I.T.A. NO.2697/KB OF 1993-94 VS I.T.A. NO.2697/KB OF 1993-94
2001 P T D (Trib.) 1047
[Income-tax Appellate Tribunal Pakistan]
Before Syed Kabirul Hasan, Judicial Member and Shahid Jamal, Accountant Member
I.T.A. No. 2697/KB of 1993-94, decided on /01/.
st
October, 2000 Income-tax---
----Casual income---Word "casual"---Connotation---Assessee was Director -employee of a company and certain amount of loan advanced to him during his service with the company was waived by the employer company at the time of retirement of the assessee---Amount received on account of waiver of loan was a casual income of the-assessee and taxable---Principles.
The assessee was a Director-employee of a company. A loan was, advanced to the assessee out of which a balance of Rs. 9,11,658 was left at the time of retirement. The employer at the time of retirement waived the remaining balance of loan amounting to Rs. 9,11,658. This loan amount was shown as exempt on the plea that the same was a capital receipt. The Assessing Officer did not accept the plea of capital receipt but treated the same as revenue receipts and taxed as voluntary receipts or gift or ex gratia.
No doubt, the waiver of loan is not explained in any previsions but in the characteristic of the transaction, it is defined that it is a receipt and since all receipts by the assessee would necessarily be deemed to be income of the assessee for the purpose of income-tax and the question whether any particular receipt is income or not depends on the nature of the receipts and the true scope and effect of the relevant tax provisions. If the assessee takes a stand that certain receipt is not income, then the onus is on the assessee. In the present case it is clear that this type of receipts are not recurring receipts because it may be granted in a lifetime. These receipts can be characterised as windfall receipts because unexpectedness of the advantage pertaining to the factum of the receipts and not to the quantum of receipts. Windfall receipt is some unexpected receipt and not in the contemplation of the assessee and not directly attributable or occurring by way of its using profits. In the present case, these receipts are not related to the business of the assessee as the assessee is not doing any business but was a Director of the company who is doing the business. This fact is defined that this income was not expected neither by the assessee nor by the employer of the assessee.
The income is normally defined "that a gain or recurring benefit (as measured in money) which proceeds from labour, business or property; commencing revenue or receipts of any kind, including wages or salaries, the proceeds of agricultural or commercial, the rent of houses or return on investments".
The income may be casual or non-recurrent, the word "casual" implies chance, accident, uncertainty. The fact that a receipt is only occasional in its existence would not itself make out casual in nature. If it arises in respect of the amount for which the payment is normally made, the presumption is that it is not of a casual nature. The better example would be that of case of reward paid to the Government employees. Previously, clause 48 was inserted in the Schedule to the Income Tax Ordinance, 1979 whereby the Government employees specially of Customs were awarded a certain prize on their meritorious duties, but this clause was omitted in the assessment year 1996-97. Likewise, there was clause 65 were by the casual income of any nature was exempted from the tax under the Ordinance. Later on, an amendment was made in this clause from the assessment year 1990-91 and it was inserted that any income of more than Rs. 25,000 will be taxable. It can safely be assessed that every receipt generally may be income unless is expressly exempt.
Income received by the assessee can either be a casual income or windfall receipts. The causal income is an income which is not recurring income whereas windfall income has been defined as a casual or unexpected acquisition or advantage.
The amount received on account of waiver of loan was a casual income of the assessee. Since it is taxable under the law, therefore, the said income of the assessee was taxable.
1985 PTD 500 and 106 ITR 758 ref.
Irfan Saadat for Appellant.
Jawed Iqbal Rana, D.R. for Respondent
Date of hearing: 27th October, 2000.
ORDER
SYED KABIRUL HASAN (JUDICIAL MEMBER).---In this appeal, the value of loan of Rs. 911,658 which was disallowed by the Assessing Officer, is contested by the appellant as being capital receipts not taxable. The assessment year involved is 1990-91.
2. The brief facts are that the assessee was a Director-employee of M/s. Johnsons (Pvt.) Limited. A loan was advanced to the assessee out of which a balance of Rs. 911,658 was left 'at the time of retirement. The employer at the time of retirement waived the remaining balance of loan amounting to Rs. 911,658. This loan amount was shown as exempt on the plea that the same was a capital receipt. The Assessing Officer did not accept the plea of capital receipts but treated the same as revenue receipts and taxed as voluntary receipts or gift or ex gratia. The order of the Assessing Officer was upheld by learned CIT (A).
3. The main contention of Mr. Irfan Saadat, learned counsel for the assessee is that the amount of loan was not receipts in the eyes of law and, therefore, was not an income. He referred to various provisions of the Income Tax Ordinance, 1979 wherefrom the waiver of loan does not appear to be taxable in stricto senso. He has relied on a case-law 1985 PTD 500 wherein the nature of receipts was discussed.
4. Mr. Vishnu Qavi Raja, learned D.R., has supported the order of learned CIT (A).
5. We have heard both the learned representatives and also perused the orders of learned CIT(A) as well as the Assessing Officer.
6. From the scrutiny of the relevant provisions of the Income Tax Ordinance, 1979; it appears that no doubt, the waiver of loan is not explained in any provisions but in the characteristic of the transaction, it is defined that it is a receipt and since all receipts by the assessee would necessarily be deemed to be income of the assessee for the purpose of income-tax and the question whether any particular receipt is income or not, it depends on the nature of the receipts and the true scope and effect of the relevant tax provisions. If the assessee takes a stand that certain receipt is not an income, then the onus is on the assessee. In this case, it is clear that this type of receipts are not recurring receipts because it may be granted in a lifetime. In our view, these receipts can be characterised as windfall receipts because unexpectedness of the advantage pertained to the factum of the receipts and not to the quantum of receipts. In strict sense, what is a windfall receipt. In our view, windfall receipt is some unexpected receipt and not in the contemplation of the assessee and not directly attributable or occurring by way of its business profits. In this case, these receipts are not related to the business of the assessee as the assessee is not doing any business but was a Director of the company who is doing the business. This fact is defined that this income was not expected neither by the assessee nor by the employer of the assessee.
7. The income is normally defined "that a gain or recurring benefit (so measured in money) which proceeds from labour, business or property; commercial, revenue or receipts of any kind, including wages or salaries, the proceeds of agricultural or commercial, the rent of houses or return on investment".
8. The income may be casual or non-recurrent. The word "casual" implies chance, accident, uncertainty. The fact that a receipt is only occasional in its existence would not itself make out casual in nature. If it arises in respect of the amount for which the payment is normally made, the presumption is that it is not of a casual nature. The better example would be (hat of case of reward paid to the Government employees. Previously, clause 48 was inserted in the Schedule to the Income Tax Ordinance, 1979 whereby the Government employees specially of Customs were awarded certain prizes on their meritorious duties, but this clause was omitted in the assessment year 1996-97. Likewise, there was clause 65 whereby the casual income of any nature was exempted from the tax under the Ordinance. Later on, an amendment was made in this clause from the assessment year 1990-91 and it was inserted that any income of more than Rs. 25,000 will be taxable. If we thoroughly examine this point, we can safely assume that every receipt generally may be income unless is expressedly exempt.
9. In case reported as 106 ITR 758 (Bombay High Court), the Bombay High Court observed on consideration of various case-law on the subject of income as under:
"In dealing with this argument it is necessary to bear in mind that the word ' income' even as it is used in the Income-tax Act has often been characterised by judicial decisions as formidably wide and vague in its scope. It is a word elastic import and its extent and sweep are not controlled or limited by the use of the words 'profits and gains' in sections 4 and 6. As has been observed by Sir George Lowndes in Commissioner of Income-tax v. Shaw Wallance & Co (1932) 2 Comp. Cas. 276; AIR 1932 PC 138, the object of Indian Income-tax Act is to tax 'income', a term which it does not define. It is expanded, no doubt, into income, profits and gains, but the expansion is more a matter of words than, of substance. Similar is the observation of Lords Russell in Maharajkumar Gopal Saran Narain Singh v. Commissioner of income-tax (1935) 3 IM 237 (PC), where it has been observed that the word 'income' is not limited by the words 'profits' and 'gains'. Anything which can properly be described as income is taxable under the Act unless expressly exempted'. The diverse forms which income may assume cannot exhaustively be enumerated, and so in each case the decision of the question as to whether any particular receipt is income or not must depend upon the nature of the receipt and the true scope and effect of the relevant taxing provision."
Thus, it is clear that all receipts by the 'assessee would not necessarily be deemed to be income of the assessee and the question as to whether any particular receipt is income or not will have to be determined depending upon the nature of the receipts and the true scope and effect of the relevant taxing provision.,"
10. As we have observed somewhere above that this income received by the assessee can either be a casual income or windfall receipts. The casual income is an income which is not recurring income whereas windfall income has been defined as a casual or unexpected acquisition or advantage. On this, the same Division Bench has observed:
"Now, it has to be made clear that when we are talking of a windfall receipt in connection with the consideration of the question whether such receipt would be income or not, we will have to restrict the concept of such windfall to a case where the unexpectedness of the advantage pertains to the factum of receipt and not to the quantum of receipt. By reason of the exigencies of the economic situation or political or international situation a trader or a businessman or an industry may make unduly large profits which are often loosely expressed as windfall profits. But this is not the nature of the windfall we are contemplating. Where the element of windfall or unexpectedness pertains only to the quantum of receipts, such element will not have any bearing- on the question we are considering and such -receipt will be profit or income of the assessee although unusually large."
11. In view of above, we are of the considered view that the amount received on account of waiver of loan of Rs. 911,658 was a casual income of the assessee. Since it is taxable under the law, therefore, we would hold that the said income of the assessee was taxable. With this observation, this appeal is dismissed and the order of learned CIT(A) is upheld.
M.B.A./51/Tax(Trib.)Appeal dismissed.