By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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New Page 2
Part A — Reported Decisions
48 (2008) 22 SOT 197 (Mum.)
Nirmala P. Athavale v. ITO
ITA No. 1084 (Mum.) of 2005
A.Y. 2001-02. Dated : 29-2-2008
S. 28(iv) of the Income-tax Act, 1961 — Gifts received by a
social reformer and philosopher from followers in recognition of personal
qualities and noble thoughts could not be taxed u/s.28(iv).
The assessee, husband of the appellant, a well known social
reformer and philosopher and having lakhs of followers spread all over the
world, had established a movement called ‘Swadhyaya’ for the upliftment of the
masses. The assessee had devoted his whole life to the cause of this movement
and had never charged any fee or remuneration from his followers or the persons
who attended his lectures at any point of time. During the relevant previous
year, the assessee had received voluntary gifts of certain sum on his 80th
birthday from his admirers and well-wishers in recognition of his personal
qualities and noble thoughts and claimed the same to be exempt from taxation.
The Assessing Officer held that conducting spiritual discourses amounted to a
vocation and, hence, the provisions of S. 28(iv) were squarely applicable to the
instant case. The Assessing Officer, therefore, treated the amount of gifts
received by the assessee as his income from profession and brought the same to
tax. The CIT(A) confirmed the action of the Assessing Officer.
The Tribunal set aside the orders of the lower authorities.
The Tribunal noted as under :
(a) The work done by the assessee was a mass movement or
campaign and not a vocation. Even if it was treated as vocation, then having
regard to the fact that the assessee had never charged any fee or remuneration
for his imparting of knowledge and practising of values based on ‘Shrimad
Bhagawat Gita’ and also the fact that the assessee did not have any vested
right to receive any kind of payment for these activities from his
disciples/followers, the gift made by the followers, without being under any
contractual or legal or customary obligations to do so, could not be treated
as a consideration arising out of carrying on of vocation.
(b) In Helios Food Improvers (P.) Ltd. v. Dy. CIT,
(2007) 14 SOT 546 (Mum.) the Tribunal has held that the provisions of S.
28(iv) can be applied in a number of situations, but the bottomline or crucial
fact would always be circumvention of income by taking or receiving income in
other forms. Since, in the instant case, there was no intention of
circumvention of income on the part of the assessee or receiving income in
other forms, provisions of S. 28(iv) could not be applied.
(c) Further, the term ‘perquisite’ as per dictionary
meaning means ‘privilege or benefit given in addition to one’s salary or
regular wages’, which means that it is an additional benefit and not a
complete substitution of one’s income. The assessee had never charged any
consideration from his followers or persons who attended his lectures. Hence,
it could not be termed as ‘benefit’ or ‘perquisite’ within the meaning of S.
28(iv).
