An amount received by an assessee as professional income does not cease to be his professional income merely because he later creates a trust out of the said amount.

Judgment

S. K. DAS, J. : This is an appeal on a certificate of fitness granted under the provisions of sub-s. 2 of S. 66A of the Indian Income-tax Act, 1922, by the High Court of Judicature for the State of Punjab then sitting at Simla. The certificate is dated December 28, 1953, and was granted on an application made by the Commissioner of Income-tax, Punjab, appellant herein. The relevant facts are shortly stated below.

2. For the assessment year 1946-1947 one Pandit Thakurdas Bhargava, an advocate of Hissar and respondent before us, was assessed to income-tax on a total assessable income of Rs. 58,475 in the account year 1945-1946. This sum included the amount of Rs. 32,500 stated to have been receive by the respondent in July, 1945, for defending the accused persons in a case known as the Farrukhnagar case. The assessee claimed that the said amount of Rs. 32,500 was not a part of his professional income, because the amount was given to him in trust or charity; this claim of the assessee was not accepted by the Income-tax Officer, nor by the Appellate Assistant Commissioner who heard the appeal from the order of the Income-tax Officer. Both these officers held that the assessee had received the amount of Rs. 32,500 as his professional income and trust which the assessee later created by a deed of Trust dated August 6, 1945, did not change the nature or character of the receipt as professional income of the assessee; they further held that the persons who paid the money to the assessee did not create any trust nor impose any obligation in the nature of a trust binding on the assessee, and in fact and law the trust was created by the assessee himself out of his professional income; therefore, the amount attracted tax as soon as it was received by the assessee as his professional income, and its future destination or application was irrelevant for taxing purposes. From the order of the Appellate Assistant. Commissioner a further appeal was carried to the Income-tax Appellate Tribunal, Delhi Branch. We shall presently state the fact which the Tribunal found, but its conclusion drawn from the facts found was expressed in the following words : "The income in this case did not at any stage arise to the assessee. Keeping in mind the express stipulation made by the assessee when the accepted the brief there was a voluntary trust created, which had to be and was subsequently reduced into writing after the money was subscribed. The payments received from the accused and other persons were received on behalf of the trust and not by the assessee in his capacity as an individual. In this view, we delete the sum of Rs. 32,500 from the assessment."

3. The appellant then moved the Tribunal for stating a case to the High Court on the question of law which arose out of the order of the Tribunal. The Tribunal was of the opinion that a question of law did arise out of its order, and this question is formulated in the following terms :

"Whether the sum of Rs. 32,500 received by the assessee in the circumstances set out in the trust deed later executed by him on August 6, 1945 was his professional income taxable in his hands, or was it money received by him on behalf of a trust and not in his capacity as an individual."

It appears that in stating a case the Tribunal framed an additional question as to whether the trust was created at or before the payment of Rs. 32,500, but expressed the view that this additional question was implicit in the principal question formulated by it. A case was accordingly stated to the High Court under S. 66 of the Indian Income-tax Act, and the High Court by its judgment dated August 3, 1953, answered the question in favour of the assessee, holding that "the sum of Rs. 32,500 received by the assessee was not received by him as his professional income but was received on behalf of the trust and not in his capacity as an individual". The appellant then moved the High Court and obtained the certificate of fitness referred to