Commissioner of Expenditure Tax, Gujarat vs Manorama Sarabhai

K.T. Desai, C.J.—This is a reference u/s 25(1) of the Expenditure-tax Act, 1957, at the instance of the Commissioner of Expenditure-tax,

Gujarat. The assessee in this case is Shrimati Manorama Sarabhai. The assessment year with which we are concerned is the assessment year

1959-60, the accounting year being the year which ended on 31st March, 1959. The assessee is a B. Sc. in Social Sciences of the London

University and a graduate of the Bombay University. She devotes part of her time to running educational institutions for children. She has been

associated with the Shreyas school at Ahmedabad for about fourteen years and is one of the persons running the same. The school is run in the

same way as other institutions with the help of paid employees, but in view of her financial position, the assessee renders service to the school in an

honorary capacity. At the time when she left India in or about April, 1958, she applied to the Reserve Bank of India for allotment of the necessary

foreign exchange. In her application she stated that she was thinking of going abroad for one year for seeing some progressive experimental

schools in England and Europe, that since 1947, she and her sister-in-law had founded a school named Shreyas which had been recognised by the

Bombay State as an experimental school and that her idea in going abroad was two-fold. One of her ideas was that she wanted to study

educational psychology which she felt would help her in the understanding of children and that she had written to the Tavistock Institute to let her

have the benefit of their course in educational psychology and that the institute had agreed to do so. She also wanted to see the working of school

both in England and Europe whenever time permitted her to do so. She further stated that if given the requisite exchange, she would be going with

ten years'' experience in a school and felt that it would help her to imbibe what was best abroad and bring it out to be incorporated in the education

imparted in India. She secured admission in the Tavistock Clinic of Mental Hygiene, London, for the purpose of training in education and clinical

psychology. She completed the training in June, 1959, and was accepted for a further year as an associate student in the adult department of the

clinic for the year 1959-60 also. She travelled to places like Switzerland, Holland and Scandinavia for the purpose of studying institutions

connected with children in those countries. In the aforesaid activities, she incurred expenses to the extent of Rs. 13,592 during the year ending on

31st March, 1959. She claimed that she was entitled to an exemption in respect of the expenditure incurred as aforesaid u/s 5(a) of the

Expenditure-tax Act, 1957. She succeeded in her contention before the Income Tax Appellate Tribunal. Thereupon, at the instance of the

Commissioner of Expenditure-tax, this reference has been made for the purpose of determining the question following :

Whether on a true interpretation of section 5(a) of the Expenditure-tax Act, 1957, the educational activities of the respondent amount to

''business, profession, vocation or occupation''.

Section 5(a) of the Expenditure-tax Act, 1957, runs as follows :

No expenditure-tax shall be payable under this Act in respect of any such expenditure as is referred to in the following clauses, and such

expenditure shall not be included in the taxable expenditure of an assessee -

(a) any expenditure, whether in the nature of revenue expenditure or capital expenditure, incurred by the assessee wholly and exclusively for the

purpose of the business, profession, vocation or occupation carried on by him or for the purpose of earning income from any other source.

The learned Advocate-General, who appears on behalf of the Commissioners, urged that the words ""business, profession, vocation or

occupation"" as used in this section should be understood in the same sense in which the words ""business, profession or vocation"" have been used

under the Indian Income Tax Act, 1922. He submitted that unless an activity is carried on with the dominant motive of deriving income or profit, it

would not fall within the words ""business, profession, vocation or occupation"" used in section 5(a) of the Expenditure-tax Act, 1957. He further

urged that the legislature has, in section, also provided that any expenditure incurred by an assessee wholly and exclusively for the purpose of

earning income ""from any other source"" was expenditure which was excluded for the purpose of the expenditure-tax and that the said provisions

indicated the general intent of the legislature in enacting section 5(a). The words ""from any other source"" clearly meant from any source other than

business, profession, vocation or occupation. In his submission, it was necessary that the words ""business, profession, vocation or occupation

should also refer to activities carried on for the purpose of earning income and if any activity was not carried on for the purpose of earning income,

then, having agreed to the context in which the words were used in the section, such activity would not constitute business, profession, vocation or

occupation. The meaning sought to be given by the learned Advocate-General cannot be attributed to those words in the light of the context in

which the words have been used. If the legislature intended to confine the exemption to the expenditure incurred for the purpose of earning income,

the legislature would have used the words ""for the purpose of earning income from business, profession, vocation or occupation"" and not merely

the words ""for the purpose of business, profession, vocation or occupation"". The words ""for the purpose of"" have been used in connection with the

words ""the business, profession, vocation or occupation"" and have been repeated in connection with the words ""earning income from any other

source"". The legislature has thus provided disjunctively for different categories of expenditure and it is not right that the concept underlying one

category should be imported into the other. For the purpose of the present case, we will have to consider whether the assessee carried on any

vocation or occupation"". It is not necessary that the income or profit motive should exist before an activity can be termed vocation or occupation.

A vocation or occupation may be carried on without any profit motive. A vocation or occupation may be carried out of considerations of social

services or of conferring some benefit to humanity or to a class of persons. One cannot say that merely because income has not been derived or

income had not been desired, an activity cannot be regarded as vocation or occupation. The earning of income or the desire to earn income cannot

be regarded as the dominant consideration or the requisite element for the purpose of constituting an activity into a vocation or occupation. It may

be that a vocation or occupation carried on by a person may yield income or may not yield income. The mere fact that no income is intended to

derived or to be received from such activity would not make that activity cease to be vocation or occupation. Even as regards business it had been

held that it is not essential to the carrying on of a business that the person carrying it on should make a profit or even that he should desire or want

to make a profit. A business may be carried on ""no profit no loss"" basis. Co-operative societies or mutual insurance companies may carry on

business although they may not make and may not want to make any profit. A reference may be made to a decision of the Supreme Court in the

case of P. Krishna Menon v. Commissioner of Income Tax. It has been held in that case in order that an activity might be called a vocation it was

not necessary to show that it was an organised activity and that it was indulged in with a motive of making profit. The word ""occupation"" is a word

of wider import than the word ""vocation"". A person who is carrying on an occupation need not necessarily be carrying on a vocation, but every

person carrying on a vocation must be regarded as one carrying on an occupation. If a profit motive is not the pre-requisite of the activity

vocation"", it cannot be regarded as the pre-requisite of the activity which could be termed ""occupation"". On the facts of the present case, the

activity carried on by the assessee must be regarded as an occupation within the meaning of section 5(a) of the Expenditure-tax Act, 1957. If she

had, for the service rendered by her, been receiving remuneration, then, in accordance with the argument advanced by the learned Advocate-

General, such activity was liable to be regarded as occupation and any expenditure incurred by the assessee wholly and exclusively for the purpose

of such occupation would have been exempt from expenditure-tax. Merely because the assessee bring in affluent circumstances does not receive

any remuneration, the character of her activity does not change. If her activity could be regarded as an occupation within the meaning of the section

and if she received remuneration therefor, it is not possible not to regard it as occupation merely because she is carrying on the same activity from

the motive of doing social service or social good without taking any remuneration therefor.

The learned Advocate-General drew our attention to certain authorities which made a distinction between a vocation or occupation on the one

hand and a hobby on the other. A hobby, by and large, is referable to an activity which occupies the leisure moments of an individual. It is not

necessary for the purpose of the present case to consider the question whether if the activity carried on by the assessee constitutes occupation, it

also constitutes a hobby. It is sufficient for the purpose of satisfying the provisions of section 5(a) that the activity constitutes an occupation.

The learned Advocate-General pressed us to reframe the question in the manner stated in Civil Application No. 10 of 1962. He desires us to

reframe the question in the terms following :

Whether, on the facts and in the circumstances of the case, and on a true interpretation of section 5(a) of the Expenditure-tax Act, the sum of Rs.

13,952 is to be excluded from the taxable expenditure u/s 5(a) of the Expenditure-tax Act ?

The learned Advocate-General very frankly stated to us that he desired the question to be re-framed in this form so that he can agitate before us

the question whether the assessee had carried on the activity during the year of assessment. He indicated that the assessee, during the assessment

year, had gone abroad and that she was not actively carrying on the activity of running a school during that period. This point was at no stage

canvassed before the Tribunal and we would not reframe the question with a view to enlarge the scope of the reference. A question of the nature

sought to be agitated before us does not arise out of the order of the Tribunal. In our view, the question as framed by the Tribunal is sufficient for

the purpose of disposing of the matter in controversy between the parties which arises out of the order of the Tribunal.

Our answer to the question is that on a true interpretation of section 5(a) of the Expenditure-tax Act, 1957, the educational activities of the

respondent amount to an occupation within the meaning of the said section. The Commissioner will pay to the assessee the costs of the reference.