Case: Commissioner Of Income-Tax, Uttar Pradesh Vs. Manmohandas

1. Under an agreement dated January 2, 1931 Lala Manmohan Das-hereinafter called the assessee- was appointed Treasurer of the Allahabad Bank Ltd. in respect of certain Branches, Sub-Agencies and Pay Offices. The assessee was assessed to income-tax as representing his Hindu undivided family, and the income received by the assessee under the terms of the agreement with the Allahabad Bank was treated as income of the Hindu undivided family. In the previous year corresponding to the assessment year 1950-51 the assessee in performing his duties as a Treasurer suffered a net loss of Rs. 38,027/-. For the assessment year 1951-52, the profit and loss account of the assessee showed Rs. 73,815/- as receipts, against which were debited outgoings amounting to Rs. 39,370/- which included Rs. 20,000/- being the loss suffered by the assessee as Treasurer of the Patna Branch of the Allahabad Bank arising from misappropriation by an Assistant Cashier. The Income-tax Officer refused to allow the loss suffered in the previous year to be set off against the net profit of Rs. 34,445/- and brought that amount of profit to tax as remuneration received by the assessee as Treasurer of the Allahabad Bank. The order of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal held that the remuneration received by the assessee as Treasurer of the Allahabad Bank was income arising from pursuit of a profession or vocation within the meaning of S. 10 of the Act and the loss suffered during the preceding year was liable to be set off against the assessees income from that source in the year under consideration.        2. At the instance of the Commissioner of Income-tax, U. P., the following questions were referred to the High Court of Allahabad under S. 66 (1) of the Income-tax Act, 1922:(1) Whether on a true interpretation of the deed of agreement dated 2nd January, 1931, appointing the assessee as Treasurer of the Allahabad Bank Limited, income earned by the assessee from his activities as such Treasurer fell to be computed under Section 10 of the Act or Section 7 or Section12 of the Income-tax Act?        If the answer to this question is that such income is liable to be computed under Section 10 of the Act.        (2) Whether the assessee could claim a set off of the loss suffered by him in the preceding year 1950-51 against his profits in the year under consideration i. e. 1951-52 having failed to prefer an appeal against the refusal by the Income-tax Officer making the assessment for the year 1950-51 to allow the assessee to carry forward the loss under Section 24 (2) of the Act?The High Court held that the remuneration received by the assessee from the Allahabad Bank was income liable to be taxed under S. 10 of the Income-tax Act, and that the assessee could claim to set off the loss computed in the assessment year 1950-51 against the profit in the subsequent year. With certificate granted by the High Court, this appeal has been preferred by the Commissioner of Income-tax.

Reasoning: 13. In the present case there is no covenant which either expressly or impliedly confers upon the Bank such control and supervision over the work done by the Treasurer, and the agreement is not liable to summary determination. His duties, liabilities and responsibilities are to be such as either by custom or contract usually devolve upon the Treasurers and those which are specified in the agreement. It is true that under Cl. (d) he has to transmit from one place to another place whenever so required, under such guard as may be provided by the Bank, all such money, cash, bullion, securities, cheques, notes hundies, drafts, orders and other documents, but that does not put the Treasurer under the general supervision of the Bank14. On a careful consideration of the covenants, we are of the view that the Treasurer was not a servant of the Allahabad Bank under the terms of the agreement, dated January 2, 1931, and the remuneration received by him was not "salaries" within the meaning of S. 7 of the Income-tax Act. But that is not sufficient to conclude the matter in favour of the assessee. The benefit of S. 24 (2) of the Indian Income-tax Act may be availed of by the assessee only if the loss sought to be set off was suffered under the head "Profits and gains * * in any business, profession or vocation". It is difficult to regard the occupation of the Treasurer under the agreement as a profession, for a profession involves occupation requiring purely intellectual or manual skill, and the work of the Treasurer under the contract cannot be so regarded. Occupation of a Treasurer is not one of the recognized professions, nor can it be said that it partakes of the character of a business or trade. In performing his duties under the agreement the assessee exercised his skill and judgment in making proper appointments and made arrangements for supervising the work done by the staff in the Cash Department of the Banks Branches. The remuneration received by him was for due performance of the duties and also for the guarantee against loss arising to the Bank out of the acts or omissions of the Cash and other staff of the Bank. Taking into consideration the nature of the duties performed, and the obligations undertaken, together with the right to remuneration subject to compensation for loss arising to the Bank from his own acts and omissions or of the servants introduced by him into the business of the Bank, the assessee may be regarded as following a vocation. The remuneration must therefore, be computed under S. 10 of the Income-tax Act and loss of profit suffered in that vocation in any year may be carried forward to the next year and be set off against the profit of the succeeding year.