Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessment years 1955-56 to 1958-59 - Whether whenever an amount is paid as personal gift for personal qualities of assessee and as token of personal esteem and veneration, it cannot be subjected to tax as income arising out of business, profession or vocation under section 10 of 1922 Act - Held, yes FACTS The assessee was a disciple of the late Shri Aurobindo. He utilised his talents given to him by the divine for doing service for the divine cause. His two main activities were singing bhajans and writing books. Some of his bhajans were recorded and he earned royalty from the same. He also earned royalty from the books. Both these receipts were charged to tax under the head 'other sources'. He travelled widely not only in India but round the world and sometimes gave lectures on his tour. He attracted several persons towards him, who called him their guru. The assessee received an amount from several persons as gifts. a major portion of the said amount was given to him by two foreigners. The amount was utilised for construction of a temple. The ITO held that receipts in question were taxable receipts as they were received by virtue of assessee's profession whether as a philospher, writer, musician, or a spiritualist. On appeal, the AAC held that receipts were not receipts arising from business or exercise of profession or vocation but they were testimonials and personal gifts given to the assessee as a token of esteem and regard for his personal qualities and therefore, these amounts were not subject to tax in the assessment of the assessee. On further appeal, the Tribunal held that all the disciples of the assessee intended to give moneys primarily to him and since the amounts were given to him in the first instance, the income form the property constructed out of those amounts could be rightly taxed fully in the hands of the assessee. On reference: HELD Having regard to the provisions of section 10 of the 1922 Act it could not be disputed that it is only receipts arising out of profits or gains of business,…

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