Commissioner of Income Tax vs International Clearing and Shipping Agency

R. Jayasimha Babu, J.—The question referred to us, at the instance of the Revenue, is :

Whether, on the facts and in the circumstances of the case, the asses-see carrying on the business as clearing and shipping agents is entitled to be

assessed at the tax rates applicable to a professional firm ?

The assessment years relating to which this question has arisen are 1978-79 to 1981-82. The claim of the assessee, a professional clearing and

shipping agency, Madras, was that it is carrying on a profession and should, therefore, be taxed at the lower rate applicable to firms which carry on

profession as provided in the Finance Act, 1979. The Commissioner of Income Tax as also the Tribunal accepted the plea of the assessee on the

ground that a similar plea had been accepted in respect of another shipping and clearing agency by the Appellate Tribunal, Bombay Bench-D.

Learned counsel for the Revenue placed before us the decision of the Bombay High Court which has disapproved the view of the Bombay

Bench of the Tribunal, in the case of Commissioner of Income Tax Vs. Jivanlal Lalloobhai and Co., . In that case, the Bombay High Court held

that the activity of clearing, forwarding and shipping agents does not amount to a ""profession"" and a firm carrying on such activity is not entitled to

the benefit of the lower rate of tax applicable to registered firms as provided in sub-paragraph II of Paragraph C of Part I of Schedule I to the

Finance Act, 1976, and the Finance (No. 2) Act, 1977. In so holding the court relied on an earlier decision rendered by it in Commissioner of

Income Tax Vs. Lallubhai Nagardas and Sons, .

Learned counsel for the assessee fairly submitted that he is unable to support the order of the Tribunal.

The terms ""business"" and ""profession"" are defined in the Act in Sections 2(13) and 2(36), respectively. Though the scope of the term ""business

is wide, if the activity is properly to be characterised as profession, then that activity cannot also be regarded as business. The distinguishing feature

of a profession is the possession by the practitioner of the profession of specialised knowledge involving intellectual skill and higher education in

learning. The services rendered by a professional while practising the profession, are the service for which he has been trained. The practice of a

profession cannot be regarded as a commercial activity though the practice is not without compensation or profit. The compensation earned by the

practitioner of a profession is by reason of the personal qualification possessed by him or her.

The observations of Scrutton L. J. in this regard in IRC v. Maxse [1919] 12 TC 41 are as follows (page 61) :

''Profession'' in the present use of language involves the idea of an occupation requiring either purely intellectual skill, or if any manual skill, as in

painting and sculpture, or surgery, skill controlled 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.

The activity of a shipping and clearing agent was considered by the Supreme Court in the case of M/s. Cochin Shipping co. Vs. E.S.I.

Corporation, , wherein the Supreme Court held that the activity is a ""shop"" for the purpose of the Shops and Establishments Act as the activity

carried on by a shipping clearing and forwarding agency is a commercial activity. The assistance rendered by the clearing and shipping agent to

those who import or export, by attending to the documentation and ensuring the clearance of goods, cannot be regarded as profes- sion based on

intellectual attainments or personal service rendered on account of possession of specialised skill and knowledge based on higher learning and

intellectual skill.

The Tribunal, therefore, was in error in holding that the assessee which admittedly carries on the business of clearing and shipping agents is

entitled to be taxed at rates admissible to a professional firm.

Our answer to the question referred to us is, therefore, in the negative, in favour of the Revenue and against the assessee. The Revenue is

entitled to costs of Rs. 1,000.