 -73. The assessee was informed by a letter of the then Revenue Secretary dated February 22, 1969, about the above allegations and the counter -allegations and the Government's proposals to appoint a Commission of Enquiry under the Commission of Enquiries Act, 1952, and that the Government was thinking of choosing the assessee for the purpose of conducting the enquiry. , The assessee signified his willingness. On March 26, 1969, notification appointing the Commission of Enquiry was issued. On the same day, another order was issued fixing a monthly honorarium of Rs. 1,500 and providing for payment of travelling allowance at the rates applicable to High Court judges, and permitting the use of a State car for the assessee within the municipal limits of the Trivaudrum city. The enquiry commenced on April 1, 1969, and came to an end on December 10, 1971, without being completed on account of adventitious reasons. The assessee received a remuneration of Rs. 16,500 during the assessment year 1970 -71, Rs. 18,000 during the assessment year 1971 -72 and Rs. 15,484 during the year 1972 -73. On the above facts let us examine the question of law sent up by the Tribunal which we have set out earlier.
(3.) COUNSEL for the assessee referred to the three questions settled for consideration by the Tribunal which were : " (i) Whether the seven items of remuneration specified above or any one of those are receipts of a casual nature ; (ii) Whether such receipts are receipts of a non -recurring nature; and (iii) Whether such receipts are receipts arising from the exercise of a profession (vocation or occupation) - Strenuous arguments were advanced by counsel for the assessee on all the above questions. Counsel for the revenue objected emphasising the only question which had been referred at the instance of this court under Section 256(2) of the Act. He further pointed out the order of the Tribunal, where, after formulating the thjee questions arising for consideration, the Tribunal had entered its finding only on point No. 1 to the effect that the remuneration in the seven instances was not of a casual nature (vide paragraph 8 of the order of the Tribunal); and left open points 2 and 3 without recording any finding. Counsel for the revenue drew our attention to the well -known decision of the Supreme Court in CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589, which has explained when a question of law can be said to arise out of the order of the Tribunal. Observed the court (page 611) : " The result of the above discussion may thus be summed up : (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.";

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