A.N. Varma, J. - (1.) AT the instance of the Revenue, the following question of law has been referred for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the commission of Rs. 25,000 received by the assessee on sale of shares of M/s. Universal Tyres Co. was exempt from tax under Section 10(3) of the Income-tax Act, 1961 ?"
(2.) THE assessee is an individual and the proceedings relate to the assessment year 1970-71. THE assessee enjoys income from commission on the sale of products like cycle, linoleum, jute-matting, etc., manufactured by various Birla concerns. During the relevant previous year, he was paid a sum of Rs. 25,000 by Universal Tyres Ltd. Under a revised return, he asserted that this amount was exempt from tax under Section 10(3) of the Income-tax Act, 1961, claiming the same as a receipt which was of a casual and non-recurring nature not falling under any of the provisos to Section 10(3). In the alternative, it was claimed that in case the said receipt was treated as assessable income, he was entitled to a deduction of 25 per cent. therefrom as expenses incurred by him in helping M/s. Universal Tyres Ltd.--also a Birla concern--in the sale of its shares and in the setting up of a factory owned by that company at Naini. The Income-tax Officer negatived the assessee's claim for exemption of the said receipt of Rs. 25,000 from tax holding that the amount paid to the assessee by M/s. Universal Tyres Ltd., for helping it in the sale of its shares formed part and parcel of the assessee's normal and regular business and hence liable to be taxed. The Income-tax Officer, however, allowed a deduction of ten per cent. instead of 25 per cent. claimed by the assessee from that receipt as expenses. In this way, the Income-tax Officer made an addition of Rs. 22,500 to the assessee's income. The assessee appealed before the Appellate Assistant Commissioner but without any success. The Appellate Assistant Commissioner held that the aforesaid amount had been paid to the assessee for having rendered specific services, namely, the sale of shares and for the setting up of a factory in Naini, and, consequently, the transaction constituted an adventure in the nature of trade and, therefore, liable to be assessed. He observed that the very fact that the assessee agreed to help M/s. Universal Tyres Ltd. in the sale of its shares indicated that the amount received was not a casual income or a windfall. Under the circumstances, the amount of Rs. 25,000 earned by the assessee was liable to be treated as an assessable income not exempt from tax under Section 10(3).
(3.) THE Income-tax Appellate Tribunal, on further appeal by the assessee, reversed the decision of the Income-tax Officer and the Appellate Assistant Commissioner and held that the receipt of Rs. 25,000 by the assessee was clearly casual and non-recurring in nature and inasmuch as the same did not arise from any business or by the exercise of any profession or occupation, it was exempt from tax. THE Tribunal found that the assessee's principal source of income was commission received from various Birla concerns for the sale of the products mentioned above. He was not a share-broker, nor is he in the business of helping industries in the setting up of their factories. THEre was no stipulation or understanding between him and M/s. Universal Tyres Ltd. regarding the payment of this amount. THE amount was paid to him by M/s. Universal Tyres Ltd. ex gratia in recognition of his services rendered by assisting the former in the disposal of their shares as well as setting up their factory at Naini. In the result, the assessee's appeal was allowed. THEreupon, at the instance of the Commissioner of Income-tax, the Tribunal has referred the question quoted above for our opinion. The short question which arises for our consideration is whether the receipt of Rs. 25,000 by the assessee was his "income" or a "receipt" of a casual and non-recurring nature and whether this payment to the assessee could be regarded as a receipt arising from any business of the assessee or from exercise by him of any profession or occupation. In order to appreciate the question, it will be convenient to have Section 10(3) extracted here ; "10. Incomes not included in total income.--In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included...... (3) any receipts which are of a casual and non-recurring nature, not being winnings from lotteries, to the extent such receipts do not exceed one thousand rupees in the aggregate : Provided that this clause shall not apply to- (i) capital gains chargeable under the provisions of Section 45 ; or (ii) receipts arising from business or the exercise of a profession or occupation; or (iii) receipts by way of addition to the remuneration of an employee." ;