INCOME TAX OFFICER v. MRITUNJAY MUKHERJEE
[Citation -1984-LL-1027-4]

Citation 1984-LL-1027-4
Appellant Name INCOME TAX OFFICER
Respondent Name MRITUNJAY MUKHERJEE
Court ITAT
Relevant Act Income-tax
Date of Order 27/10/1984
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags profits and gains of business or profession • appropriate authority • professional activity • business activity • share of profit • foreign liquor • central excise • special bench • nursing home • share income
Bot Summary: At the outset, I must say that the activities carried on by the assessee- firm were definitely business activities, because there could be no firm without business activities and the assessee agrees that it is a firm, such of the business activities may also be professional activities like activities carried on by doctors in treating their patients or the activities carried on by lawyers for their clients. The said case has pointed out a clear distinction between the ' profession ' and ' business ' on the authority of the Supreme Court in the case of Dr. Devendra M. Surti v. State of Gujarat AIR 1969 SC 63: ' There is a fundamental distinction therefore between a professional activity and an activity of a commercial character ': ...... a ' profession ... involves the idea of an occupation requiring either purely intellectual skill, or of manual skill controlled, as in painting and sculpture or surgery, by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale of commodities. A professional activity must be an activity carried on by an individual by his personal skill and intelligence ... and unless the profession carried on by also partakes of the character of a commercial nature ' the professional activity cannot be said to be an activity of a commercial character. Applying the test laid down by the aforesaid authorities to the facts of the present case, I find that the activities carried on by the firm in which the assessee and his wife were partners were mere business activities and not professional activities. Further, the activities carried on even by those persons can be called professional activities only insofar as they relate to exercise of their intellectual skill in advising their patients or clients. The activities of even doctors, relating to dealing in medicines, have been held to be nonprofessional activities in that very case. Respectfully following the aforesaid authority, I come to the conclusion that the activity carried on by the aforesaid firm did not amount to professional activity and so it was business activity and the same is squarely hit by section 64(1)(i).


1. This appeal has been filed by department against order, dated 22-7-1982, of AAC relating to assessment year 1980-81, previous year of which ended on 31-3-1979. 2 to 7. [These paras are not reproduced here as they involve minor issues.] 8. Coming to merits of case, Shri S. K. Lahiri urged that learned AAC erred in his decision and so his order deserved to be set aside and that of ITO deserved to be restored. assessee is individual deriving income from property and share of profit from business styled Dinbazar Foreign Liquor (off) Shop, at Jalpaiguri, which deals in foreign liquor. It is important to note that firm was engaged in purchase and sale of foreign liquor. wife of assessee was also partner in same firm. ITO invoked provisions of section 64(1)(i) of Income-tax Act, 1961 (' Act '), and included share income of wife of assessee from said firm in total income of assessee. 9. assessee appealed to AAC and contended that ITO erred in applying provisions of section 64(1)(i) to facts of assessee's case. certificate from Superintendent of Excise, Jalpaiguri, was produced before him, which reads as below: " This is to certify that Smt. Sudha Mukherjee, wife of Shri Mritunjay Mukherjee of Dinbazar, Jalpaiguri, was granted excise licence No. 1/1977-78 to deal in foreign liquor along with her husband Shri Mritunjay Mukherjee after satisfying department as to her professional qualification and fitness. She has also undertaken training as sales woman for last 3 years. licence was granted from 1-4-1977 on being satisfied that she is fully qualified professionally in this line. I wish her success." case of assessee was that wife, Smt. Sudha Mukherjee, had professional qualification to carry on business as dealer in foreign liquor. Since firm was engaged in professional activities, and since section 64(1)(i) refers only to business, share income of wife could not be included in income of husband. Reliance was placed on decision in case of CIT v. Dr. K. K. Shah [1982] 135 ITR 146 (Guj.). This argument appealed to AAC, who accepted same. He also observed that aforesaid certificate was not new piece of evidence because it was produced before him only to confirm what was already narrated before assessing officer, viz., that wife of assessee had professional qualification to carry on business as dealer in foreign liquor and so excise authorities had granted her licence to do so. 10. Shri S.K. Lahiri urged before me that case of Dr. K.K. Shah did not apply to facts of this case. He pointed out that aforesaid case of Dr. K.K. Shah, was concerned with firm of doctors. doctor husband and doctor wife were carrying on activity of running nursing home for purpose of treating their own patients. In that case, business has been distinguished from profession and it was held that income arising out of professional activities do not come within purview of section 64(1)(i), while income arising out of non-professional business activities do come within purview of section 64(1)(i). To be more precise, it was held that income arising out of activity of treating patients was professional income outside purview of section 64(1)(i). On other hand, income arising out of selling drugs to patients or charging room rent from patients are business income which is hit by section 64(1)(i). Shri S.K. Lahiri contended that aforesaid case was confined to professionals like doctors, lawyers, architects, etc., and did not extend to persons doing business as dealers, even though doing such business required some licence from some statutory authority or other. He also urged that AAC erred in admitting new evidence in form of certificate from excise authorities without following procedure laid down in rule 46A of Income- tax Rules, 1962 (' Rules '). 11. Shri Sanjay Bhattacharjee, on other hand, supported older of AAC. He stated that certificate of excise authorities was not new piece of evidence and it was produced only to show that licence to deal in foreign liquor was given only to those persons who were professionally qualified. In any case, he urged, Income-tax Rules were only directory and not mandatory. Coming to merits of case, he took me through order of AAC and especially aforesaid certificate. He explained that assessee AAC and especially aforesaid certificate. He explained that assessee was carrying on business alone until he became invalid due to unfortunate mishap. He stated that assessee was brutally stabbed by miscreants. He had to request his wife, who was school teacher, to resign her job and help him in running business. It was thus wife joined assessee's firm. She was also trained in selling liquor and so licence was taken from excise authorities. He emphasised fact that any layman cannot get dealer licence in foreign liquor and that licence to wife of assessee was granted only because of her professional qualification, as stated in aforesaid certificate. He kly relied on decision in case of Dr. K.K. Shah in support of his case. 12. I have considered contentions of both parties as well as facts on record. I find that question raised in this appeal is, as to whether activities carried on by aforesaid firm can be said to be professional activities. At outset, I must say that activities carried on by assessee- firm were definitely business activities, because there could be no firm without business activities and, however, assessee agrees that it is firm, such of business activities may also be professional activities like activities carried on by doctors in treating their patients or activities carried on by lawyers for their clients. ' Business ' includes ' profession ' for purpose of being taxed under head ' Profits and gains of business or profession '. But, word ' business ' appearing in section 64(1)(i) does not include profession, as has been held in case of Dr. K.K. Shah. In fact, said case has pointed out clear distinction between ' profession ' and ' business ' on authority of Supreme Court in case of Dr. Devendra M. Surti v. State of Gujarat AIR 1969 SC 63: " ' There is fundamental distinction therefore between professional activity and activity of commercial character ': ...... ' profession ". . . involves idea of occupation requiring either purely intellectual skill, or of manual skill controlled, as in painting and sculpture or surgery, by intellectual skill of operator, as distinguished from occupation which is substantially production or sale or arrangements for production or sale of commodities.' '. . professional activity must be activity carried on by individual by his personal skill and intelligence . . . and unless profession carried on by (a person) also partakes of character of commercial nature ' professional activity cannot be said to be activity of commercial character." Special Bench of Tribunal in case, of Dr. J.N. Mokashi v. ITO [1982] 1 SOT 367 (Bom) had also considered meaning of ' Profession '. They have held that professional qualification means fitness to do job or undertake occupation requiring exercise of intellectual skill or of manual skill as controlled by intellectual skill. Applying test laid down by aforesaid authorities to facts of present case, I find that activities carried on by firm in which assessee and his wife were partners were mere business activities and not professional activities. In my opinion, purchasing and selling of commodity, even foreign liquor, dealing in which requires licence from appropriate authority, does not amount to professional activities. Normally, every trade and business requires some licence or other to carry on same. drug seller has to take licence under Drugs Act, 1940. Similarly, dealer in fire-works has to obtain licence from Corporation or police authorities. mere requirement of licence to deal in commodity does not make activity professional one. test is different. That test has been enumerated by Supreme Court in case referred to above. It is evident from decision in case of Dr. K.K. Shah that activities carried on by doctors, lawyers, architects and like alone can be regarded as professional activities. Further, activities carried on even by those persons can be called professional activities only insofar as they relate to exercise of their intellectual skill in advising their patients or clients. activities of even doctors, relating to dealing in medicines, have been held to be nonprofessional activities in that very case. Respectfully following aforesaid authority, I come to conclusion that activity carried on by aforesaid firm did not amount to professional activity and so it was business activity and same is squarely hit by section 64(1)(i). It i s well known that section 64 was enacted to avoid mischief, i.e., evasion of tax. Hence, this section has to be interpreted in order to prevent mischief and advance remedy---CIT v. Sodra Devi [1957] 32 ITR 615 (SC.) If argument of learned representative for assessee is accepted, then mischief will be perpetuated and remedy will be nullified because there is no business which does not require application of some skill or other in which case all business activities will become professional and go outside purview of section 64. Evidently, such interpretation being, in my opinion, contrary to intention of Legislature, accepted canons of construction has to be rejected. Hence, with due respect to learned Central excise authority, I am unable to decide this appeal in favour of assessee solely on basis of his certificate, when facts relevant to issue in this appeal point to contrary. 13. For above reasons, I reverse order of AAC and restore that of ITO. 14. In result, appeal is allowed. *** INCOME TAX OFFICER v. MRITUNJAY MUKHERJEE
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