M G K MENON Vs. INSPECTING ASSISTANT COMMISSIONER
LAWS(IT)-1989-6-7
INCOME TAX APPELLATE TRIBUNAL
Decided on June 26,1989

Appellant
VERSUS
Respondents

JUDGEMENT

F.C. Rustagi, Judicial Member - (1.)THE sum and substance of all the grounds raised by the assessee in this appeal is to dispute the taxability of sum of/US $ 5,000, received by the assessee-appellant from the organisers of the XXXVth JCI World Congress, 1980, for delivering the keynote address at the Seminar of- the said JCI World Congress held at Osaka, Japan, on the llth November, 1980, on the theme "Energy: Planning for the Future", and participating in the Subsequent panel discussions of the Seminar.
(2.)The assessment year involved is 1981-82 for .which the relevant previous year ended on 31-3-1981. The assessee derives income from salary, house property, dividends, interest etc. In part III of the return of his income the assessee had shown a sum of Rs. 41,800 equivalent to.US $ 5,000 and claimed the same as exempt from income-tax for delivering the key-note address on "Energy: Planning for the Future" and participating in the panel discussion. The assessee had also claimed a sum of Rs. 5,000 as exempt in very same part III of the return which was received by him from Kerala State Government as an award. The ITO in course of assessment proceedings accepted the assessee's contention in respect of Science & Technology award from Kerala State Government in a sum of Rs. 5,000 but rejected assessee's contention regarding exemption of US $ 5,000 received from the Osaka Junior Chamber of Commerce, Japan. The ITO narrated the details in paras 2, 3 & 4 of its order with assessee's contentions, but rejected the same, as according to him the payment of US $ 5,000 was stipulated to be as lecture fee and it was on that basis that administrative sanction was granted by the Government of India. The ITO observed that the said amount was offered and accepted as lecture fee and out of the said amount 20% thereon also came to be deducted as per Japanese tax laws. Aggrieved by the said assessment order, the assessee came before the CIT(Appeals) and he also dealt at length with assessee's contentions, but confirmed the order of the ITO. He, however, observed that the issue has to be decided on one single claim i.e. whether it is in the nature of income or not, and narrated the following facts in his order, which were important, according to him:-
(i) The receipt was contractual in nature in so far as an offer was made and accepted. The fact that the assessee was persuaded by other factors in accepting the offer is not relevant to the determination of this issue, nor do the existence of other factors change its character.

(ii) The contractual receipt was described by the payer as a ' 'lecture fee'' and tax deducted at source therefrom. The assessee could, and if he desired to do so the onus was on him to prove that the nature of receipt was something other than a "fee" i.e. a personal gift, testimonial etc. No such evidence is led. Mere averments cannot take the place of evidence. The recognition of the assessee's unquestionably high standing in the field of Science does not by itself help in arriving at the conclusion that the receipt was a personal gift on account of his attainments and not a "fee" (even if it may be a token).

(iii) The receipt of this "lecture fee'' was intimately connected with the assessee's official capacity and employment with the Government of India who deputed him for this participation in JCI - World Congress and bore all expenses other than those borne by the inviting organisation and paid him full pay and allowances for the period of such deputation. In this context it cannot be considered to be a personal gift or testimonial. If the organisation desired to honour the assessee with a personal gift or testimonial they would have gone to Japan on a personal visit to receive a personal gift or testimonial. The facts are otherwise.

2.1. The AAC accordingly held the said amount to be taxable with the observation that since the amount is received from a person other than employer, it has been rightly taxed as income from other sources.

To start with the learned counsel for the assessee gave the background of the dispute at length. He submitted that since February 1971 the assessee Prof. M.G.K. Menon had been in service of the Government of India as Secretary, Department of Electronics and Chairman, Electronics Commission (1971-78); Scientific Advisor to the Minister for Defence, Director-General, Defence Research and Development Organisation and Secretary in the Ministry of Defence for Research & Development (1974-78); Director General, Council of Scientific & Industrial Research (1978-81); and Secretary, Department of Science and Technology since 1978. He was also Chairman of the Indian Space Research Organisation during January 1973. He submitted that Prof. Menon is one of the top scientists not only in this country but in the world as he is a scientist who is internationally renowned. He went on to submit that prior to joining Government service, Prof. Menon was the Director of the Tata Institute of Fundamental Research, Bombay since 1966. He submitted that it was during his association with the said Institute that Prof. Menon attained a position of eminence and high academic distinction in the sphere of scientific research in India and abroad. He was also elected as a Fellow of the Royal Society, London and in 1968 the President of India awarded him the "Padma Bhushan". He was also member of UN Secretary General's Advisory Committee on the application of science & technology to development during 1972-79 and was its Chairman for two years. He was a special advisor to the International Federation of Institutes for Advance Study, Stockholm and Honorary Foreign member, American Acadamy of Arts & Science. He went on to read a note given by the assessee in assessment proceedings about his qualifications and high position in the field of science, which finds place in assessment order, virtually verbatim, which he went on to read at length. He then submitted that it was due to his eminence that he in June 1980 received a letter from Mr. Takashi Mukaibo, President of the University of Tokyo, which is placed on assessee's compilation on p.7. He submitted that is was due to uncomparable competence in the field especially on the importance of the problem for developing countries that Prof. Menon was recommended by Takashi Mukaibo for giving the keynote lecture in Annual International Congress at Osaka Junior Chamber of Commerce. A few days after Prof. Menon received a letter from the office of the said Congress which is placed on p. 8 of assessee's compilation and thereafter on 5-8-1980, Prof. Menon got another letter dated July 31, 1980 from President of Osaka Junior Chamber. Prof. Menon wrote back to the President of Osaka Junior Chamber Inc. on 24-8-1980 and thereafter sought permission from the Hon'ble Prime Minister on 24-8-1980. The importance of Dr. Menon attending the said conference was projected by the learned counsel for the assessee by going through the said note placed before the Hon'ble Prime Minister. He submitted that even Indian Embassy in Tokyo had communicated that Japanese Foreign Ministry was keen on participation of Prof. Menon in the said conference. The Government of India cleared Mr. Menon's attending the said Conference and Staff Officer to the Secretary in Department of Science & Technology, New Delhi, confirmed the programme of Prof. Menon to the President of Osaka Junior Chamber, Japan. He submitted that the said Conference was addressed by five distinguished international personalities viz. Mr. E. Heath, Ex-Prime Minister of U.K; (2) Prof. J.K. Galbraith, Honorary Professor, Harvard University; (3) Mr. R.Ortiz, Opec Secretary General; (4) Mr. S.Okita, Government Representative, for External Economic Relations, besides Prof. M.G.K. Menon. He submitted for our perusal the photostat copy of photographs giving the names of keynote speakers. He also drew our attention to deputation of Prof. Menon to deliver a keynote address which is placed on assessee's compilation at p.19. He pointed out that though Prof. Menon was Secretary to the Government of India, it was decided that whatever be paid as fee or honorarium, present or payment for recommendation, the same be kept by Prof. Menon. In the voluminous paper book he has also placed the keynote address delivered by Prof. Menon and he submitted that it was due to this eminence, high calibre and knowledge of Prof. Menon that he was paid the said amount and that it was not income. He drew our attention to definition of fee given in Webster's Seventh New Collegiate Dictionary along with meaning of the word "honorarium" given therein. He also cited decision in case IRC v. Wesleyan & General Assurance Society [1948] 1 All. ER 555 in support of the contention that it is not the name given to the transaction by the parties that should determine its character but who are the recipients of the same should be considered. He went through the explanatory notes on the Finance Act, 1972, CBDT Circular No. 108 dated 20-3-1973 giving the background as to why definition of income in Section 2(24) had been amended. At last he submitted that it is wrong to say that there was a contract between the JCI Conference and the assessee and for that he drew our attention to Chitty on contracts, photostat copy of which is placed on assessee's compilation on pages 8 to 10 of the second paper book. He submitted that merely because the said amount was termed as lecture fee would not make it taxable, because it was due to assessee's pre-eminence and recognition that he was paid the said amount. According to him it was more or less an award. The learned D.R. on the other hand relied on the order of the two lower authorities. He submitted that merely because Prof. Menon was in Government service would not practice profession, was without substance because he actually went to deliver the lecture. He delivered the same and got the payment of US $ 5,000 as stipulated in the first letter received by Prof. Menon from the President Osaka Junior Chamber, Inc. according to him even the Government recommendation or share in some of the expenses of Prof. Menon thereto could not lend support to assesscc's contention, because in course of argument it was pointed out by the learned counsel for the assessee that extra baggage charges were paid by the Government.

(3.)AFTER taking into consideration the rival submissions and going thoroughly through the voluminous paper book filed at two stages before us and carefully considering the submissions made by and on behalf of the assessee before the two lower authorities and before us, we are unable to uphold the finding of the CIT( Appeals).
4.1 From the background technical qualifications and eminence attained by the assessee, there could not be any dispute. Undoubtedly he is internationally renowned personality in the field of science. To start with let us see as to why Prof. Menon came to be invited by the President, Osaka Junior Chamber, Inc. It can be seen from the very start when the scenes for this great occasion were shown. The very first letter from President, University of Tokyo dated 23-6-1980, which is placed on p.7 of assessee's compilation, would throw some light. We cannot do anything better than reproducing the said letter below:-

JUDGEMENT_2326_TLIT0_19890.htm

Dear Dr. Menon :

I was informed that the Osaka Junior Chamber (of Commerce) is planning to hold a big annual international congress in coming November and was asked to suggest names of the guests distinguished in the field of the main theme of this year, which is "energy : planning for the future". Although I was also asked to participate in the seminar, I regret that I cannot because I have to chair the Conference of the Association of the National Universities of Japan at the same date in Tokyo.

As I am well aware of your incomparable competence in the field, especially on the importance of the problem for developing countries, I strongly recommended to the organizing group to invite you as one of the keynote speakers.

I will deeply appreciate it if you could spare your busy schedule in accepting the invitation enclosed herewith.

JUDGEMENT_2326_TLIT0_19891.htm

4.2 It is apparent from the above letter that it was due to uncomparable competence in the field of Science that the asscssee's name was introduced by the President of University of Tokyo to XXXV JCI World Congress. It was not a smaller occasion as the topic which was assigned to Prof. Menon was to be a challenge to the 10,000 young JC members from 84 nations throughout the world as mentioned in the very first letter sent to Mr. Menon. The following reminder from the said Congress on 31st July 1980 shows that it was the Congress which was interested in Prof. Menon being there and not Mr. Menon himself. It was not that Prof. Menon directly accepted the said invitation. To start with Prof. Menon in his letter of August 24, 1980, wrote back to the President, Osaka Junior Chamber, Inc., as under:-

August 24, 1980

Dear Dr. Hiraoka

Thank you very much for your letter dated 27th June, 1980 inviting me to participate as one of the keynote speakers at the Theme Day Seminar of the XXXV JCI World Congress to be held in Osaka, Japan in November this year and to attend the panel discussion/seminar which will be held subsequently. I have also received your subsequent letter dated 31st July, 1980. I am sorry for the delay in replying to you. I am deeply honoured by the invitation and would personally be very happy to accept the same and given the keynote address on the main theme "Energy: Planning for the Future" and to attend the panel discussion. However, you will realize that, with my position in Government my attendance will depend on the approval of my Minister, who is the Prime Minister and this will be clearly related to various official matters here for which my presence may be needed. I shall, therefore, let you know on a definite basis about my participation in a little while. With kind regards

Your sincerely,

JUDGEMENT_2326_TLIT0_19892.htm

4.3 Thereafter what was most important was the note which was placed before the Hon'blc Prime Minister by Prof. M.G.K. Menon. To understand the level of the said Congress, we cannot do anything better than to reproduce the note, placed before the Prime Minister for his consideration:-

DEPARTMENT OF SCIENCE & TECHNOLOGY

The XXXV JCI World Congress is to be held in Osaka, Japan in November this year. The main theme selected is "Energy: Planning for the Future". The President of the University of Tokyo, Professor Takashi Mukaibo, has written to me stating that he has recommended to the organisers that I should be invited as one of the keynote speakers. I have received a formal invitation from the President, Osaka JCI, inviting me to deliver a keynote address on the first day of the Seminar (Tuesday, November 11, 1980) planned during the Congress and to participate in the Panel discussion of the second day which would be televised nationally. They will provide all expenses for the journey, including a first class return air fare and hotel accommodation and a lecture fee of US $ 5,000. I have received communication from our Embassy in Tokyo that the Japanese Foreign Ministry is keen on my participation as invitee. I have been informed by our Science Counsellor in Tokyo that the other invitees expected to attend include: Mr. Heath (former Prime Minister of UK), Prof. John K. Galbraith, and the Chairman of OPEC. Though this had come sometime ago, I had not put it up since I was not sure of my commitments around that time period. In a recent discussion with Shri E. Gonsalves, Secretary, Ministry of External Affairs, he suggested that I should visit Japan for a variety of reasons, and this could be on my return from the visit I am making to China between 25th August and 4th September. Whilst this will not be possible on account of my commitments here in September, a very short visit in November, when Parliament is not in session and now planned should be possible.In particular, I would like to take this opportunity to see and discuss some of the very significant developments and achievements in Japan relating to utilization of non-conventional renewable energy sources.

My visit will be for a maximum period of 4 working days excluding travel time. For consideration and orders of Prime Minister.

Sd/- (M.G.K. Menon) August 24, 1980

4.4 Thereafter what is contained in rest of the papers, filed by the assessee, are undisputed facts that the said Congress was addressed by renowned international personalities, five in number, which are named above. Simply because the payment of US $ 5,000 has been intimated as fee, cannot militate against the assessee's claim. When we go through Webster's Seventh New Collegiate Dictionary, "fee" is to mean, "a charge for a professional service". Looking to the fact that Prof. Menon was in regular employment of Government of India, he could not practice any profession, it could not be said that the amount received by Prof. Menon was "fee", because it was not as a professional that Mr. Menon delivered the keynote address and got the payment, but it was as one of the most eminent scientists of the world that he delivered the keynote address and got the amount which was more for his recommendation. The same can be called as honorarium. When we look to the meaning of "honorarium" given in the said Webster's Dictionary, it is to mean, "a reward usual for services on which custom or propriety forbids a price to be set'' Regarding the nomenclature of the transaction, we cannot do anything better than to reproduce what the Lords of House of Lords in England observed in the case of Wesleyan & General Assurance Society (supra), a copy of which is available on p.3 of assessee's compilation:--

Two propositions are well established in the application of the law relating to the income-tax. First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction. To call a payment a loan if it is really an annuity does not assist the taxpayer, any more than to an item a capital payment would prevent it from being regarded an income payment if that is its true nature. The question always what is the real character of the payment, not what the parties can. Secondly, a transaction, which on its true construction is of a that would escape tax, is not taxable on the ground that the same could be brought about by a transaction in another form which would attract tax.

4.5 We shall be failing in our duty in case we ignore the background in form of explanatory notes on the Finance Act, 1972, C.B.D.T.'s Circular No. 108 dated 20-3-1973. What is to be seen in the present case is whether what the assessee got was income at all. If it was not income it could not be termed as casual income. We cannot do anything better, than to extract a few lines from the said explanatory notes: --

(1) The definition of "income" in Section 2(24) of the Income-tax Act has been amended to specifically provide that winnings from lotteries, crossword puzzles, races including horse races, car games and other games of any sort or from gambling or betting of any form or nature what-so-ever will be regarded as income for purposes of the Income-tax Act [Section 3(b)(ii) of the Finance Act].

It should, however, be noted that receipts, which arc of a casual and non-recurring nature, will be liable to income-tax only if they can properly be characterised as "income" either in the general connotation or within the extended meaning given to the term by the Income-tax Act.

4.6 Whether the invitation to Prof. Menon and his acceptance of the same was a contract, if seen as per comments given by Chitty on Contracts, it could conveniently be said that it was not contract, because the learned author under the head, "Contractual Intention" has made the observation:-

An agreement, even though it is supported by consideration, is not binding as a contract if it was made without any intention of creating legal relations.

And then he has further said as to what are "Social agreements" in para 120 of Chapter 2 - The Agreement, as under:-

Social agreements:- Many social arrangements do not amount to contracts because they are not intended to be legally binding. Accepting an invitation to dinner docs not give rise to a contract. Similarly it has been held that the winner of a competition held by a gold club could not sue for his prize because "no one concerned with that competition ever intended that there should be any legal results flowing from the conditions posted and the acceptance by the competitor of those conditions".., that the rules of a competition organised by a "jalopy club" for charitable purposes did not have contractual force; and that' 'car pool" and similar arrangements between friends or neighbours did not amount to contracts even though one party contributed to the running costs of the other's vehicle.



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