P. Krishna Menon v. the Commissioner of Income-Tax, Mysore, Travancore-Cochin and Coorg, Bangalore

Judgment

of supply of limestone even a part from his work in the Ga.ngapur quarry, and the agreement dated August 2, 1941, provides for his supplying limestone for the furnaces at Kulti for a. period of 12 years and for loading iron at Monoha.rpore for a. like period. There was therefore at no time any agreement which operated as a bar to the carrying on of business by the respondent. On a consideration of all the facts established, we are of opinion that the receipt of Rs. 2,50,000 by the respondent is a revenue receipt and is chargeable to tax. In the result, the appeal is allowed, the judgment of the High Court set a.side and the order of the Tl'ibuna.l restored. The respondent will pay the costs of the appellant throughout. Appeal allowed. P. KRISHNA MENON THE COMMISSIONER OF INCOME-TAX, MYSORE, TRA V ANCORE-COCJHIN AND COORG, BANGALORE (VENKATARAMA AIYAR, GAJENDRAGADKAR and A. K. SARKAR, JJ.)

Income-tax-Assessee teaching Vedanta without object of mak· ing profit-If carrying on a vocation-Disciple making gift of money -Whether receipt amounts to income from vocation-Indian Income· tax Act, I922 (XI of r922), s. IO. The assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One of his disciples made gifts of money to him on several occassions. It was contended by the assessee that he was not liable to tax on the amounts received as he was not carrying on any vocation and as the receipts were not profits or gains. Held that, in teaching Vedanta the assessee was carrying on a vocation. It is not necessary for an activity to be a vocation Commission., of I ncom•-ra:r J air am Y alji Y •nkalarama Aiyar ]. October 7 r9j8 that it should be an organised activity or that it should be practiced with a motive for making profit. P. KrishHa A.fenon Commissioner of Inland Revenue v. [14corporatcd Cot4ncit of v. . .

Law Reporting, (r888) 3 Tax Cas. ro5, IIJ, followed. Thd Cornu11ssror1er of lncome-J'a*, Mysore, 'fyavancore-Cochiu. and Coorg. lJangdlors Sarllar ]. H c/d, further, that the payments made by the disciple were income received by the assessee from his vocation. In the case of a voluntary payment, no tax can be levied on it if it had been made for reasons purely personal to the donee and unconnected with his office or vocation but it will be taxable if it was made because of the office or the vocation of the donee. The question is not what the donor thought he was doing but why the donee received it. In the present case it is plain that it was because of the teaching that the gift had been made. CIVIL APPELLA'rE JURISDICTION: Civil Appeal No. 401of1956. Appeal by special leave from the judgment and order dated March 8, 1956, of the Travancore-Cochin High Court at.Ernakulam in l.T.R. No. 24of1954. A. V. ViBwanatha Sa8tri, S. R. Ganapathy Iyer, J.B. Dadachanji and G. GopalakriBhna, for t1ie appellant.

K. N. Rajagopala Sastri, R.H. Dhebar and D. Gupta, for the respondent. 1958. October 7. The Judgment of the Court was delivered by SARKAR .J.-The appellant who was a Superintendent of Police in the service of the former Travancore State, retit'ed sometime in 1940. After retirement he was spending his time in studying Vedanta philosophy and expounding the same to such persons as were keen on understanding it. He soon gathered about him a number of disciples, one of whom was J. H. Levy of London, U.K. Levy along with others used to receive instructions in Vedanta from the appellant. He used to come to Travancore from England at reg\1lar interv1tls and stay there for a few months at a time and attend the discoursed given by the appellant and so had the benefit of his teachings on Vedanta. Levy had an account in Lloyd's Bank at Bombay. On December 13, Hl41, Levy transferred the entire balance standing to his credit in this account amounting to Rs. 2,41,103-11-3, to the credit of an account which he got the appellant to open in his name in the same bank.

Thereafter, from time to time Levy put in z9sa further sums into the appellant's aforesaid account in P. Krishna Menon Lloyds Bank, Bombay. It appears that the payments so made up to August 19, 1951, amounted to about Rs. The Commission.r 4,50,000/-. From time to time the appellant got 01 Income-Tax, ti t t th Ll d' Mysore Travanmoneys trans erre .rom IS a~conn a , e S core-C~chin and Bank, Bombay, to his account ma bank at Tnvan- Coorg, Bangalore drum in Travancore. This appeal arises out of orders for assessment to Sarkar f. income-tax passed against the appellant for the assessment yea.rs 1122, 1123 and 1124, all according to the Malaya.lam era. The respective accounting periods according to the Gregorian calendar were from August 17, 1945, to August 16, 1946, August 17, 1946, to August 16, 1947, and August 17, 1947, to August 16, 1948. It appears that during these periods Levy had deposited in the appellant's account at Lloyd's Bank in Bombay the following respective sums: Rs. 13,304/-, Rs. 29,948/- and Rs. 19,983/-.

During the same periods the appellant had obtained transfers of the following respective sums from his Bombay account t.o his Trivandrum account: Rs. 81,200/-, Rs. 47,000/- and Rs. 37,251/-. The Income-tax Officer, Trivandrum, assessed the appellant to tax on the latter amounts as foreign income, i.e., income arising in India., and brought into Travancore State in the relevant periods. We a.re not concerned in this case with the assessment made on other income of the appellant. The appellant appealed from these assessment orders to the Appellate Assistant Commissioner who consolidated them into one appeal. The Appellate Assistant Commissioner dismissed the appeal and confirmed the orders of the Income-tax Officer. The appellant. then went up in appeal to the Appellate Tribunal but that appeal also failed. The appellant thereafter obtained an order from the Tribunal referring the following questions tu the High Court of Travancore-Cochin for decision: "(i)

Whether the aforesaid receipts from John H. Levy constitute income taxable under the Tra.va.ncore Income-tax Act, 1121? and (ii) Whether there are materials for the Tribunal P K .-h-M to hold that the deposits into the assessee's bank m na enon 9 account m om ay y o n . . evy rom 1 41 as The Commi<Sion" aforesaid represented income that accrued to the asseso/ Income-Ta., see outside Tra.vancore State?" Mysore. Travan- The High Court answered the first question in the core-Cochin and ffi Coorg, E!••g•lo" ~ rmahve. t owever answer~ t e secon question m favour of the appellant, holdmg that. he was carry- Sorkar J. ing on a vocation or occupation in that State and the income derived therefrom should be considered as having arisen in Tra.vancore, and that therefore the appellant was liable to be taxed not on the amounts which he brought into Tra.va.ncore but on the amounts which had been pa.id to the credit of his account at Bombay by Levy during the relevant periods.

The appellant has now come up to this Court in appeal by special leave against the answer given by the High Court to the first question. We are not concerned in this appeal with the answer given to the second question as it had been decided in favour of. the appellant and there has been no appeal against it by the revenue authorities. We do not think that the case presents any difficulty. It has to be decided on the terms of the Trava.ncore Income-tax Act, 1121 (Malayalam Era.), but as the provisions of that Act a.re, for the present purpose, identical with those of the Indian Income-tax Act, 1922, it would be more convenient to refer to the provisions of the latter. Mr. Sastri, appearing for the appellant, has stated that the case involves really two points. E'irst, was the appellant carrying on a vocation? And secondly, if he was, can the a.mounts with which we. a.re concerned, be said to be profits or gains of the vocation ?

"". e agree with his view of the case and proceed to discuss these points. The first question is, whether the appellant was carrying on a vocation. Under s. 10 of the Incometa.x Act, 1922, tax is payable by an a.ssessee in respect of the profit or gains of any profession or vocation carried on by him. The facts foul'.d are that the appellant was studying Vedanta philosophy himself and (l) S.C.R. imparting the knowledge acquired by him as a result of his studies to such as cared to come and imbibe it. Th t th t tl JI t 1 d I'. f(ri.<l111a Mmou ere is no evr ence o s ow ie appe an· 1a made it a condition that he would impart. such known,, cm;;,.issionn ledge only to those who were prepared to pay for it. of Income-T11:r. We have therefore to prvceed on the basis that the Myw•. TraMnappellant was teaching hi,.; disciples V cdanta without c,,,, Cochin '~"J any motive or intention of making a profit out of Coorg, nang " 071 such aeti vitv.

We find no difficulty in thinking that teaching is a vocation if not a profession. It is plainly so and it is not necessary to discuss the various me:i.nings of the word 'vocation' for the purpose or to cite authorities t.o support this view. Nor do we find any reason why, if teaching is a. vocation, ten.ching of Vedanta is not. lt is just. as much teaching, and therefore, a vocation, as any other teaching. Jt is said that in te;1ching Vedanta the appellant \rns only practising religion. We are unable to see why teaching of Vedant.a as a matter of religion is not carrsing on of a vocation. In any case the question does not really arise, for, whether the appellant was, in teaching Vedanta, practising religion, is of course a finding of fact. It may be that Vedanta could he taught as a practice of religion but it could of course also be taught as any other philosophy or school of thought.

The statement of case in this case does not contain any finding that in teaching Vedanta the appellant was practising religion. It is said that in order that an activity may be called a vocation for the purposes of the Act, it has to be shown that it was an organised activity and that it was indulged in with a motive of making profit; that as the appellant's activity in teaching Vedanta was neither organised nor performed with a view to making profit, he could not be said to be carrying on a vocation. It is said that as the word 'vocation' ha.s been used along with the words ' business and profes. sion' and the object of a business and a profession is to make a profit, only such activities can be included in the word 'vocation' the object of which likewise is to make a profit. We think that these contentions 18 SUPHEME COURT R.EPORTS [1959] Supp. x95B Jack substance. We do not appreciate the significance P. ,.,ishn"

Menon of saying that in order to become a vocation a.n activity must be organised. If by that a continuous, 1'he Co1n11iissio11er or as was said, a S)'Stem~tic activity, is meant, we of lncom•·Tax, have to point out that it is well-known that a single .\IJ'"0"· T.ava"· a.ct may a.mount to the carrying on of a. business or core~Cachin and Pro1ess10n. t is unnecessary to iscuss t is quest10n Coorg. BangalortJ further as we find no want of svstem or continuity in s •• ~ .. J. the activity of the a.ppella.nt. He had gathered a. large number of disciples a.round him and wa.s instructing them in Vedanta. regularly. Levy ca.me all the way from England at regular intervals to obtain such instructions. All this clearly indicates organisation and system. Again, it is well-established that it is not the motive of the person doing an act which decides whether the a.ct done by him is the carrying on of a business, profession or vocation.

If any business, profession or vocation in fact produces an income, that is taxable income and none the less because it was carried 011 without the motive of producing any income. This, we believe, i8 too well-established on the authorities now to be questioned. It was dedded as early as 1888 in the case of the Commissioner of ]nl,and Rei·enue v. Incorporated Council of Law Reporting{') and followed ever since, that "it is not essential to the carrying on of a trade that the people carrying it on should make a profit, nor is it even necessary to the carrying on of the trade that the people carrying it on should desire or wish to make a profit". If that were not so, a person carrying on what otherwise would be a business, may say that he did not ca.rry on a business because it was not his intention to make anv income out of it, That would, of course, be absurd:

The question is, whether the aetiYity has actually produced an income and it matters not whether that activity is called by the name of business, profession, vocation or by any other name or with what intention it was carried on. The observation of Rowla.tt, J., in Stedeford v. Beloe (') to which ws were referred by Mr. Sastri, that there eould be no tax on pension granted to a retired (1) (1888) 3 Tu Cas. 105, n3. (2) (1930) 16 Tax Cas. 505. (1) S.C.R. headmaster as " there is no background of business in z9,a it", was clearly not intended to lay down that without P K .-hllf a profit motive there could be no business, profession · · "'·' :'." ·mo" or vocation. The pension could be taxed only if it had Tlte cormn;ssinn..,. a.risen out of the office and the only point decided was of Income.Tar, that it had not so arisen as the headmaster held no Mysore, 1"rava11- office, having retired earlier at the date the pension core-Cochin atid h d b J .

Coo1·g, Brmga/o,. een grante : see the same case m t ie ouse of Lords(1). 'Ve think therefore that the teaching of Sarkar J. Vedanta by the appellant in this case can properly be called the carrying on of a vocation by him. Then the other point· to be decided is, whether the payments made by Levy were income received by the appellant from his vocation of teaching Vedanta. A. very large number of authorities, both Indian and English, have been pressed upon us in the course of the argument. These cases illustrate the application of the well-settled principle that in the case of a voluntary payment, no tax can be levied on it if it had been made for reasons purely personal to the donee and unconnected with his office or vocation while it will be taxable if it was made because of the office or vocation of the donee. We do not consider it profitable to discuss them in this case. Also it seems to us that the present case is too plain to require any authority.

The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri contended that the facts showed that the payments were purely personal gift.s. He drew our attem1on to the affidavit of Levy where it is stated" all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason". But Levy also there said, "I have had the benefit of his teachings on Vedanta". It is important to remember however that the point is not what the donor thought he was doing but why the donee received it. So Collins M. R. in Herbert v. McQuade (2), referring to Inland Rei1enue v. Stt·ong (3), said at p. 649: "Now that judgment, whether or not the (1) (1932) A. C. 388. (2) (1902) 2 K.B. 631. (3) (1878) 1 Tax Cas. 207. particular facts justified it, is certainly a.n affirmation of a. principle of law that a. payment ma.y be liable to I'. !(;ishna Menon. t h "t .

1 th t fth mcomc. ax a t oug I 1s vo unta.ry on e pa.r o TheC.,:,~;,,;on,. persons who made it, a.nd that the test is whether. of Inco•"·Tax. from the standpoint of the person who receives it, it Mysore, TraMn· accrues to him in virtue of his office ; if it does, it does core-Cochin and not matter whether it was voluntary or whether it wa.s Coor1. Ban11a1o" compulsory on the part of the persons who paid it. S•rA., ;. · That seems to me to· be the test ; and if we once get to this-that the money has come to or accrued to, a person by virtue of his office-it seems to me that the liability to income tax is not negatived merely by reason of the fa.ct that there was no legal obligation on the pa.rt of the persons who contributed the money to pay it." It is well established that in cases of this kind the real question is, as Rowla.tt J. put it in Reed v. Seymour (1 ), "

But is it in the nature of a personal gift or is it a remuneration?", an observation which was quoted with approval by Viscount Cave, L. C. when the case went up to the House of Lords with the addition " If the latter, it is subject to the tax ; if the former, it is not": see Seymour v. Reed ('). We find it impossible to hold in this case that the payments to the a. ppella.nt had not been ma.de in consideration of the teaching imparted by him. Levy admitted that he had received benefit from the teaching of the appel. la.nt. It is plain to us that it was because of the teaching that the gift had been ma.de. It is true that Levy said that he ma.de the gifts to mark his esteem and affection for the appellant. But such emotions and therefore the gifts, were clearly the result of the tea.oh. ing imparted by the appellant. Mr. Sastri contends that that may be so, but we have no right to foJ:ow the successive causes and as a. result thereof link the gift with the teaching.

An argument of this kind seems to have been advanced in Bklkiston v.·Cooper (') and dealt with by Lord Ashbourne in the following words: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and (1) (1926) I K.B. 588. (2) (1907) A.C. 554· (3) (1909) A.C. 104. respect. Such reasons no doubt played their part in z95a obtaining and increasing the amount of the offerings, P K .-,.- 111 but I cannot doubt that they were given to the vicar . ns :.a enoN as vicar and that they formed part of the profits The Commissi0tur accruing by reason of bis office." We have no doubt of Jnco,,,e-Tax, in this case that the imparting of the teaching was the Myson, ~ravan­ causa causans of the ma.king of the gift; it was not ccor1-Co8' 11'" 0 l Th OOff:, ongo o,. mere y a causa sine qua non. e payments were repeated and ca.me with the same regularity as Levy's Sarka• .f. visits to the appellant for receiving instructions in Vedanta. We do not feel impressed by Mr. Sa.stri's contention that the first payment of Rs. 2,41,103-11-3 was too large a. sum to be paid as consideration.

In a.ny case we are not concerned in this case with that payment. We a.re concerned with payments which are of much smaller a.mounts and as to which it has not been said that they were too large to be a consideration for the teaching. And one inust not forget that these a.re cases of voluntary payments a.nd the question of t,he a.ppra.isement of the value of the teaching received in terms of money is not very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. In the view that we take, namely, that the payments with which we a.re concerned, were income arising from the vocation of the appellant as a teacher of Vedanta, no question of exemption under s. 4(3)(vii) of the Act a.rises. In order that a payment may be exempted under that section, it has to be shown that it did not arise from the exercise of a vocation.

In the result, we have come to the conclusion that this appeal fails and it is dismissed with costs in this Court. Appeal dismiast.d.