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PETITIONER: K. GEORGE THOMAS

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, KERALA

DATE OF JUDGMENT30/04/1986

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. MUKHARJI, SABYASACHI (J)

CITATION:  1986 AIR 1661            1986 SCR  (2) 874  1986 SCC  Supl.  269     1986 SCALE  (1)1296

ACT:      Income Tax  Act, 1961,  v. 10(3)/  Income Tax Act, 1922 s.   4(3) (vii)  - Business  income - Receipts from abroad - whether  of   casual  or   non-recurring  nature  -  Whether assessable as business income.

HEADNOTE:      The appellant  is assessed  to income tax in the status of an  individual. He  runs a  printing press  and  a  daily language newspaper.  For the year 1962-63, he filed a return of income  showing a loss. The Income-tax Officer discovered that various  remittances from  abroad had  been received by the assessee  as Vice-President of the India Gospel Mission. On an  enquiry he  found that  a major  part  of  the  funds credited to  the account  maintained by  the assessee in the name of  the Mission  had been  turned over to the newspaper and a  sizeable  part  of  it  had  been  utilised  for  his household expenses.  He rejected  the claim  of the assessee that the  newspaper had  been taken  over by  the Mission or that the drawings from the account, on which no interest had been  charged,   constituted  loans  taken  by  him  in  his individual capacity  to be  repaid in  subsequent years, and being of  the view that the remittances had been made to the assessee entirely  because  of  his  business  and  personal activities and  that  the  funds  of  the  Mission  and  the newspaper had  all been mixed up and treated together as one unit, and  the assessee  had been  operating upon  all these funds as  the individual owner of both the newspaper and the funds, held  that the  entire receipts  of cash  from abroad were relatable  to the  business activities  of the assessee and were assessable to tax as his income.      The  Appellate   Assistant  Commissioner  allowing  the assessee’s appeal  observed that  the amounts withdrawn from the funds were merely loans repayable by the assessee to the Mission, without  however recording  any definite finding on that question  or as  to whether the remittances constituted income of the assessee. 875      The Appellate  Tribunal confirmed  this order in appeal by the  Revenue holding that the receipts did not constitute income of the assessee.      The High Court, following its decision in C.I.T. v. Dr.

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K.  George  Thomas,  [1974]  94  I.T.R.,  11,  answered  the Reference in  favour of the Revenue and against the assessee holding that  the amount was assessable as the income of the assessee.      Similar questions  were raised  in Appeal Nos. 2918 and 2919 of  1977 in respect of the assessment years 1963-64 and 1964-65 respectively,  and Appeal  No. 2917 of 1977 assailed the legality  and correctness of the levy of penalty for not having submitted  a return  for the assessment year 1962-63, but no separate submissions were made in those appeals.      Dismissing the appeals by certificate, the Court, ^      HELD: 1.  The receipts  cannot be regarded as of casual and non-recurring  nature not  arising from  the  assessee’s business or  the exercise  of his  profession or  occupation within the  meaning of  s. 10(3) of the Income Tax Act, 1961 for the reasons set forth in Dr. K. George Thomas v. C.I.T. Kerala, [1985]  156 I.T.R.  412 and are assessable to tax as the assessee’s income. [879 G-H]      P. Krishna  Menon v.  Commissioner of Income-tax, [1959 35 I.T.R. 48, referred to.      The distinction sought to be drawn between the case for the assessment year 1960-61 and 1961-62 and the case for the assessment year 1962-63 on the factum that in the former the remittances  were  entered  in  the  personal  name  of  the assessee while in the latter the remittances have been shown in a  separate account  standing in  the name  of the  India Gospel Mission is wholly without substance. [879 D-E]      In the  instant case, the assessee had treated both the accounts as  his personal accounts from which heavy drawings were made  from time  to  time  entirely  for  his  personal objectives. The drawings from the account in the name of the Mission did  not constitute  loans. The assessee had treated that account as an intimate part of his personal funds. [879 E-G] 876

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeals Nos. 2916 A of 1977.      From the  Judgment and  Order  dated  3.2.1977  of  the Kerala High Court in I.T.R. Case Nos. 22 to 25 of 1975.      Devi  Pal,   Ms.  A.K.  Verma  and  Sukumaran  for  the Appellant.      K.C. Dua and Ms. A. Subhashini for the Respondent.      The Judgment of the Court was delivered by      PATHAK, J.  These appeals by certificate granted by the Kerala High  Court and directed against the judgment of that High Court  answering the  questions referred  to it  by the Income-tax Appellate  Tribunal in  favour of the Revenue and against the appellant.      The assessee,  who  is  the  appellant  before  us,  is assessed to  income-tax in  the status  of an individual. He runs a  printing press  known as  ’Kerala Dwani’  and also a Malayalam  daily   newspaper  of  the  same  name.  For  the assessment year 1962-63, he filed a return of income showing a loss  of Rs.3,37,183.  The Income-tax  Officer found  that various remittances  from the  United States  of America had been received  by him,  ostensibly in  his capacity as Vice- President  of   the  India   Gospel  Mission.  The  assessee maintained two  bank accounts with the Indian Overseas Bank, Kottayam. One  account was  in the  name of the assessee and the other  in the name of the India Gospel Mission. A credit

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of Rs.5,85,637  appeared in  the account of the India Gospel Mission.  The   Income-tax   Officer   enquired   into   the utilisation of  the funds  credited in  that account, and on examination of  the material  before him  he found  that the major part  of  the  funds  had  been  turned  over  to  the newspaper ’Kerala  Dwani’  and  a  sizeable  part  had  been utilised for household expenses by the assessee, such as the purchase of  a cow,  payment of  house rent  of his  father, personal trips  to  Bombay,  purchase  of  property  by  the assessee, and  providing loan  facilities to  the assessee’s close relatives  including his  father, brothers  and others without interest.  The personal  expenses met  from  out  of these 877 funds and the amount utilised for the purchase of properties A in  the name  of the  assessee and  his five brothers were claimed by  the assessee  as representing loans taken by him in his individual capacity to be repaid in subsequent years. The Income-tax  Officer found  that  no  interest  had  been charged on  those drawings  and that the account showed that the assessee  had been  operating  on  those  funds  in  his complete  discretion   without  regard   to  any  stipulated principles or  directions. He  found that  the purchases and the advances  made for  the purchase  of properties  found a place in  the Balance  Sheet prepared  for the  India Gospel Mission. He  rejected the  claim of  the assessee  that  the newspaper, ’Kerala  Dwani’ had  been taken over by the India Gospel Mission  and that the assessee had nothing to do with it. He  found that the statutory declarations required to be published by the newspaper annually showed that the assessee in his  individual capacity  was the  owner of the press and the newspaper,  and that  no  where  was  the  India  Gospel Mission shown  as having any connection with them as such or through him  as Vice-President  of the India Gospel Mission. The Income-tax  Officer came  to the  conclusion that on the examination of  the entire  material it  was clear  that the funds had been received mostly for assisting the assessee in running the  newspaper, and  that funds  of the India Gospel Mission and  the newspaper ’Kerala Dwani’ had all been mixed up and  treated together  as one  unit and  the assessee had been operating  upon all these funds as the individual owner of both  the newspaper and the funds. The Income-tax Officer observed that  the remittances had been made to the assessee entirely because  of his  business activities  and had  been utilised by him for his business and personal activities. He held that the entire receipts of cash from the United States of America  were relatable to the business activities of the assessee and  were  assessable  to  tax  as  the  assessee’s income. He rejected the explanation of the assessee that the drawings  constituted   loans  taken  from  himself  in  his personal capacity  and paid  to himself as Vice-President of the India  Gospel Mission.  Following  the  decision  in  P. Krishna G  Menon v.  Commissioner of  Income-tax, [1959]  35 I.T.R. 48 he brought the amount of Rs.5 India Gospel Missi n t ta as the in      On appeal by the assessee, the Appellate Assistant 878 Commissioner observed  that the  amounts withdrawn  from the funds were  merely loans  repayable by  the assessee  to the India Gospel  Mission but  no definite  finding was given on that question  nor did he render any finding on the question whether the receipt of Rs. 5,85,637 in the name of the India Gospel Mission  constituted the  income of the assessee. The Appellate Assistant  Commissioner relied  essentially on  an earlier order  made by  the Income Tax Appellate Tribunal in

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the appeals  arising out  of the  assessments made  for  the assessment years 1960-61 and 1961-62, in which years similar remittances to  the assessee  had been held by the Appellate Tribunal to be not taxable.      The  Income-tax  Officer  appealed  to  the  Income-tax Appellate Tribunal, and the Appellate Tribunal dismissed the appeal because  it preferred  to follow  its  earlier  order relating to the assessment years 1960-61 and 1961-62 wherein it had held that the receipts from abroad did not constitute the income  of the  assessee, and  that even  if  they  were assumed to  constitute his  income they  were receipts  of a casual and non-recurring nature not arising from business or the exercise  of a  profession or occupation and, therefore, not taxable.      At the  instance of  the Revenue the Appellate Tribunal referred the  following two  questions to  the High Court of Kerala for its opinion :           "(1) Whether,  on the  facts and  circumstances of           the case,  the Tribunal  was right in finding that           the amount of Rs. 5,85,637 assessed by the Income-           tax Officer  was not  assessable as the income for           the assessment year 1962-63?           (2) Whether, on the facts and circumstances of the           case, the  Tribunal was  right in finding that the           amount of  Rs. 5,85,637  are receipts  of a casual           and non-recurring nature not arising from business           or the  exercise of  a  profession  or  occupation           within the meaning of section 10(3) of the Income-           tax Act, 1961?" This reference  was numbered  as Reference No. 22 of 1975 in the High Court. 879      By its  judgment dated February 3, 1977, the High Court held that  the amount  of Rs. 5,85,637 was assessable as the income of  the assessee  for the assessment year 1962-63 and that the  receipts were  not of  a casual  and non-recurring nature. A reference made to the High Court against the order of the  Appellate Tribunal  for the assessment years 1960-61 and 1961-62,  of which  mention has  been made  earlier, had already been  answered by  the High  Court in  favour of the Revenue and  against the  assessee. That  judgment has  been reported as  Commissioner of  Income-tax v.  Dr.  K.  George Thomas, [1974]  97 I.T.R.  111. We  may point  out that that judgment of  the High  Court was  brought in  appeal to this Court and  was upheld  by a Division Bench of this Court, of which one  of us  (Sabyasachi Mukharji, J) was a member, and the judgment of this Court has since been reported in Dr. K. George Thomas  v. Commissioner of Income Tax, Kerala, [1985] 156 I.T.R.  412. Upon  that it  is clear  that the  basis on which the Appellate Tribunal proceeded to decide the case in favour of the assessee stands displaced. Learned counsel for the assessee  contends, however,  that there  is a  material difference between the case for the assessment years 1960-61 and 1961-62  and the  case for  the assessment  year 1962-63 inasmuch as  in the former case the remittances were entered in the  personal name  of the  assessee while in the present case the  remittances have  been shown in a separate account standing in  the name  of the  India Gospel  Mission. To our mind the  distinction sought  to be  drawn is wholly without substance, having regard to the overwhelming material on the record showing  that  the  assessee  had  treated  both  the accounts as  his personal accounts from which heavy drawings were made  from time  to  time  entirely  for  his  personal objectives. The  case that  the drawings from the account in the name  of the  India Gospel  Mission constituted loans is

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not supported by the evidence on the record, and it is clear that the  entire fund was treated as an intimate part of the assessee’s personal  funds. That being so, the High Court is plainly right  in holding that the amount of Rs. 5,85,637 is assessable as  the income of the assessee for the assessment year 1962-63.  It is  also apparent that the receipts cannot be regarded  as  of  casual  and  non-recurring  nature  not arising from  the assessee’s business or the exercise of his profession or  occupation within  the meaning of s. 10(3) of the Income-tax Act. The decision of this Court in P. Krishna Menon (supra)  supports that  conclusion.  Indeed  both  the questions arising 880 before us  for the  assessment year 1962-63 were, as we have mentioned earlier,  examined by  this Court on corresponding facts relating  to the assessment years 1960-61 and 1961-62, and we  cannot do better than adopt the reasons set forth in that judgment in this case. This appeal, therefore, fails.      The other  appeals before  us arising  out of Reference No. 23  of 1975  raise the  question  of  the  legality  and correctness of  the levy  of penalty on the assessee for not having submitted  a return  for the assessment year 1962-63, and Reference  No. 24  of 1975  and Reference No. 25 of 1975 which raise  similar questions for the assessment year 1963- 64 and  1964-65 respectively  as in  the Reference  we  have dealt with  above. No separate submissions have been made by learned counsel  for the  assessee on these appeals and they must also fail.      In the result the appeals are dismissed with costs. P.S.S.                                  Appeals dismissed. 881