JUDGMENT

KRISHNA IYER, J.:—

Keynote thought

Politics and philanthropy may well fall victim to the construction of Sec. 5(a). and (j) of the Expenditure Tax Act, 1957 (the Act, for short) if we fall victim to the submission naively made, at the first stage, by counsel for the State. In fairness to him, we must state that later he retracted from that position, and rightly so, for the Act, in spirit and letter, does not intend this blow on the profession of politics or the disposition for donations.

2. A fair reading of the provisions in question convincingly excludes from taxable expenditure sums wholly and exclusively incurred for the purpose of a profession or occupation carried on by the assessee and no modern man may dispute that politics is a profession or occupation. Likewise, expenditure by way of gift or donation incurred by the assessee is also excluded and no politically conscious soul will deny that donation to a party in a democracy squarely comes within this exclusionary provision. 141

The factual matrix

3. Expenditure tax under the Act was sought to be levied from the assessee PVG Raju, the respondent before us. Paradoxical, perhaps it may appear - but here is a case of a rich Maharaja practising the politics of socialism, spending lavishly for furthering his party s popularity and the prospects of his fellow candidates at the elections to the Andhra Pradesh Legislative Assembly. This expenditure, falling under two heads, was taxed by the assessing authority and upheld up to the Tribunal level. The High Court, on reference, reversed the findings on both counts and the Commissioner of Expenditure Tax, the appellant, challenges the legality of this verdict.

4. The best beginning in stating the facts may well be to extract the questions of law referred by the Tribunal in its own words: .

"(1) Whether on the facts and in the circumstances of the case the expenditure of Rs. 30,832/- claimed to be the amount incurred by the assessee for the benefit of other candidates for election is excludible from the taxable expenditure either under Sec. 5 (a) or under Section 5 (j) of the Expenditure Tax Act? .

(2) Whether on the facts and in the circumstances of the case the sum of Rs. 47,867/- claimed to be party expenses could be excluded from the taxable expenditure of the assessee either under Section 5(a) or under Section 5 (j) of the Expenditure Tax Act?

We have to assume the following facts as implied in the very questions referred to the High Court and from the attendant circumstances. They are:

(a) that the respondent, during the relevant period, was the Chairman of the State Socialist Party which was interesting itself in electoral politics; .

(b) the respondent was a wealthy socialist;

(c) that he was meeting not only the expenditure of his own elections but spending moneys for the benefit of other candidates belonging to his party;

(d) that he was issuing cheques to the Secretary and other office bearers of his party to meet the expenses involved in party work.

He expended Rs. 38,832/- for propelling the election prospects of other party candidates during the election. Likewise, he gave Rs. 47,867/- to his party through its office-bearers. On these facts the question is whether he is eligible for exclusion of the two sums from expenditure tax either under Sec. 5 (a) or under Sec. 5 (j) of the Act.

Consideration of the legal issue.

5. It is appropriate to start with reading the relevant portion of Section 5 of the Act:

"S. 5. 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;

(b