BHARGAVA, J. - (1.) THE question referred by the Income-tax Appellate Tribunal for our opinion is : Whether on the facts and in the circumstances of this case, the remuneration received by the assessees karta as Government Treasurer, Ajmer-Merwara, fell to be charged as salary within the meaning of section 7 of the Income-tax Act, or should be regarded as income from business and chargeable under section 10 of that Act ?
(2.) THE assessee is a Hindu undivided family which had several sources of income. Seth Lal Chand was the karta of the assessee family and it is said in the statement of the case that the karta Seth Lal Chand, was appointed Government Treasurer, Ajmer-Merwara, by the Chief Commissioner of Ajmer by his order dated 23rd February, 1940. His remuneration was fixed by a later order dated 21st March, 1940, at Rs. 195 per mensem. Under the terms of his appointment, he was required to furnish security and in that connection he deposited security to the value of Rs. 60,000 in the form of Government securities, indemnifying the Government for any loss which might occur during the tenure of his office as treasurer. Further, he also furnished a security bond. THE appointment having taken place in the year 1940, the remuneration received under the appointment was assessed for the first time in the income of the assessee Hindu undivided family under the head salary. In the next four assessments, the same remuneration was charged to tax as income from business, profession or vocation under section 10 of the Act and in the first instance deductions of tax under section 10 were not allowed. This error was later on corrected by an order under section 35 of the Income-tax Act. In the year 1946-47 also, this income was assessed under section 10 of the Income-tax Act and, during those various years, this income was also included in the income of the Hindu undivided family for purposes of assessment to excess profits tax. In the next two years 1947-48 and 1948-49, this remuneration was charged to tax under section 12 of the Income-tax Act and then in the next two years 1949-50 and 1950-51 tax was levied under section 7 on this income under the head salary. The question of the head under which this income was chargeable to tax assumed importance particularly in the next two years of assessment, 1951-52 and 1952-53. The treasurer had employed one L. Radha Kishan as cashier for the work at Beawar Sub-Treasury and, during an annual inspection, it was found that there was a shortage of a sum of Rs. 84,251 which was believed to have been embezzled by the cashier. The assessee was called upon by the Government to make good the loss and, when the money was not paid, attempts were made to realize the amount from the security. The sum realized was Rs. 55,842 together with Rs. 2,583 as interest which was lying in the Beawar Sub-Treasury to the assessees credit. All this sum was forfeited by the Government filed a suit against the assessee which was decreed. In the assessment year 1951-52 the assessee claimed a sum of Rs. 516 as litigation expenses incurred by him in this connection. In the assessment year 1952-53, it was claimed that there had been a loss of Rs. 84,251 which together with Rs. 324 as litigation expenses were claimed as deductible when computing the income of the assessee under the head, profits and gains of business under section 10 of the Income-tax Act. The claim was disallowed by the Income-tax Officer and the Appellate Assistant Commissioner and, when the appeal came before the Income-tax Appellate Tribunal, the Judicial Member also held that the remuneration received as treasurer was a fee in lieu of salary and as such chargeable to tax under section 7 of the Income-tax Act so that the loss incurred and the litigation expenses could not be taken into account when computing the income. The Accountant Member, on the other hand, held that the remuneration was being received by the treasurer as income from business and was chargeable to tax under section 10 of the Income-tax Act and, consequently, the losses incurred had to be deducted when computing the income in respect of the businesses including this business. There being a difference of opinion between the Judicial Member and the Accountant Member, the appeal was referred to the President of the Tribunal who agreed with the Accountant Member and, therefore, allowed the claim of the assessee. Thereupon, the Commissioner of Income-tax filed an application under section 66 (1) of the Income-tax Act and the Income-tax Appellate Tribunal has now referred the question mentioned above to us for opinion on the basis of the application. When the statement of the case was prepared, the assessee moved the Income-tax Appellate Tribunal to include in the statement of the case one more fact, viz., that Seth Lal Chand was appointed treasurer for two other treasuries also situated at Sambhal and Panchabhadra. The Tribunal rejected this application for including this statement of fact in the statement of the case on the ground that it was unnecessary. The assessee has moved an application in this court under section 66 (4) of the Income-tax Act praying that we should ask for a further statement of the case on this question of fact. That application was directed to be put up for orders at the time of the hearing of the reference. We inquired from the learned counsel for the Department whether he was opposing that application. Learned counsel for the Department drew our attention to the fact that the various orders of the members constituting the appellate order of the Income-tax Appellate Tribunal had been made part of the statement of the case and, since there was a statement on this question of fact in at least the judgment delivered by the President of the Tribunal it was not necessary to call for a further statement of the case under section 66 (4) of the Income-tax Act. The statement of fact being already included in the appellate order recorded by the President of the Tribunal and that order having been made a part of the statement of the case it was urged that we can take notice of this statement of fact for the purpose of deciding the reference without asking for a further statement of the case. In the circumstances, the application under section 66 (4) of the Income-tax Act becomes unnecessary and is to be filed.
(3.) IN answering the question referred to us the first point that has to be emphasised is that the question whether a certain income is received as salary or is income from business is essentially a question of fact and the answer to such a question will always depend on the facts and circumstances found in each case. IN the present case the statement of the case and the appellate orders by three Members of the Tribunal who decided the appeal contain findings of fact, some of which are clearly relevant material for the finding that the income which was received by the treasurer, was being received as income from business. IN enumerating these facts, we shall also take notice of the term of the security bond which has been made a part of the statement of the case by the INcome-tax Appellate Tribunal. There are also at the same time some facts which can lead to the inference that the income was being received as salary and was not arising as profits and gains of a business. The facts which appear to support the contention of the Department are that (1) the appointment letter mentions that the person appointed as treasurer is being asked to take over charge of the post with the least possible delay indication that it was treated as an appointment to a post, (2) the subsequent letter fixing the remuneration describes the amount as pay, (3) then the security bond describes the appointment given to Seth Lal Chand as office of the treasurer, (4) the security bond also mentions that there are superior officer of the treasurer, Seth Lal Chand, and (5) duty is cast on the treasurer to keep true and faithful accounts of the property entrusted and of his dealings under written orders of his superior officer therewith in the form and manner that may from time to time be prescribed under the authority of Government and also to prepare and submit such returns and accounts as he may from time to time be called upon to prepare and submit. On the other side, the facts which appear to indicate the remuneration which was paid on appointment of Seth Lal Chand as treasure was income from business are that (1) the treasurer had and was to have the power to use his discretion in the appointment promotion suspension dismissal and retirement of his subordinates and was to have to power to demand security deposit with or without interest to keep with himself till the expiry or termination of his or their services, though all such orders under this clause were subject to the approval of the district officer who was always to be empowered to direct the treasurer to dismiss, suspend or punish any particular member of the staff and the treasurer had always to comply with such orders. IN this connection notice may be taken of the fact that the staff which was to be appointed was to be in the service of the treasurer and there is nothing in the security bond or in any other material available to show that the staff after appointment was to be deemed to be in the service of the Government. It also appears that the actual control over the day to day work of the staff was vested in the treasurer and not in the Government or the officers of the Government. The intervention of the Government officers was permitted to the extent that all appointments, etc., were subject to the approval of the district officer and the district officer was empowered to direct the treasurer to dismiss, suspend or punish any particular member of the staff. This power of the district officer was a sort of general power of supervision over the appointment, dismissal, suspension, etc., of the staff without vesting in the district officer any power to regulate the day to day work of the servants of the treasurer. The treasurer had thus to maintain an organization of his own with a fairly large staff. (2) The salary of the staff appointed by the treasurer had to be paid by him and not by the Government. (3) The treasurer indemnified against any loss or damage to the Government property entrusted to him whether the loss occurred as a result of any act of the treasurer himself or any of his agents or whether it occurred even as a result of an act of a total stranger. The responsibility of the treasurer indemnifying the Government for such loss was held to be inconsistent with the treasurer was not required to render any personal service to Government and the services were to be performed not by the treasurer but by the staff of the treasurer. It was held by the President of the Tribunal that these facts and circumstances showed that the assessee was a contractor who agreed to get certain services performed and received a certain remuneration for the performance of these services performed and received a certain remuneration for the performance of these services and did not itself become a servant of the Government. This enumeration of the facts found would show that the Tribunal came to findings some of which led to the inference that the assessee was working as an independent contractor whereas some pointed to the appointment being in the nature of a contract of service where under the assessee was receiving a salary. In these circumstances, it is not possible for us to hold that there was no material before the Tribunal for arriving at the finding which the Tribunal did. It may be that on that material two opinions might have been possible. As we have stated earlier, the question that arose was essentially a question of fact to be decided on the facts and circumstances found. While we find that there was material for arriving at the view which the Tribunal did, it is not possible for us to set aside the finding recorded by the Tribunal. We may, in this connection, refer to a decision of this court in Commissioner of Income-tax v. I. D. Varshani where, in similar circumstances, it was held by this court that a finding having been recorded that certain income was salary was a finding of fact on the material and, consequently, it could not be set aside by this court.;