Prof. G.S. Ramaswamy vs The Commissioner of Income Tax

R. Jayasimha Babu, J.—Two questions have been referred to us at the instance of the assessee who is a Professor and author of a book

titled ""Design and Construction of Concrete Shell Roof"". The assessee had served as a Director of Structural Engineering Research Centre. The

assessment years are 1984-85 and 1985-86.

For the assessment year 1984-85 two questions have been referred. They are,

1.Whether, the Tribunal was correct on the facts and in law in its interpretation of the declarations of the assessee''s karta dated 03.01.1967 and

22.12.1970?

2.Whether, the Tribunal, on the facts and in the circumstances of the case, was justified in disallowing the expenditure claimed by the assessee in

respect of the publication of the revised edition of the book ""Design and Construction of Concrete Shell Roofs""?

The assessee had, several years prior to this assessment year, in the year 1967 on 03.01.1967, made a declaration that he had thrown into the

hotchpot of the Hindu Undivided Family consisting of himself his two sons, his daughter and his wife, all his income from the royalty of the book

which was to be published by a publisher in New York. The expenditure of a sum of Rs.1,500/- which had been incurred by him for the

preparation of the book was also to be debited to the accounts of that Hindu Undivided Family. The declaration further sets out that, ""all income

accruing from the royalty of the above book will be put into the bank account of the above Hindu Undivided Family"".

The assessee claimed that for bringing out the second edition of that book which was published by a different publisher in Florida, the assessee

had incurred an expenditure of a sum of Rs.35,515/- and that that sum was required to be deducted from the royalty income in that year which

was in the sum of Rs.1,24,568/-. That expenditure was stated to have been incurred on typing, photo copying, etc. of 2000 pages manuscript

prepared by him at New York while he was there on an assignment. The published book contained 720 pages. The assessing officer did not allow

this expenditure on the ground that no supporting evidence was forthcoming and what was supplied was only an estimate.

The Commissioner on appeal by the assessee allowed his appeal partly by holding that after considering the details of expenditure claimed

before him, and taking into account that some of the expenses were not fully vouched, the assessee would be entitled to a deduction of

Rs.25,000/- as against the claim of Rs.35,515/- made by the appellant. On further appeal to the Tribunal, this time by the revenue, the Tribunal set

aside the appellate order by holding that the declaration that had been made by the assessee in the year 1967 was only with regard to the

publication of a book by the publisher MaGraw Hill in New York, and did not extend to the publication of the second edition of that book by a

different publisher. The Tribunal did not hold that the amount of deduction quantified by the Commissioner was in any way erroneous.

We have already extracted the portion of the declaration which states that all income accruing from the royalty of the above book will be put

into the bank account of the HUF. In the further declaration made on 22.12.1970, the assessee had, after referring to the fact that he had written

the book, confirmed that he had thrown into the hotchpot the right to receive the royalties. The effect of these declarations is to vest in the HUF the

right to receive the royalties on the book. The book had value because of the contents and the authorship of the assessee. The royalties were

received for the publication of the contents. The amount received as royalty on the second edition of the book which was published by a different

publisher clearly vested in the HUF. The first question referred to us, is therefore answered in favour of the assessee and against the revenue.

Coming to the second question, the only reason given by the Tribunal for disallowing the expenditure is that the declaration made by the

assessee pertains only to the first edition. That interpretation placed by the Tribunal on the declarations made is clearly erroneous. The second

question is also required to be and is answered in favour of the assessee with the rider that the amount to be allowed is not the amount claimed by

the assessee, but the amount that had been allowed by the Commissioner whose assessment of the quantum of the allowance has not been found

by the Tribunal to be erroneous.

The question referred for the assessment year 1985-86 is,

Whether the Tribunal was justified on the facts and in law in disallowing the expenditure claimed by the assessee on account of the foreign trip of

the kartha during the accounting year?

The assessee claimed that he had to attend an international seminar on the subject of his book and had incurred expenditure on travel and stay

for attending such seminar. The knowledge gathered by reason of attending that seminar was a part of the input into the preparation of the second

edition of that book. Though the assessing officer had rejected that claim of the assessee for deduction, on appeal, the Commissioner allowed the

assessee''s claim in part and fixed the amount of allowance at Rs.35,000/- as the reasonable expenditure for attending such seminar. The Tribunal,

on further appeal by the revenue, disallowed that amount only on the ground that the Hindu Gains of Learning Act, 1930 (Act XXX of 1930) does

not permit a claim of that nature to be made.

The royalty from the book written by the Kartha of the HUF had vested in the HUF by reason of the declarations made by the assessee in the

years 1967 and 1970. Those royalties clearly are in the nature of gains of learning. The Hindu Gains of Learning Act, 1930 in Section 3 provides

that no gains of learning shall be held not to be excluded and separate property of the acquirer of such learning inter alia, by reason of his learning

having been acquired with the aid of some joint funds of his family. Here the person who had acquired that learning had chosen to throw into the

hotchpot the fruits of the learning in the form of royalties realised from the publication of that book. Act 30 of 1930 does not prohibit the person

who is entitled to the fruits of learning to voluntarily make it a part of the assets of HUF. The Tribunal was in error in its construction of the

provisions of the Act. The Tribunal has not held that the amount allowed by the Commissioner was excessive.

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