Patna High Court
Commissioner Of Income-Tax vs Beldih Club on 28 September, 1985
Equivalent citations: [1986]161ITR861(PATNA)
JUDGMENT Nazir Ahmad, J.
1. A consolidated statement of the case has been submitted by the Income-tax Appellate Tribunal, Patna Bench B, Patna (hereinafter referred to as "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), referring the following questions of law for the opinion of this court :
"1. Whether, on the facts and in the circumstances of the case, the receipts of the sum of Rs. 15,000, Rs. 23,900 and Rs. 17,800 in the assessment years 1964-65, 1965-66 and 1966-67, respectively, in the hands of the assessee as entrance fees are in the nature of capital receipts ?
2. Whether, on the facts and in the circumstances of the case, the receipt of the sum of Rs. 50,000 as donation from TISCO in the assessment year 1966-67 in the hands of the assessee is in the nature of capital receipt ?"
2. The relevant facts as regards question No. 1 may be briefly stated. The assessee-club is Beldih Club. In the three assessment years 1964-65, 1965-66 and 1966-67, the Income-tax Officer held that the assessee-club is not governed by the principle of mutuality and, therefore, the income arising to it will not be exempt from taxation. He, therefore, taxed various incomes of the assessee. He also held that the entrance fees of Rs. 15,000, Rs. 23,900 and Rs. 17,800 are revenue receipts in the hands of the assessee.
3. The Appellate Assistant Commissioner passed a consolidated order for the assessment years 1964-65 to 1966-67. The Appellate Assistant Commissioner also agreed with the Income-tax Officer that the income of the club was not covered by the principle of mutuality. As regards the entrance fee, he held that the entrance fees were not liable to tax and so he excluded the amount of entrance fees from the assessment for the three assessment years.
4. The Tribunal disposed of the appeals filed by the Department by a consolidated order for all the three assessment years in question. The Tribunal held that the entrance fees received were all of capital nature and it was also shown as capital receipt in the accounts of the assessee. The Tribunal held that these receipts were of capital nature. The three assessment orders of the Income-tax Officer for the assessment years 1964-65, 1965-66 and 1966-67 are annexures A, A-1 and A-2, respectively. The consolidated order of the Appellate Assistant Commissioner is annexure B and the consolidated order of the Tribunal is annexure C.
5. Question No. 1 referred in the taxation case relates to the entrance fees. A similar question has been referred in Taxation Case No. 41 of 1975 (CIT v. United Club [1986] 161 ITR 853) and for the detailed reasons mentioned therein we have held that the entrance fee received by the club at the time of entrance of the new members is a receipt of revenue nature and is chargeable to tax in the hands of the assessee. For the detailed reasons mentioned in Taxation Case No. 41 of 1975, which is also being disposed of by order of this date, I hold that the receipts of the sum of Rs. 15,000, Rs. 23,900 and Rs. 17,800 in the assessment years 1964-65, 1965-66 and 1966-67, respectively, in the hands of the assessee as entrance fees are not in the nature of capital receipts, rather they are receipts of revenue nature and are chargeable to tax in the hands of the assessee-club. I may also point out that two of the amounts mentioned in question No. 1 relating to entrance fee are not correct. I have given correct figures with reference to the assessment orders of the Income-tax Officer in annexures A-1 and A-2. The answer to question No. 1 is given in the negative and in favour of the Revenue and against the assessee.
6. Now let us take up question No. 2. Question No. 2 relates to a donation of Rs. 50,000 from TISCO in the assessment year 1966-67. In the assessment year 1966-67, the Income-tax Officer has simply included the amount of Rs. 50,000 relating to donation receipt in the total income of the assessee. Against this assessment order, the assessee appealed before the Appellate Assistant Commissioner.
7. The Appellate Assistant Commissioner has pointed out that in the assessment year 1966-67, the amount of Rs. 50,000 was received as donation from Mr. J.R.D. Tata who was the President of the assessee-club. This amount was paid ex-gratia from the fund of the Tata Iron and Steel Co. Ltd. (TISCO). The Appellate Assistant Commissioner has pointed out that in the annual report, the donation was described as follows :
"We had the pleasure of a visit from the President, Mr. J. R. D. Tata, accompanied by Mr. J.J. Bhaba. We are grateful to the President who is taking a keen interest in the club activities. He has promised all help for the much needed major repairs and renovations for which he was kind enough to sanction a handsome donation of Rs. 50,000 from the Tata Iron and Steel Co. Ltd."
8. The Appellate Assistant Commissioner took the view that such a donation cannot become income of the club as it is purely an ex gratia and ad hoc payment, entirely dependent on the sweet will of the donor and cannot be treated as income. The Appellate Assistant Commissioner also held that it was a capital receipt and also a casual receipt. The Tribunal also agreed with the view of the Appellate Assistant Commissioner.
9. Now let us consider whether the findings of the Appellate Assistant Commissioner and the Tribunal are correct and can be upheld. It cannot be doubted that the assessee has business income and the income of the assessee is not exempt on the ground of mutuality. In such circumstances, if the amount of Rs. 50,000 is held to be a revenue receipt, then the amount will be taxable in the hands of the assessee-club.
10. Mr. B.P. Rajgarhia relied on the case of Rani Amrit Kunwar v. CIT [1946] 14 ITR 561 (All). In this case, the assessee was the wife of the Ruler of the Kalsia State and the sister of the Maharaja of Nabha State. She was residing at Dehra Dun in British India for some years with her sons and daughters. In the assessment year she received a sum of Rs. 14,744 from the Kalsia State and Rs. 8,910 from the Nabha State. It was found that similar payments had been made to the assessee of varying amounts in each of the years she had lived at Dehra Dun and that they represented allocations for her benefit made in the relative State budgets. In the case of payments from the Kalsia State, they were made for the purpose of meeting the assessee's household and living expenses and the education of her children and in the case of the allowance from Nabha State, it was made as an annual "wardrobe allowance" and as presents on certain days of festival each year. She was not bound to account for the moneys. Although the payments appeared in the State budgets as State expenditure, there was no dividing line between the part of the income of the State which the Ruler spent for public purposes and that part which he spent for his private purposes, and, in those circumstances, it was held that the allowances received by the assessee from the Kalsia State were remittances from her husband and were taxable as income which must be deemed to have accrued to the assessee in British India under Section 4(2) of the Indian Income-tax Act, 1922, and the question whether the remittances received by her were casual and non-recurring did not arise. It was also held that as there was no evidence in the case to show that the payments made by the Nabha State were attributable to any custom, usage or traditional obligation and there was consequently no origin for the payments which could amount in its nature to a definite source so as to render each payment "income" and not merely a casual or annual windfall, these payments were not "income " and were not assessable to income-tax. It was also held in this decision that under the Indian Income-tax Act, 1922, income in order to be taxable need not arise from any business activity, investment or an enforceable obligation to pay but may arise from voluntary or customary payments. Nor is it necessary that it should be the result of some outlay on the part of the assessee. It has also been held in this decision that the words "non-recurring nature" in Section 4(3)(vii) mean not that the payments have as a matter of fact not recurred but that they are not bound to recur. This is a decision of the Allahabad High Court and the facts of the case were entirely different from the present case before us and so this decision will not be applicable to the case of the assessee.
11. Mr. B.P. Rajgarhia has relied on the case of P. Krishna Menon v. CIT [1959] 35 ITR 48. This is a decision by their Lordships of the Supreme Court of India. In this case, after his retirement from Government service, the appellant was spending his time in studying and teaching Vedanta philosophy. L, who was one of his disciples, used to come from England at regular intervals to Trivandrum where the appellant resided, and stay there for a few months at a time and attend his discourses, and so received instructions in Vedanta and had the benefit of his teachings. L transferred the entire balance standing to his credit in his own account at Bombay, amounting to more than 2 lakhs, to the account of the appellant opened in the latter's name in the same bank at Bombay. Thereafter, from time to time, L put in further sums into the appellant's account in Bombay. The question was whether the receipts from L constituted the appellant's income taxable under the Travancbre Income-tax Act, 1121 (which was identical with the Indian Income-tax Act, 1922). It was also held by their Lordships of the Supreme Court that teaching was a vocation, if not a profession, and teaching Vedanta was just as much teaching as any other teaching and, therefore, a vocation. It was also held by their Lordships of the Supreme Court that in order that an activity might be called a vocation, it Was not necessary to show that it was an organised activity and that it was indulged in with a motive of making profit ; it was well-established that it was not the motive of a person doing an act which decided whether the act done by him was the carrying on of a business, profession or vocation and if any business, profession or vocation in fact produced an income, that was taxable income, and was none the less so because it was carried on without the motive of producing an income. It was also held by their Lordships of the Supreme Court that the teaching of Vedanta by the appellant was the carrying on of a vocation by him and that the imparting of the teaching was the causa causans of the making of the gifts by L, that it was impossible to hold that the payments to the appellant had not been made in consideration of the teaching imparted by him, and that, therefore, the payments were income arising from the vocation of the appellant. It was also held by their Lordships of the Supreme Court that as the payments made by L were income arising from a vocation, they were not casual Or non-recurring receipts and ho question of exemption under Section 4(3)(vii) of the Indian Income-tax Act arose. It was also held in this decision that in order that a payment may be exempted under Section 4(3)(vii) of the Indian Income-tax Act as a casual and non-recurring receipt, it has to be shown that it did not arise from the exercise of a vocation. The principle laid down by their Lordships of the Supreme Court has naturally to be followed but the question is whether the amount of Rs. 50,000 was paid to the club from the exercise of a business.
12. Mr. B.P. Rajgarhia has also relied on the case of Ramanathan Chettiar v. CIT [1967] 63 ITR 458 (SC). In this case, it was held that a receipt of interest which is foreseen and anticipated cannot be regarded as casual even if it is not likely to recur again. In this decision, it was also held that the interest granted under the decree of a court and calculated upon the footing that it accrued de die in diem has the essential quality of recurrence which is sufficient to bring it within the scope of the 1922 Act and so it was held that the amount of interest received by the assessee was in the nature of a revenue receipt and that the receipt was not of a casual and non-recurring nature and was, therefore, not exempt from tax under Section 4(3)(vii) of the Act. Of course, this is a decision of the Supreme Court but the facts of this case are entirely different from the facts of the present case before us and it will not be applicable to the case of the assessee-club.
13. Mr. B. P. Rajgarhia has also relied on the case of CIT v. Dr. K. George Thomas [1974] 97 ITR 111, which is a decision of the Kerala High Court. In this case, the assessee was in the United States from 1953 to 1957, during which time he took his Ph.D. Degree. He returned to India by the end of 1957 and started a newspaper Kerala Dhwani in August, 1959. According to the assessee, during his stay in the United States and after his return to India, he was engaged in a movement called India Gospel Mission for the spread of religion and for crusading against the forces of atheism and the political ideologies which favoured atheism, and his friends in America and those who believed in the cause which he was espousing were sending him donations and helping the movement. In his letter to the Income-tax Officer, he stated that the receipts were purely personal gifts and testimonials paid as a token of esteem and regard for his personal qualities and were unconnected with any particular act or service and there was no specific purpose for the contributions. From the above sources, the assessee received Rs. 2,90,220 and Rs. 3,63,750 during the accounting periods relevant to the assessment years 1960-61 and 1961-62, respectively. In those circumstances, the Kerala High Court held that the aforesaid amounts were assessable as the income of the assessee in the relevant assessment years. It was also held that the receipts of casual and non-recurring nature will not be included in the total income of a person, but if there are receipts arising from the exercise of a vocation, they will be included in the total income of a person, even if they were of a casual and non-recurring nature or voluntary, and the receipts resulting from such payments will be outside Section 4(3)(vii) of the Indian Income-tax Act, 1922. The Kerala High Court held that the assessee was very actively and fully occupied with the activities connected with achieving the objects of strengthening faith in God and fighting against atheism and was solely occupied with these affairs and that the paper which he published for this purpose was a daily coming out with views in support of that mission. It was also held that anything in which a person is engaged systematically can be an occupation or vocation. It was also held that there was a link between the activity of the assessee and the payments, in that the payments were made by those who held similar views as those of the assessee and who were very much interested in the propagation and the acceptance of those views by the general public and that the payments were made for the purpose of helping the assessee to run the paper which was the mouthpiece or medium through which the ideas were to be spread. It has also been held that the assessee had stated that he was incurring a huge loss from the newspaper and press and he represented to the Indian Gospel Mission in the United States that he could not carry on the newspaper and suggested that they take over the newspaper and they agreed and sent him further money. It was in those circumstances that it was held that the connection between the activity of the assessee and the donations was thus intimate and the payments were made because of the activity in which the assessee was engaged. This decision is based on the decision of their Lordships of the Supreme Court reported in P. Krishna Menon v. CIT [1959] 35 ITR 48.
14. Mr. K.D. Chatterjee, on behalf of the assessee, relied on various decisions to support the view that the donation of Rs. 50,000 was a capital receipt and it was given to the assessee for the specific purpose of major repairs and renovation to the building which would be a capital expenditure and so, if the expenditure was of a capital nature, the receipts should also be treated as a capital receipt.
15. Mr. K.D. Chatterjee relied for this purpose on the case of Monghyr Electric Supply Co. Ltd. v. CIT [1954] 26 ITR 15 (Pat). It appears that in this case in its books of account, the assessee-company treated the service connection receipt amounting to Rs. 8,674 as revenue receipt and included this amount in its total return of income which was Rs. 2,52,728. The company however, treated, the amount of Rs. 7,504 which was spent on the service connection as capital expenditure. The company consequently claimed depreciation on the amount of Rs. 7,504 which had been spent on the service connection. The Tribunal held that the amount of Rs. 8,674 should be treated as a revenue receipt and was liable to be taxed. On these facts, the Patna High Court held that the service connection is an income-producing asset--it is an asset or an advantage for the substantial benefit of the business of electric supply carried on by the assessee and that these considerations are sufficient to stamp the expenditure on service connection with the character of a capital expenditure and there is no revenue quality in that expenditure. It was also held that the service connection which was installed by the assessee in this case had enough durability to justify its being treated as a capital asset and that the service connection which had been installed by the assessee must be regarded as reaching the dignity of the capital asset and expenditure on the creation of this asset must be treated as a capital expenditure and not an expenditure from revenue. In this case, references were made to various decisions in this connection.
16. Mr. K.D. Chatterjee has also relied on the case of Hoshiarpur Electric Supply Co. v. CIT [1961] 41 ITR 608 (SC). In this case, the assessee credited service connection receipts to the revenue account and debited the corresponding cost of laying service lines to the capital account. Their Lordships of the Supreme Court held that the classification of the receipts in the form of accounts is not of any importance in considering whether the receipt is taxable as revenue. Their Lordships of the Supreme Court held that the receipts though related to the business of the assessee as distributors of the electricity were neither incidental to nor in the course of the carrying on of the assessee's business ; they were receipts for bringing into existence capital of lasting value and the contributions were not made merely for services rendered and to be rendered but for installation of capital equipment under an agreement for a joint venture and the total receipts being capital receipts, the fact that in the installation of the capital only a certain amount was immediately expended, the balance remaining in hand cannot be regarded as profit in the nature of a trading receipt. Their Lordships of the Supreme Court also held that the High Court was in error in holding that the excess of the receipts over the amount expended for installation of service lines of the assessee was a trading receipt.
17. Mr. K.D. Chatterjee has also relied on the case of CIT v. Poona Electric Supply Co. Ltd. [1946] 14 ITR 622 (Bom). In this case, it was held that the company would not have constructed new lines and given the supply of electricity to the Government unless they received Government contribution towards capital expenditure to be incurred by the company in laying these new lines and that this contribution is not in the nature of recurring income or receipt, and that it is not as if the company is charging the Government anything more for supplying electricity to them, but what the company tells Government is : "We are not in a position, and we do not propose to incur capital expenditure to supply electricity to you unless you contribute towards the same". It was also held in such circumstances that when the Government agreed to make this contribution, the company agreed to incur capital expenditure to supply electricity to the Government. Thus, in this case, it was held that the contribution made by the Government for supply of electricity by the company was a capital receipt and not a revenue receipt, as it was meant for capital expenditure.
18. There are various other decisions relating to voluntary gifts which are also to be considered. In the case of Sewal Singh Ajit Singh v. CIT [1980] 126 ITR 732 (P & H), which is a decision of the Punjab and Haryana High Court, the Nawab of Malerhotla transferred to the assessee a piece of land valued at Rs. 16,000. The Income-tax Officer fixed the value of the land at Rs. 20,000 and treated the same as the assessee's income on the ground that the land had been conveyed by the Nawab in token of service Tendered by the assessee in his capacity as a general attorney for the purpose of selling the lands belonging to the Nawab. In those circumstances, it was held by the Punjab and Haryana High Court that the contents of the deed of gift clearly mentioned that the assessee in his capacity as general attorney served the donor honestly and faithfully and it was because of the honesty and faithfulness that the donor developed true and natural love and affection towards the assessee and out of this love and affection, he gifted the land to the assessee. It was also held that the mere fact that the assessee served the Nawab in the capacity of general attorney was no ground for holding that the transaction was not a gift. It was also held in this decision that there was no contractual or legal obligation on the part of the Nawab to pay any remuneration to the assessee and the assessee had no legal right to receive any remuneration and, therefore, the transaction was a gift and not a remuneration paid by the Nawab to the assessee for the services rendered by him as his general attorney.
19. In the case of Siddhartha Publications P. Ltd. v. CIT [1981] 129 ITR 603 (Delhi), the assessee-company which was publishing an English magazine approached the "World partnership" organisation for financial assistance as the magazine run by it suffered from indifferent quality because it was unable to pay its writers adequately, that the assessee was keen to give a brighter look to the magazine by improving its format and layout and also help the contributors and that the organisation should create bulk subscriptions for the magazine. The organisation contributed a sum of Rs. 28,342, to the assessee but expressed its inability to follow up the suggestion of the assessee of either creating bulk subscriptions or increasing the amount of donation but hoped that the contribution would help in increasing the circulation and would put the magazine on a more economical footing. In those circumstances, it was held that even voluntary payments made continuously over a long period of time without consideration and without any source of income depending entirely on the whim of the donor are not income and that the receipt was a casual receipt and depended on the sweet will of the donor and, if not paid, could not be forced against the donor and that the payment was non-recurring in nature because the payee had no right of expectation. It was also held in this decision that though the foreign organisation had been formed for the promotion of literary and educational facilities and though the assessee also requested the organisation for financial assistance by taking a large number of subscriptions or giving a subsidy, the request was not acceded to by the organisation, and that the letter from the organisation to the assessee made it clear that they had decided to give the sum purely as a donation and not for the purposes of business. It was also held in this decision that no services, were rendered by the assessee to the foreign organisation nor was there any mutual or commercial arrangement between the donor and the assessee as to the terms for the provision of financial assistance to the assessee, and that the payment was purely by way of a donation or a gift or bounty and so it was not a revenue receipt liable to tax.
20. In the case of CIT v. Dr. B.M. Sundaravadanam [1984] 148 ITR 333 (Mad), one K who was treated in 1958 by the respondent surgeon was completely cured of his ailment and a sum of Rs. 4,082 was paid by K to the respondent as and by way of professional charges. Subsequently, in 1960, K executed a deed of settlement by which he gifted an area of 33.38 acres of land specifically mentioning in the deed that the gift was made in order to show his feeling of gratitude to the doctor who had shown him kindness. The Income-tax Officer included a sum of Rs. 65,000, being the value of the land gifted, as income arising to the assessee out of his profession. In those circumstances, it was held by the Madras, High Court that where a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision, and only where the character of the receipt is established as income, the burden of proof that it is not taxable lies on the assessee. It was also held in this decision that in view of the donor having already paid the assessee his professional charges as a doctor, there was no legal obligation on the part of the donor to make any further payment for the services rendered by the assessee and there was also no legal right in the assessee to receive any further payment for the professional services, rendered earlier, and hence, it was not possible to hold that merely because the assessee was a medical practitioner.
the gift received by him was towards services rendered, and so it was held that the value of the lands gifted could not be included in the total income of the assessee as his professional income.
21. In the case of H.H. Maharaja Rana Hemant Singhji v. CIT [1971] 79 ITR 83 (Raj), on the merger of the Dholpur State, the question arose whether the "Dholpur House" should be treated as private property of the ruler or the property of the State of Rajasthan. By letter dated October 30, 1951, the Government of India informed the Maharaja of Dholpur that the said house would be considered to be the property of the Rajasthan State, but 1/3rd of the rental value would be paid to His Highness as a purely ex gratia arrangement, and in the event of the sale of the house. His Highness would be entitled to 1/3rd of the sale price minus the share of the Government of India in the form of 75 per cent. of the incremental value. The fact that the payment to the Raja was only an ex gratia payment was emphasised by the Government in subsequent correspondence also. One-third of the rent was continued to be paid to His Highness Maharaja Udai Bhan Singhji till his death and, thereafter, to Her Highness Malvinder Kaur, and then to His Highness Maharaja Hemant Singhji, who was recognised as the Ruler of the Dholpur State. The payments ceased when the said property was sold. The Income-tax Officer taxed the income from the property and, in those circumstances, it was held that the various amounts received by the assessee were exempt from payment of tax as they did not form part of the taxable income, being receipts of a casual and non-recurring nature : merely because the Government of India continued to make payments for several years, they did not cease to be casual receipts: they were casual and non-recurring in nature, inasmuch as they depended on the good wishes of the Government of India.
22. It has been held in the case of Rev, Father Prior Sacred Heart's Monastery v. ITO [1956] 30 ITR 451 (Trav-Coch), that the donations received by a monastery for putting up a charitable institution and used for that purpose cannot be regarded as income and assessed to income-tax ; they are of the nature of gifts and are capital receipts. It has also been held in this decision that assuming that such donations are of the nature of "income" and not capital receipts, they fall within Section 5(3)(vii) of the Cochin Income-tax Act which exempts receipts which are of casual and non-recurring nature, from the liability to assessment. It has also been held in this decision that the mere fact that certain donations have recurred in some years is not sufficient to characterise them as "recurring receipts". In order that a receipt may be a "recurring receipt", there must be a claim or right in the assessee to expect its recurrence, and a voluntary gift depending entirely upon the goodwill of the donor does not, therefore, cease to be of a "casual and non-recuring nature" by reason merely of the fact that the gift is repeated.
23. From the various decisions mentioned above, it is evident that even if voluntary payments are made continuously over a long period of time without consideration and without, any source of income and depending entirely on the whim of the donor, they cannot be treated as income and such payments are casual payments which depended on the sweet will of the donor and if not paid could not be enforced against the donor and the payments will be non-recurring in nature because the payee has no right of expectation.
24. It cannot be doubted that Mr. J.R.D. Tata as the President of the assessee-club paid a donation of Rs. 50,000 for major repairs and renovations of the buildings of the club. It cannot be doubted that major repairs and renovations may be treated as capital expenditure, and once the amount is treated as capital, the amounts received will also have to be treated as capital receipts. The Tribunal has pointed out that the amount of Rs. 50,000 was paid by Mr. J.R.D. Tata who was the President of the club at that time and that that amount was paid ex gratia from the fund of the TISCO for the benefit of the club as the club was catering to the employees of the TISCO and such amounts were not paid regularly and that it was only in special circumstances that this amount was paid for carrying on some major repairs and renovations in the club. It also cannot be doubted that the major repairs of the club may be termed as capital expenditure and the amount received has to be treated as capital receipt. From the case in Hoshiarpur Electric Supply Co. v. CIT [1961] 41 ITR 608 (SC), it is evident that if the expenditure is treated as capital expenditure, then the receipt for that expenditure will be treated as a capital receipt. The Supreme Court in this decision has also clearly laid down that the receipts though related to the business of the assessee were not incidental to nor in the course of the carrying on of the assessee's business and they were receipts for bringing into existence capital of lasting value. If this principle is accepted, then it has to be held that although the assessee is not exempt from taxation on the ground of mutuality which means that the assessee-club is carrying on business, it cannot be said that the amount of Rs. 50,000 which was paid by the President of the assessee-club in special circumstances for carrying on major repairs and renovations to the club can be treated as a revenue receipt and cannot be treated as a capital receipt. It cannot be doubted that the club had no claim of regular donation from the President, Shri J.R.D. Tata. The Tribunal has clearly said that such amounts were not paid regularly and the amount of Rs. 50,000 was paid under special circumstances. Thus, it is evident that it is a voluntary payment by Mr. J.R.D. Tata which was not in connection with the carrying on of the business of the assessee and the payment cannot be said to be incidental to or in the course of carrying on the assessee's business.
25. In view of the decision of the Supreme Court in Hoshiarpur Electric Supply Co. Ltd. v. CIT [1961] 41 ITR 608 (SC), it has to be held that the amount of donation of Rs. 50,000 was not taxable. It cannot be doubted that the club had no right of expectation and that it depended on the sweet will of the donor and if not paid, could not be enforced against the donor. Even if the amount of donation of Rs. 50,000 is treated as income, then it has to be held that the receipt was casual and non-recurring and so it has to be held to be exempt under Section 10(3) of the Act, which lays down that in computing the total income of the previous year of any person, any income falling within any of the clauses of the section shall not be included. We are concerned with the assessment year 1966-67. In that year, Section 10(3) was as follows :
"(3) any receipts which are of a casual and non-recurring nature, unless they are--
(i) capital gains chargeable under the provisions of Section 45 ; or (ii) receipts arising from business or the exercise of a profession or occupation; or
(iii) receipts by way of addition to the remuneration of an employee."
26. Thus, it appears that in the assessment year 1966-67, the amount of Rs. 50,000 cannot be included in the total income of the assessee as it was a casual and non-recurring receipt. It was only after the amendment by the Finance Act, 1972, with effect from April 1, 1972, that casual and nonrecurring receipts were also made taxable when exceeding Rs. 1,000. However, in the assessment year 1966-67, the entire amount has to be treated as casual and non-recurring because it was only once in that year that Mr. J.R.D. Tata had made the gift of Rs. 50,000 to the assessee-club. There is no evidence to show that donations were made regularly by the TISCO to the assessee-club and so it has to beheld that the donation was made only once for major repairs and renovations in the club and so it has to be treated as a casual receipt of non-recurring nature and so it is not to be treated as income for the purpose of taxation,
27. Before I conclude, I may point out that Mr. B.P. Rajgarhia relied on the judgment of this court dated April 1, 1985, in Taxation Cases Nos. 123 to 126 of 1975 [since reported in Jamshedpur Co-operative Stores Ltd. v. CIT [1986] 157 ITR 127 (Pat)]. In that case, question No. 2 related to the subsidy and on the facts, it was found that from the very inception of the assessee, TISCO and its other subsidy companies had been regularly contributing to the society for the benefit of their employees who are the main beneficiaries of the co-operative society, and that payments to the assessee had been made by the companies of their own sweet will in a regular manner month after month and were not without consideration and they were accepted regularly by the assessee and the source was connected with the normal business activity of the society and, in those circumstances, it was held to be revenue receipt. The facts in Jamshedpur Co-operative Stores Ltd. v. CIT (Taxation Cases Nos. 123 to 126 of 1975--[1986] 157 ITR 127 (Pat)) were different from the facts of the present case before us and hence I hold that this decision is not helpful to the revenue-petitioner.
28. Taking either view in the matter, the amount of Rs. 50,000 is to be treated as a capital receipt and not as a revenue receipt.
29. In view of my discussions above, question No. 1 is answered in the negative and in favour of the Revenue and against the assessee. As regards question No. 2, I hold that the receipt of a sum of Rs. 50,000 as donation from TISCO in the assessment year 1966-67 in the hands of the assessee is in the nature of a capital receipt and is not a revenue receipt and so question No. 2 is answered in the affirmative and against the Revenue and in favour of the assessee. As both the parties have partly succeeded, there will be no order as to costs.
30. Let a copy of this judgment be sent under the seal of this court and the signature of the Registrar to the Assistant Registrar, Income-tax Appellate Tribunal, who shall pass necessary orders to dispose of the case in conformity with this judgment.
Uday Sinha, J.
31. I agree.