http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: COMMISSIONER OF EXPENDITURE TAX, ANDHRA PRADESH

       Vs.

RESPONDENT: SHRI PVG RAJU, RAJAH OF VIZIANAGARAM

DATE OF JUDGMENT29/09/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. GUPTA, A.C.

CITATION:  1976 AIR  140            1976 SCR  (1)1017  1976 SCC  (1) 241

ACT:      Expenditure Tax  Act, (29  of 1957),  s. 5 (a) and (j)- Politics if  a pro  fession -  Gratuitous  payments  towards election expenses of party candidates and to office bearers- if ’donation’.

HEADNOTE:      Under s.  5 (a)  and (j)  of the  Expenditure Tax  Act, 1957, no expenditure tax shall be payable on any expenditure incurred by  the assessee  wholly and  exclu sively  for the purpose of  his business  profession or vocation, and on any expenditure incurred by the assessee by way of donation.      The respondent-assessee  was the  Chairman of the State Socialist  Party   and  politics   was  his   profession  or occupation. He is a wealthy socialist and spent Rs. 38,832/- towards election  expenses of other candidates of his party, and gave  Rs. 47,867/- to the office-bearers of his party to meet the expenses involved in party work. ^      HELD: The  two amounts  are eligible for exclusion from expenditure tax.                                                     [1021 B]      (1) Under  modern conditions,  politics is a profession or occupation. [1020 C]      (2) But  the  expenses  incurred  on  behalf  of  other candidates cannot  be the  assessee’s professional expenses. [1020 D]      (3) The  amounts, however,  fall under  s. 5(j)  of the Act. When  a person  gives  money  to  another  without  any material return,  he donates  that sum.  Therefore, when the assessee gave money to the candidates of his party for their elections expenses, it was money gratuitously given, that is he made donations. [1020 E-G]      (4) Similarly,  the amounts  paid to  office-bearers of the party  were not  for any  material return. They were for loyalty or gratitude. Wholly motiveless donation is rare but material return alone negates a gift or donation. Therefore, they also were outright gifts. [1021 A-C]

JUDGMENT:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

    CIVIL APPELLATE  JURISDICTION: Civil  Appeal No.  30 of 1971.      Appeal by  special leave  from the  judgment and  order dated the  19th February,  1970 of  the Andhra  Pradesh High Court in case Reference No. 2 of 1967.      R. M. Mehta and S. P. Nayar for the appellant.      P. Ram Reddy and A.V.V. Nair for the respondent.      The Judgment  of the  Court was  delivered  by  KRISHNA IYER, J.                       Keynote thought.      Politics and  philanthropy may well fall victims to the contruction of  s. 5(a) and (j) of the Expenditure. Tax Act, 1957 (the Act for 1018 short) if  we fall victim to the submission naively made, at the first  stage, by  counsel for  the State. In fairness to him, we  must  state  that  later  he  retracted  from  that position, and rightly so, for the Act, in spirit and letter, does not  intend this  blow on the profession of politics or the disposition for donations.      A  fair   reading  of   the  provisions   in   question convincingly excludes from ’taxable expenditure’ sums wholly and exclusively  incurred for the purpose of a profession or occupation carried  on by the assessee and no modern man may dispute  that   politics  is  a  profession  or  occupation. Likewise, expenditure by way of gift or donation incurred by the assessee  is also  excluded and no politically conscious soul will  deny that  donation to  the party  in a democracy squarely comes within this exclusionary provision.                      The factual matrix      Expenditure tax  under the  Act was sought to be levied from the  assessee  PVG  Raju,  the  respondent  before  us. Paradoxical, perhaps,  it may appear-but here is a case of a rich Maharaja practising the politics of socialism, spending lavishly for  furthering  his  party’s  popularity  and  the prospects of  his fellow  candidates at the elections to the Andhra  Pradesh   Legislative  Assembly.  This  expenditure, falling  under   two  heads,  was  taxed  by  the  assessing authority and  upheld up  to the  Tribunal level.  The  High Court, on  reference, reversed  the findings  on both counts and the  Commissioner of  Expenditure Tax,  the   appellant, challenges the legality of this verdict.      The best  beginning in stating the facts may well be to extract the questions of law referred by the Tribunal in its own words:           "(1) Whether on the facts and in the circumstances                of the  case the  expenditure of Rs. 38,832/-                claimed to  be the  amount  incurred  by  the                assessee for  the benefit of other candidates                for election  is excludible  from the taxable                expenditure either  under Section  5  (a)  or                under Section  5 (j)  of the  Expenditure Tax                Act ?           (2)  Whether on the facts and in the circumstances                of the  case the  sum of Rs. 47,867/- claimed                to be  party expenses  could be excluded from                the  taxable   expenditure  of  the  assessee                either under  Section 5(a)  or under  Section                5(i) of the Expenditure Tax Act ? We have to assume the following facts as implied in the very questions referred  to the High Court and from the attendant circumstances. They are:           (a)  that  the  respondent,  during  the  relevant                period  was   the  Chairman   of  the   State                Socialist Party  which was interesting itself

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

              in electoral politics; 1019           (b)  the respondent was a wealthy socialist;           (c)  that he  was meeting not only the expenditure                of his  own elections but spending moneys for                the benefit  of other candidates belonging to                his party;           (d)  that he  was issuing cheques to the Secretary                and other office-bearers of his party to meet                the expenses involved in party work. He  expended   Rs.  38,832/-  for  propelling  the  election prospects of  other party  candidates during  the  election. Likewise, he  gave Rs.  47,867/- to  his party  through  its office-bearers. On these facts the question is whether he is eligible for  exclusion of the two sums from expenditure tax either under s. 5(a) or under s. 5(j) of the Act.               Consideration of the legal issue      It is  appropriate to  start with  reading the relevant portion of s 5 of the Act:           "s. 5.  No. expenditure-tax shall be payable under      this Act  in respect  of any  such  expenditure  as  is      referred  to   in  the   following  clauses,  and  such      expenditure  shall  not  be  included  in  the  taxable      expenditure of an assessee. . .           (a) any  expenditure, whether  in  the  nature  of      revenue expenditure or capital expenditure, incurred by      the assessee  wholly and exclusively for the purpose of      the  business,   profession,  vocation   or  occupation      carried on  by him or for the purpose of earning income      from any other source;           (b) to (i)...           (j) any  expenditure incurred  by the  assessee by      way  of,  or  in  respect  of  any  gift,  donation  or      settlement on trust or otherwise for the benefit of any      other person."      The  assessee  was  Party  Chairman  and  politics  was undoubtedly his  profession or occupation, it being admitted that his  interest in  politics was  not causal nor sporadic but abiding and ambitious.      The contention of the respondent which met with success before the  High Court  was that  the election  expenses  of other candidates  set up by him as Chairman of the Socialist Party,  loosely   described  as  ’party  expenditure’,  were incurred wholly  and exclusively  for  the  purpose  of  his ’profession’ or  ’occupation’. So,  the  first  point  which arrests our  attention in examining this contention is as to whether politics  of the  socialist brand  or otherwise is a profession or occupation.      There can  hardly be  any doubt  that it  is either, or both. Harold  Laski treated  politics as a science and wrote his well-known  book on the Grammar of Politics, but the art of politics  at a  practical level has also been the subject of comment  and has  been praised and denounced on the basis that it  is a  profession.  To  Gandhiji  it  is  sacred  as religion. In Lincoln it rises to noble heights of statesman- 1020 ship. Lenin,  Nehru and  a galaxy of other great visionaries and makers  and moulders  of the modern world have dedicated themselves to  politics as  a profession.  Of course  in its vulgar and  vicious manifestations, this occupation has been regarded by  literary giants  like Dr.  Johnson as  the last refuge of  a scoundrel’.  Robert Louis  Stevenson  has  used barbed words:  ’Politics is  perhaps the only profession for which no  preparation is thought necessary (Familiar studies of Men  and Books,  ’Yoshida-Torajiro’). George Bernard Shaw

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

uses stinging  language in Major Barbara: ’He knows nothing; and he  thinks he knows everything. That points clearly to a political career’.  It is  thus clear,  without reference to the wealth  of case-law  relied on  by the  High Court, that politics has  been a  profession and,  indeed, under  modern conditions in India, perhaps the most popularand uninhibited occupation-with its perils, of course. Law cannot take leave of  realities   and  therefore   s.  5(a)   must  bear   the construction that politics is a profession or occupation.      The next  question is  whether the expenditure incurred by the assessee for the election of candidates set up by him as Chairman  of his  party can  be legitimately  regarded as incurred ’wholly  and exclusively’  for the  purpose of  his profession or  occupation.  We  have  grave  doubts  whether meeting the  expenses of  other candidates can be fulfilment of his  professional expenses, but this question deserves no deeper probe for the simple reason that s. 5(j) embraces the expenditure as it does answer the description of a donation. When a  person gives  money to  another without any material return, he  donates that sum. An act by which the owner of a thing voluntarily  transfers the title and possession of the same from  himself to another, without any consideration, is a donation.  A gift  or gratuitous  payment  is,  in  simple English,  a   donation.  We  do  not  require  lexicographic learning  nor   precedential  erudition  to  understand  the meaning of  what many  people do  every  day,  viz.,  giving donations to some fund or other, or to some person or other. Political donations  are not  only common,  but are assuming deleterious dimensions in the public life of our country. It is therefore  clear that  when this Raja assessee gave money to the  candidates of  his Party  for  them  to  meet  their election expenses,  he made  donations. Even if he met their election expenditure,  it was  money gratuitously  given  on their behalf  and therefore  amounted to  donation.  Without straining language,  we reach  the natural  conclusion  that what the respondent expended for the other candidates during the elections  was ’donation’  in the  language of  the law. There is no suggestion nor evidence that any material return was in  contemplation when  he spent  these  sums.  Being  a politically important  man with  plenty of money and vitally interested in boosting his Party’s standing in the State, he donated liberally  for candidates  set up  by the  party. In this view  s. 5(j)  aplies to  these  donations  which  earn exemption from the expenditure tax.      The next  item relates  to sums  gives to the Socialist Party. It  is reasonable  to assume that the amounts paid to the office-bearers 1021 of the  party were  without an  eye on  any material  return other than  loyalty or  gratitude. They were outright gifts. Indeed,  many  rich  people  out  of  diverse  motives  make donations  to  political  parties.  The  hope  of  spiritual benefit or  political goodwill,  the  spontaneous  affection that benefaction  brings, the popularisation of a good cause or the  prestige that  publicised bounty  fetches-these  and other myriad consequences or feelings may not mar a donation to make  it a  grant for  a quid  pro quo. Wholly motiveless donation is  rare, but  material return alone negates a gift or donation.  We  need  not  investigate  the  propriety  or political donations  ’unlimited’ and  often  invisible.  All that we  need consider  is whether  such sums  are gifts and donations or  are non-gratuitous  payments  with  a  tag  of return. We have no doubt that on the question as framed, and on the facts and circumstances present, these sums were paid purely  as   gifts  and   donations  to  his  Party  by  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

respondent. It  is not surprising either, because he was the Chairman of  the said  party, had  a long  and liberal purse from which to draw and a large circle of support to build up in the long run.      The inevitable  conclusion from  our discussion is that both the  heads of  expenditure fall under s.5(j) of the Act and, therefore,  flow out  of the  assessable zone. The High Court’s conclusion  is sound  and the  appeal deserves to be and is hereby dismissed, but without costs. V.P.S.                                     Appeal dismissed. 1