Karnataka High Court
The Commissioner Of Income Tax vs H.S.Ramachandra Rao on 12 August, 2009
Bench: D.V.Shylendra Kumar, Aravind Kumar
Advocates}
IN THE HIGH COURT ore' KARNATAKA,
DATED THIS THE 121%! DAY 01? AUG? 2909 T j u
PREsEz~:[*1*"' % "
THE HOIWBLE MR. JUSTICE
.559 .
THE HON'BLE MR. Jus_f1*-:.<_:E ARA_vm;:}v-K{i.§§AR
I.T.A.NO.2*g;.'§};_§);_F;'_g004 '= _
1. The Commiszsioxler ;bfIr1c§>:3;1e-1:-ax, ' "
Central ci:i:1q,c_ RLB:3i1dit1g,.._
Queens;I~?:0;é:d,1-~...---':--_V '
Bangalorg. -I_ " '
2. The 'Assistant 'C9i?::zniis$ioI'1er
Of In(:nme»Ta.x," V.
Gem-a1' £31016?-I.(4),_
C.R=.Bui1d'ing, 'Queens Road,
13fifi€53"m- '
Appeliants
A1'~i111.;
" ~ ' ~ . __ "Sr1.H.S.R'amachandra Rae,
' V.*3N';:>;T178, 'Kavcri', 5"' Main,
"3***%P1.iasa, J-P-Ragar,
- B:'mga1om~78.
: Respendent
' 3 (By Sr1.S.Parthasarathi,Adv0cate)
fiieé return for the block mriod 1-4-1990 to 14-7-«Z000 on
24-4-2001 declaring undisclosed income as 1"1_1'4L.L
the ceurse of Search proceedings the
admitted that he had received
Cha1rm' an of Paramahamsa
a sum of 123.42 Iakhs for
and secretary ship Jaya;1a,_§a1:_ Educetione Sriciety. On
verification by the autuariees W found that the
Jayanagar Education had been started
Prim' my and High School
at No.2"?',{ II east Jayanagar, Bangalore
and f:.;}1e_ aseessee °wa';s the founder life member and was
. of said society during 1996-97. The
worked as the Head Master in the
metitutieta-tifl the date of his superarmuation in 1991.
" It was also noticed by the a1.1t11oI°ities that durm g
1§?96~97 the management of the society was taken over by
Dr.K.R.PaI*amahamsa. Chariman of Peramahamsa
V/':1;
Foundation (R) Trust, Bangalore. The above said
Jayanagar Education Society is having Kannadafiviedium
school and this institution was and is 'the
land provided by the Bangalore Deve1opm6fli;d.:A¥11:5§>itityi.V' ..
4. During the course of A'
assessee had admitted thatViiie"'h.e.d feceivegi Rs.4'2'
lakhs from the above esarafinaietanjsa and in
response to the notice it ii'{V§;t1:1§§Lv--..g4J41t11o1ih'es under
Section' my med block return declaring
there §;in<ier igjceme at nil and in the said
block ret1:imhin.Vthei'~statement enclosed to part III of the
"total income and loss for the
Liasseesmeiatfear 1997-98", the assesses he_.d mentiened
trmted Rs.35,0{),000/- received fiem
for relinquishing two pests held by
":j"i:1 Jayanagar Education Society as a capital receipt.
'' The Assessing Ofiicer after calling upon the assessee to
. '4 jzistify the said claim and after considering the reply
WV;
thereunder held that the amount of Rs.:_3c?-« "as
exigbie to tax under the Act by
income under the head " income free: ..ot_he1* ~soLii".ces"f and
raised the demand according
as undisclosed income. h ' V. V A it S V
5. Aggieved by an appeal
before the err j25;a§/ee«§1{4)/crr(A)~v1/o2-
O3 contendin1g'ii:iéitV Rs...§7i,54,266/~ received
by the life membership and
" itheffiiiéiyiaiiagar Education society by
enclosing' thev. cop:/.of'«.;t§I1e proceedings of the executing
M&"Lin_g._.held on 15~9~1996 and 2-1(}«1996
'coiivehi:ig '_ch:"ange in management and his zesiglation to
the two posts and thus claimed the said
'V._"a.m.ei1i1tt}_i'eceived from Dr.K.R.Paramahamsa is to be
A ":if'*é;iAf<fited as capital receipt and thus net exigble to tax. The
i' Appellate Authority after considering the contentions
'4 raised by the appellant] assessee rejected the same and
j
held that it is to be treated as RevenueAV.é..1eeei§5§
confirmed the finding of the Assessing '
treated the same as "undiscloseai AV
period by order dated 13~9~2o02.i's..%
6. Aggieved byfhe "_asse"sse_e filed further
appeal before the the same and by
raising the
(i) 3?f',5f?~,266/~ is to be 'seated
I'€€;eipt. _i1ot revenue receipt.
* first Appellate Authority in
A statifag can be termed as goodwill is
law anti there was no admitted
sale éfiany goodwill.
considering the contentions raised by
ttie-44._assiesseeiiar1d the case law relied thereunder came to
eorszlusion that the amount of 123.37 ,54,266/ ~ is
in nature and accordingly allowed the appeal and
-»v-reversed the findings of the first Appellate Authority who
V has eonfirmed the finding of the Assessing Oflicer.
{EV
7. Aggieved by the same, the revenue has filed the
present appeal by raising the following
questions of law: it it i
" Whether the Tribunal is i
hoiding that the *i!;2_y_'5? in
the assessee for "is
member ship shipv:'of_theVV
Jayanagar ' society he
had founded. 'runr'ii'r1g""for
the past 31' but a
compe1f1satie1'1- eholfld be
_ i_:1W;t1ature and cannot
'be under the Head
2 L 1t1co1::1e__fi'Q1i1«.other sources?"
have Sri.M.V.Seshachala, learned Senior
2 for the Department and
learned counsel appearing for the
E158 ,ssee : and we have perused the orders of the
Appellate Authorities, the Assessment Order as
T " "also the statement gven by the assessee under Section
132(4)}:-efore the authorities on 14-7-2000, 24~7-£2000,
5';/'\§i""'
I0
resulted in a sum of Rs.2,57,0()0/- being
had been added by the Assessing
investment. The assessee "h
the Tribunal and A'
Rs.37,54,266/-- is referable""'to."the of the
post of honorary 1. appeliant
had worked as full a substantial
period 1111 his e9e1. The inmnsic link
between of the appellant
that the said receipt is
directlyzi 'refereble A ' pfofession/avocafion and relied
upon. the judg1ne11t Menon Vs. CIT (35 ITR 48)
4. held that teaching. is an evocation
i~.f:VnetV and teaching 'Vedanta' is just as much
_ 'as; other teaching and therefore an avocation
on Leis premise granted the relief to the asseseee.
10. Sri.§;i.V.Seshacha1a contends that the
"fauthorities/citatiorzs referred to and relied upon by the
Fgav
'i
II
Tribunal are net applicable and relevant for the purpose of
the piesent set of facts. He further contends the receipt is
not in the nature of capital receipt as adn;iitte:di3}f"L:<L?;:io;1ey
was not received for transfer of any capifalv
assessee himself claims that said j
relinquishing the Life .91'
the Society and hence it 1:0
receipt. It is also coritegeded.thei;'--tiie._sssesseeiiimself had
volunteered that it is his statement
gven ieiiithe statement dated 14-7-
2000 hot specified or has come out
with;Vh'ieiAac1:{1aI"amoޣ1t fie received. In fact he admits in
. dateii"i4-7~2000 to the fol-fiowing effect:
a Litigafion about the post of the
between one of the mencxbers and
x then'; secietary i.e., my seif. The litigation went
seven years in the (201111 érithout any final
conclusion. Meanwhile the Government
superceded the Society and nearly for a ywr
and a half gavemment appointed an
Adminisizatcr who maintained the fzmction of
12
the society. The aémixlistrator handed ~
society during 1990 forming a I&*Ira;1:ri'agVii{ g".e:"'
committee with a Iesolutionjgo _ u
management by adding new
was done as per the 1996"
I lefi the institution
elected in the teen
onward i have ;wi.fi3._&the
Per the first fime the respeedent'-has with the following
admission on" £311: fiélerthefetaiementz
""" ef:ha§é;V 21 R335 lakhs
"as capital xeceipts for
membership and
Education Society"
TSri4.iP'a1fthasa1*athy, learned counsel appearing for the
that receipt of this amtmnt by the
V VV _ asseeseev-__'i$ :15: in the nature of income at an but it is in the
A. ' flixatixxe of-ifixonoraiium and it is a capitai receipt for giving up the
« _ pQ'st. honorary seczetaxyship and iife membership of the
% and further submits that the consideration so received
is in lieu of giving up the post which had certain status and
5 . .
)5\.;:»;~v
13
position in the society. In this mgard the dccision~-§:_1 vfi._k_';t§
of en' Vs. K.R.Honnappa (1939) 180 rm 559 V itgag éeesé,
Itiicd upoarx. In the said case a of
was handed over as purse] mgncy
purchasing a car and it was ~-- as
The said decision woulribc ofV3:1o-Q;-.-:sVi£~;t;;;ncc respondent
assesses, in the instant ¢ases1n¢e:»it:s%Tvdigfinguishah1e both on facts and on 'the:"f¥5i1:6\'-%fi3}Vg':
(i) a" g'.'¥)#}gSidCIafi0H paid to the ____ H personal character i.e., for ._ the constituency in general A pro quo for sezvices rendered the confiibutors. Whereas in the A. it is by the way of quid pro quo namely up the post the assesses was hoiding ' was paid and hence it cannot be 1 characterised as money paid towards rendition of any sezvices.
(ii) In the instant case the moaey was paid by a thinzi person namely Dr.K.R.P m to induce the 14 assessee to give up the Secretaxyship or life membership.
Hence the citation above referred to relied upon "
counsei for the respondent is inapplicable to -{fie present case.
12. Sri.Parthasarathy, fQr"v--?,h.¢:'VI'es1'i;).1§1t1ejn"':, assessee would draw our atte1§:fb:1:i»to the~.qfiieSfio;1§ framed by the revenue for determixiaiienié as the nature of the receipt by the assess'.ec:. WI'1;*£c'iT: of compcnsaizion reeeivecfi :6: and life membership of the asséssee. s}ociei§,%':e'.7u7§é'}3.i_e5::.'i,:s to be oonsflexed and not as a case of of the assesses. In this regard
- é upon the follcrwing decisions:
.1: 1%;4.2)V%V 5I.'€.'ri§i'1'R 157 (B0111) '1 '(H M Inspector of taxes) V Barlow 2: (1957) 31 rm 826 (Born) .A WA Gufiv CIT Bombay c.-5 [(1959) 36 rm 84 (Bom; H S Captain V CIT Bombay
4. (1959) 36 ITR 175 (SC) CIT Hyci V Vazir Sultan and Sons 0"
17
respondent assessee and came: to the conclusicrn. it Viaé a revenue mceipt. We do not find any from the sa1d' finding of fiact. -« is mferred to above is pressed jinto to VV when sold for consideration i£»bn{:bmesA 'tin: asnkét not pmfit or gain. This as it was the specific contxzntion 51"" n»%§_¢'3"4'¥c.vfc.'.t11e first Appeflatc Authority in fixnund No.3 which reads as fo1Iow'a=;4 'Ij_. ' "" n'n1'-néif CIT'{A.)VV'éHed in stating thffl thgé as Goodwill as then: nale of such goodwill.
The was a leased land Z ..... «Bangalore Development 'A ' v ., which an annual lcasc payment and the institution was by the ticpartment of Education, V ééfivgéegnnicnt of Karnataka, so the question of .. , does not arise.
of this specific contention having been taken by the T before the Appcilatze Authority that it is not a. good will [the assessee cannot contend contrary to the same. 18
15. From the foregoing discussion it has__towi5e' that the amount received by the assesses 'hei seated» as 'a capital receipt since to forego life Izzeaibership or.iisee;e_tVaIiysig.ip, there is no capital asset which has assesses in favour of was not earning any income or. of" the said pests and by virtue of sanxe,' '£:%xe.assessee did not lose monetariiy aiztzliias amount received fium firfaramahamsa by be termed or construed as oa;2_i;a1.re(ieipt.
16.{n5'\}ieti¢?" here in above we axe of the consir1exeeii"{5opiiiion ii a111ount Ieeeived by the assessee:':ea1JI13i;i1i3'eV _ca1;iitai in nature as held by the Tfibunal ¥:fi2:'go'ught as income from other sources. 1;'? answer the question of law foxmulated V.fL€I'BiIi--~8':})t}V.€ iaéfavoafiof the revenue and against the assesses. is 'accordingly. No order as to costs.
-- V g 3d/':
Judge Sd/-I Judge