Brief about the case
The appellant was Editor-in-Chief of the English Magazine ‘India Today’. During the year under consideration, the assessee received a sum of Rs. 1 Lac as “B.D. Goenka Award” instituted by B.D. Goenka Foundation, an independent entity, for excellence in Journalism which he claimed to be exempted from tax. A.O. disallowed the claimed and treated it as taxable income. Order of CIT(A) confirming assessee view point was set aside by the Income Tax Appellate on the appeal made by the revenue in this behalf. Assessee filed appeal before Hon’ble High court on the following question of law:-
Question of Law
“1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the receipt of Rs. 1 lakh by the appellant as an award given to him by B. D. Goenka Foundation for his excellence in journalism was in the nature of income liable to tax in the hands of the assessee.
2. Whether on the facts and in the circumstances of the case the ITAT was right in holding that the receipt of the amount of Rs.1 lakh by way of an award from B. D. Goenka Foundation was taxable as assessee’s income as the said institution was not covered by section 10(17A) of the I.T. Act.”
The award was not for any services rendered but in the nature of testimonial and expression of recognition by an institution of eminence of a person in the field of Journalism. The testimonial paid to any professional or any person as a token of esteem and regard for his ability or qualities and unconnected with any particular professional act or services is not income. The receipt in question can-not be construed to par-take the character of income and therefore the question whether it is taxable or exempt would not be relevant. In support, reliance was placed on several judgments in the matter.
Contention of Revenue
Any award falling under u/s 10(17A) of the act is only exempt from tax. Award received to the assessee in the present case is not one which is instituted in public interest by the Central Government or any State Government or by any other body approved by the Central Government i.e, it does not fulfill the conditions of section 10(17A) and thus liable to tax.
Held by High Court
The Court held that the Act does not make a blanket provision whereby any and every receipt is to be treated as income and thereby made exigible to tax. The Supreme Court in the case of Parimisetti Seetharamamma vs. CIT, (1965) 57 ITR 532 (SC) held that the testimonials and personal gifts do not fall within the ambit of the term “income”. In all cases, the burden lies on the Revenue to prove that the receipt is income within a taxing provision, but where the receipt is in the nature of income, the burden to prove that it is exempt is on the assessee.
If a person performs an action unaware that the other person would reward him, the receipt may not be towards or for a service rendered, unless there is an element of quid pro quo. Similarly, expectation of reward even when there is no obligation would be income.
After going through the various judgments sighted on the issue and after applying the same test to the present receipt it was held that the said amount would be a capital receipt, being purely in the nature of a testimonial. The causa causans in the present case is not directly relatable to the carrying on of vocation as a journalist or as a publisher. It is directly connected and linked with the personal achievements and personality of the person i.e. the appellant. Further, it is to be noted that the payment in this case was not of a periodical or repetitive nature. The prize money has in the instant case been paid by a third person, who was not concerned with the activities or associated with the “vocation” of the appellant. The aforesaid prize money was paid to the assessee on a voluntary basis and was purely gratis.
The question of exemption under Section 10 would only arise if at the first instance, the receipt is found to be a revenue receipt. It would be incorrect to first examine whether a particular receipt has been exempted and then on the said reasoning and ratio proceed to decipher and hold that the amount/receipt is income for the purposes of the Act
In view of the aforesaid discussion, the substantial questions of law mentioned above, are answered in favour of the appellant assessee and against the Revenue. Rs. 1 lakh received by the appellant-assessee as an award from B.D. Goenka Trust for Excellence in Journalism would be a capital receipt and hence not income taxable under the Act, i.e. Income Tax Act, 1961.