Law:

Section:

Income-tax Act, 1922 -Section 2(6c), 3, 4, 6(iv), 6(v) -- Income -Profits and gains of business -Hotel -Service charges from boarders and lodgers for payment to employees -Charges having no profit making quality about it -Amount representing service charges posted in account books under head "general account" -Posting whether changed the quality and nature of the amount and became liable to tax in the hands of hotel -Held no -- Assessable income -Assessee hotel introducing practice of collecting "service charges" from its boarders and lodgers and paying same to employees -Contention that amount having been brought ot general account, such posting changed nature of amount and ceased to be property of employees, hence could be assessed to income-tax, held, not correct -Quality and nature of amount fixed at time either of its receipt or its accrual -Money did not have any profit-making quality about it, hence, not income of assessee -Practice, if, however, adopted to make tax-free income and amount remaining undisbursed for such length of time as to raise inference of its being colourable, amount may be assessable to tax -- JUDGMENT The judgment of the court was delivered by NOORUL ARFIN J.-The following question has been referred for the opinion of this Court by the Income-tax Appellate Tribunal:-- "Whether the amount of Rs. 89,634.00 received by the appellant on behalf of various employees can under provision of the Income-tax Act, 1922, be treated as income of the applicant?" Our answer to the question rests on the facts as stated in the statement of the case sent by the Tribunal, and these facts are: for the charge year 1959-60, the Income-tax Officer notice an amount of Rs. 89,634.00 as at 31st December, 1954 in the assessee's books under the head "general account". The source of this amount is that the bills issued to the boarders and lodgers of the assessee included an additional charge at ten per cent of the amount of the bills under the head service charges". The entry of Rs. 89,634.00 was taken note of by the Income-tax Officer after Rs. 18,645.00 had been disbursed to the employees. It would appear that the assessee, with a view to discourage the…

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