1985 PLP (Trib (PTD)

3. In support of his contention Mr. F. . . . . A . . . . the learned Authorised Representative of .the appellant relies on the judgment of the Allahabad High Court reported as (1968) 67 I T R 616 (hereinafter referred to as the Allahabad case) to suggest that the facts in this case were applicable to the appellant's case. He further contends that the judgment of Madras High Court reported as (1950) 18 ITR 825 (hereinafter referred to as the Madras case) and relied upon by the learned Appellate 'Assistant Commissioner, is distinguishable and cannot be applied on the facts of the appellant's case. Briefly stated, the facts of the Madras case are that the assessee was retired Judge of the Madras High Court and the matter dealt with of a quasi‑judicial nature. Mr. F.. A...particularly refers tip the last 10 lines on page 829 of the judgment (18 ITR) to point out that the Madras Government made an offer to Mr. V.P. Rao, Retd. Judge, to act as an arbitrator and‑ he was also informed that he would be paid .a lump sum fee of Rs.3,000 for the work and will also get travelling allowance etc. which Judge is entitled to get. He then worked as an arbitrator on certain agreed conditions and admittedly dealt with a quasi‑judicial matter. According to the learned Authorised Representative he thus clearly earned fees by utilizing his knowledge as an ex‑Judge by settling an issue. In the case of the appellant, however, no such quasi‑judicial matter was to be dealt with and on the contrary he was simply to act as an arbitrator on a commercial matter between Pakistan Refinery Ltd., and Mr. A Z The appellant, therefore, could only earn a sort of casual income and was thus exempt from tax. Mr.F....A.... thereafter reverted to the Allahabad case whose facts according to him, were similar to those of the appellant's. Relying on this judgment, he contends that the appellant's income was exempt from tax as it fell within the ambit of section 4(3)(vii) of the Income‑tax Act. Brief facts of this case have been narrated in paragraph 5 of the order. Mr. F the learned Departmental Representative contended that the facts in the case of Mr. V.P. Rao (Madras case) were similar to those of the appellant's and in that view of the matter the receipts in the instant case were not of a casual nature and were clearly liable to tax. In his opinion the facts of the Allahabad case were rather distinguishable inasmuch as the Chief Justice of Allahabad High Court was specifically requested by the Provincial Government to act as an Umpire between the two arbitrators because under normal circumstances the Acting Judges were barred from undertaking works of judicial nature on payment of honoraria or remuneration etc. The fee received by the Chief Justice was thus of a casual nature. Mr. F also relied on a judgment of the Supreme Court of Pakistan reported as P L D 1981 SC 85 wherein it was held that the onus to prove that income qualifies for exemption under section 4(3)(vii) was on the person who claims exemption. In the instant case the learned Authorised Representative of the appellant failed to prove that the arbitration fees received by the assessee was exempt from tax under section 4(3)(vii). Lastly he also placed reliance on another judgment of the Allahabad High Court in the case of Chunnil Lal Kalyana Das reported as I T C 419.,

4. In reply Mr. F....A.... the learned Authorised Representative distinguished the facts of the Madras case by contending that the retired Judge received Rs.3,000 as fees which had been specified in advance for acting as an arbitrator, and for enquiring and reporting as the dispute between two Local Boards. It was held that the fees arose from the exercise of an occupation of an arbitrator because the receipt was not casual and non‑recurring and hence was liable to tax. In order to examine whether' the facts of the appellant's case are similar to those of the Madras case or that of the Allahabad, we state briefly the relevant portions from the two judgments. In the Madras case the learned Judges concluded the judgment by making the following observations:‑‑ "Here Mr. V.P. Rao was the retired High Court Judge and his agreement to act as an arbitrator at the request of the Government which chose him as a suitable person for that kind of work was in consonance with his judicial equipment and ability of course there might have been dozens of other Vakils, professors, merchants etc. who could have done that arbitration work but that will not make any difference to our view. Mr.V.P. Rao agreed to do this arbitration work . . . . . . because of the promise by the Government to pay him a lump sum remuneration of Rs.3,

000. It was not a case where no remuneration had been fixed or was expected and where a lump sum amount was given finally as a kind of unexpected windfall of a casual or accidental nature

" "In view of all the above considerations we are satisfied that Rs. 3,000 in question in this case arose from the exercise of occupation of arbitration by Mr. V.P. Rao and, therefore, the assessee cannot claim exemption under section 4(3)(vii) of the Income‑tax Act and the sum would be taxable as urged by the Commissioner of Income‑tax."

5. Briefly stated in the Allahabad case the facts are that the Chief Justice o9 the High Court agreed to act as an arbitrator and he was paid Rs.20,000 half of which was paid by the Government and the other half by the party. This was solitary instance of the assessee having acted as an arbitrator. The Tribunal held that the sum of Rs.20,000 received by the assessee as arbitration fee was for rendering some services and the receipt was thus a sort of remuneration for the exercise by the assessee of an occupation. Further the payment was anticipated, thought of, stipulated for and was not casual nor was it a mere windfall. Accordingly the receipt was held by the 'tribunal to be liable to the learned Judges of the Allahabad High Court made the following observations in the operative part of their judgment: "I think that upon the facts of the present case the I.T.A.T. could not reasonably entertain the view that the assessee had an occupation other than that of a Judge. The I. T. A. T. had arrived at an erroneous conclusion because of the obvious fallacy in supposing that the work of the arbitrator in the present case was inextricably connected with the assessee's Judicial office when there is nothing of any substance whatsoever which could justify such a view. Lastly I may observe that even if this was a case in which there was some doubt whether the sum of Rs.20,000 paid to the assessee as an umpire or arbitrator was taxable income or not, the doubt should be resolved in favour of the asse55ce where this can be reasonable done. I am definitely of the opinion that the more reasonable and plausible of the two possible views, even of it were conceded for the sake of argument that two views are possible is that the sum of Rs.20,000 was casual and non‑recurring item of income which cannot be related to exercise of any profession, vocation or occupation by the assessee."

6. We have heard the arguments advanced by the representatives of both the sides and we have perused the judgment relied upon by Mr. F....A... and Mr. M...F...D.R. In order to attract the provisions of clause (vii) of section 4(3) the receipts must be causal and/or non‑recurring. The words casual and non‑recurring have not peen defined in the Act and hence these will have to be considered in the plain and ordinary sense. The word 'casual' is defined in Webster's New International Dictionary as: "Subject or produced as a result of change; without design; not resulting from plan; without specific motivations, special interest or constant purpose; without foresight, plan or method; occurring encountered, acting or perform without regularity or at random; occasional.'

7. Keeping in view the definition of the word 'casual' a receipt which is foreseen or anticipated or is provided for by an agreement, written or otherwise, cannot be regarded as casual receipt even if it is not likely to recur again. The word non‑recurring has also not been defined but the Courts have explained its meaning two, which we would briefly advert to in a subsequent paragraph.

8. It will be noted that the appellant admittedly was not a profession arbitrator but he had the knowledge and expertise of dealing with various disputes or litigations in commercial matters. In the instant case, the appellant was appointed arbitrator between M/s. P

R

L

& M

M

Z

a person who was engaged in shipping business. It also transpired that the dispute arose in connection with shipment of crude oil.

9. It will also be observed that the facts of the Allahabad case are fundamentally different from those obtaining in the Madras case narrated in an earlier paragraph. Wherein the assessee was an Acting Judge and could not under normal circumstances, act as an arbitrator and receive remuneration, was under some peculiar circumstances as a result of which the Government wanted him to act as an arbitrator. He, therefore, did not act voluntarily but at the instance of the Government and a party. He never solicited or expected to receive any remuneration.

10. The facts in the appellant's case appear to be similar to those of the Madras wherein the retired Judge acted as an arbitrator and received an amount of Rs. 3,

000. In the appellant's case under consideration also the assignment of arbitration was voluntarily accepted by the assessee and there was a specific motivation for which he undertook the work i.e. the expectation to receive remuneration in all the three years. The element of some regularisation was also available. All these facts lead to the conclusion that the appellant through his "exercise" of profession vacation as lawyer/retired Judge earned arbitration fees which clearly fell outside the scope of the provisions of section 4(3)(vii) of the repealed I.T. Act. Since the remuneration for his services as arbitrator was not casual, accidental or exceptional the same fell outside the purview of section 4(3)(vii) We therefore, do not consider it necessary to go into the question whether the receipts of the appellant were of a non‑recurring nature. The fact of the matter is that by virtue of his knowledge and expertise the appellant may, continue to act as arbitrator and earn remuneration. In fact such remuneration was received by the appellant in the three years under consideration.

11. Before parting with the case we may also point out that the judgment of the L ....H....C.... in the case of Commissioner of Income tax v . Qazi A . . . H . . . A . . . L. . . reported as (1979) 29 Tax 129 is not at all applicable on the facts obtaining in the appellant's case. In this case an Advocate received some amount for translation of two religious books into English. The High Court held that a voluntary gift depending entirely upon the goodwill of the donor does not cease to be of casual and non‑‑recurring nature by reason merely of the fact that the gift .is repeated. The judgment, therefore, does not help the appellant's case because the facts are altogether different.

12. For the foregoing reasons the order of the learned Appellate Assistant Commissioner is confirmed and accordingly the four appeals fail. M. B. A. Appeal dismissed.