JUDGMENT

MANCHANDA J. - This is a case stated u/s 66 (1) of the Indian Income Tax Act, 1922, hereinafter referred to as the Act. The question referred is :

"Whether on a true interpretation of section 4 of the Income Tax Act, the sum of Rs. 20,000 received by the assessee as remuneration was revenue income liable to tax under the Indian Income Tax Act ?"

The material facts lie within a narrow compass. There was a dispute, between Messrs. United Timber Trading Co., Calcutta, and the Union of India, which was referred to the arbitration of two persons. The nominee of the Government was Sri. Charan Singh, Special Solicitor to the Government Department of Industries and Supply, while the arbitrator nominated by Messrs. United Timber Trading Co. Ltd. was the late Sri Sarat Chandra Bose, a leading advocate and at that time a member of the Executive Council Government of India. The aforesaid arbitrators, at a meeting held on the 1st April, 1947, decided to request the assessee to act as an umpire in the event of there being a difference of opinion between them. The offer was conveyed in a letter dated the 3/5th of April, 1947, and was signed by Sri. Shiv Charan Singh for self and on behalf of Sarat Chandra Bose coarbitrator. The letter concluded :

"We, arbitrators, shall feel most grateful if you will kindly intimate your acceptance of this appointment.

I am to add that by accepting this appointment you will be rendering a great public service as it is a difficult problem to find suitable umpires and I am sure the parties and the arbitrators will all have confidence in your judgment, should it become necessary to refer the matter to you."

The assessee at that time was a puisne judge of the Allahabad High Court and after taking the permission of then Chief Justice he replied, vide letter dated the 12th April, 1947. This reads :

"I am in receipt of your registered letter No. OSD (C)/160, dated the 23rd/5th April, 1947, and beg to inform you that I have no objection to acting as umpire in the case mentioned by you."

There was neither mention of any payment nor was there any question at that time of any payment of fee for acting as an umpire. Thereafter, the assessee became the Chief Justice in 1947, and considered that it was not proper or permissible for him to act as an umpire. As he had not heard anything for nearly three years from the arbitrators, he considered that the matter was closed. In 1949, however, he heard from the late Sri Sarat Chandra Bose, that there had been a difference of opinion between the arbitrators and the matter was going to be referred to him for its being decided in accordance with the previous decision taken. The assessee wrote to Sri Sarat Chandra Bose that it would not be right for him to act as an umpire, and, therefore, he declined to do so. The assessee by him letter dated the 9th July, 1949, also wrote to the said Sri Shiv Chandra Singh expressing his inability to act as an umpire and added that he would like to be excused. He also stated that he was returning the records of the case.

Thereafter, on or about the 20th February, 1950, Sri Sarat Chandra Bose, suddenly died of heart failure. In this situation, the late Sri Shyama Prasad Mukerji, was then the member of the Government of India, Industries Department, made a personal appeal to the assessee, vide letter dated the 23rd February, 1950, to waive his objection to work as an umpire, as otherwise it would involve the Government and the other party to the dispute in unnecessary expense and prolonged litigation, as the case would have to start de novo in the Calcutta High Court. In these peculiar circumstances, the assessee agreed to act as umpire. Even up to that stage there was no question of any payment of fees. It was only on the 8th May, 1950, that the said Sri Shiv Charan Singh informed the assessee that there was no indication of any fees that were to be charged and he should let him know so that the he can obtain the sanction of the Government for pay