# THE COMMISSlbNER OF INCOME-TAX, PUNJAB v. SHRI THAKUR DAS BHARGAVA, ADVOCATE, I HISSAR - **Citation:** [1961] 1 S.C.R. 75 - **Court:** Supreme Court of India - **Decided:** 1961 - **Bench:** S. K. Das, M. Hidayatullah, J. C. Shah - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-commisslbner-of-income-tax-punjab-v-shri-thakur-das-bhargava-advocate-i-2223 - **Pages:** 8 ## Headnote ' ' t · Income Tax-Professional income-Lawyer accepting case on condition of clients' paying money for charity-Money paid to lawyer and charitable trust created-Whether amount received is professional income. · The assessee, an advocate, accepted a case on condi~ion that the clients would provide him with Rs. 40,000 for chai;itable purpos~s and that he would create a public charitable trust with the money. }he clients gave the assessee Rs. 3z,500 and ·he created a trust therewith. The assessee claimed that the said amount of Rs. 3z,500 was not his professional income as the amount had been given to him in trust for charity. Held, that the said amount Was the professional income o'. the assessee and was liable to income-tax. At the time When this money ,was paid to the assessee no trust or obligation inJhe nature of trust was created. The clients who paid the money did not create any trust nor imposed any legally enforceable obligation on the assessee. 'fhe money when it was received by the assessee was his,professional ipcome though he had eXpressed a desire earlier to create~ charitable trust out of the~ money when received. The assessee's own voluntary desire to create a trust out of the fees paid to him, did not create a trust or a legally enforceable obligation. · Raja Bejoy Singh Dudhuria v. Commission1e-tax v. Thakur Das Bhargaia S. K. Das]. 76 SCPREME COURT REPORTS [ 1961] S. K. DAS J.-fhis 1s an appeal on a certificate of fitness granted under the provisions of aub-s. 2 of R. 66A of the Indian Income-tax Act, 1922, by the High C'ourt of Judicature for the State of Punjab then sitting at Simla. The certificate is dated December 28, 1953, and wa.s granted on an application '.Dade by thf Commissioner of Income-I.ax, Punjab, appellant herein. The relevant facts a.re shortly stated below. For the assesment yea.r I 946-4 7, one Pandit Thakur. da.s Bha.rga.va, a.n advoca.to of HiBBa.·r a.nd respondent btiforc us, was assessed to income tax on a total assessable income of Rs. 58,475/. in the account year 194546. This sum included the amount of Rs. 32,500/- sta.ted to have been received 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 a.mount of Rs. 32,500/· was not a part of his professional income, because the amount was given to him in trust for 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 profession a.I income and the trust which the a.ssessee la.ter 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 aBBessee; they further held that the persons who paid the money t-0 the assessce did not create any trust nor impose any obligation in the nature of a trust binding on the assessec, and in fact and law the trust was created by the assessce himself out of his professional income; therefore, the amount attracted tax as soon as it was received by the aBBessee as his professional income, and its future destination or application was irrelevant for taxing purposes. From the order of the Appellate·Assista.nt Commissioner a further appeal was carried to the Income-tax Appel. late Tribunal, Delhi Branch. We shall presently state the facts which t ## Text J ' i 's.C.R. SUPREME COURT REPORTS 75 THE COMMISSlbNER OF INCOME-TAX, PUNJAB v. SHRI THAKUR DAS BHARGAVA, ADVOCATE, I HISSAR. (S. K. DAS, M. HIDAYATULLAH and,J. C. SHAH, JJ.) ' ' t · Income Tax-Professional income-Lawyer accepting case on condition of clients' paying money for charity-Money paid to lawyer and charitable trust created-Whether amount received is professional income. · The assessee, an advocate, accepted a case on condi~ion that the clients would provide him with Rs. 40,000 for chai;itable purpos~s and that he would create a public charitable trust with the money. }he clients gave the assessee Rs. 3z,500 and ·he created a trust therewith. The assessee claimed that the said amount of Rs. 3z,500 was not his professional income as the amount had been given to him in trust for charity. Held, that the said amount Was the professional income o'. the assessee and was liable to income-tax. At the time When this money ,was paid to the assessee no trust or obligation inJhe nature of trust was created. The clients who paid the money did not create any trust nor imposed any legally enforceable obligation on the assessee. 'fhe money when it was received by the assessee was his,professional ipcome though he had eXpressed a desire earlier to create~ charitable trust out of the~ money when received. The assessee's own voluntary desire to create a trust out of the fees paid to him, did not create a trust or a legally enforceable obligation. · Raja Bejoy Singh Dudhuria v. Commission1e-tax v. Thakur Das Bhargaia S. K. Das]. 76 SCPREME COURT REPORTS [ 1961] S. K. DAS J.-fhis 1s an appeal on a certificate of fitness granted under the provisions of aub-s. 2 of R. 66A of the Indian Income-tax Act, 1922, by the High C'ourt of Judicature for the State of Punjab then sitting at Simla. The certificate is dated December 28, 1953, and wa.s granted on an application '.Dade by thf Commissioner of Income-I.ax, Punjab, appellant herein. The relevant facts a.re shortly stated below. For the assesment yea.r I 946-4 7, one Pandit Thakur. da.s Bha.rga.va, a.n advoca.to of HiBBa.·r a.nd respondent btiforc us, was assessed to income tax on a total assessable income of Rs. 58,475/. in the account year 194546. This sum included the amount of Rs. 32,500/- sta.ted to have been received 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 a.mount of Rs. 32,500/· was not a part of his professional income, because the amount was given to him in trust for 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 profession a.I income and the trust which the a.ssessee la.ter 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 aBBessee; they further held that the persons who paid the money t-0 the assessce did not create any trust nor impose any obligation in the nature of a trust binding on the assessec, and in fact and law the trust was created by the assessce himself out of his professional income; therefore, the amount attracted tax as soon as it was received by the aBBessee as his professional income, and its future destination or application was irrelevant for taxing purposes. From the order of the Appellate·Assista.nt Commissioner a further appeal was carried to the Income-tax Appel. late Tribunal, Delhi Branch. We shall presently state the facts which the Tribunal found, but its conclusion drawn from the facts found was expreBBed in the fo II owing words : " The income in this case did not at '' 1 S.C.R. SUPREME 'COURT REPORTS 77 I86o any stage arise to. the assessee. Keeping in mind the express stipulation made by the-_assesses when he d h b f h l Com1nissioner of accepte t e rie · t ere was a vo untary trust created, Income-tax \\·hich h11od to be and was subsequently reduced into v. writing after the money was subscribed. The' payThakur Das . men ts receiyed from the accused and other persons Bka.gava were received on behalf of the trust aI)d not ·by the assessee in his capacity ·as an· individual. In this view; we delete the sum of Rs. 32,500/- from the assessment." . The appellant then moved the Tribunal for stating a case tQ 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 it formulated in the following tern:is : · "Whether the suin 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 iri 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 vie.w 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 t.he Indian Income-tax Act, and the High Court by its judgment dated August 3, l953, 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 earlier in this judment. , We shall presently state the facts found by the Tribunal in connection with the receipt of the sum of Rs. 32,500/- by the assessee, from which the Tribunal drew its inference. But the question as framed by the Tribt:ina,l a.nd answered :by the· High Court, ·was S. K. Das j. Comn11ss1ourr of I t1Co111e-tax v Thakur Da~ Hhargav~ S. 1(. Das j. 78 SUPREME COURT REPORTS [19~1] whether in the circumstances set out in the trust deed dated August 6, 1945, the amount of Rs. 32,500/- received by the assesRee was professional income in his hand. 1 t is, therefore, appropriate to refer first to the recitals in the trust deed. The respondent stated in the trust deed that he had " decreased " his legal practice for the last few years and had reserved his professional iucome accruing after June 1944 for payment of taxes and charity. He then said: "accord-. ingly, I have been acting on that. In the Farrukhnagar, district Gurga.on case, Grown v. Ohuttan Lal etc., the relatives and the accused expressed a strong desire to get the case conducted by me during its trial. At last 011 their pe1siste11ce and promise that they would provide mo with Rs. 40,000/· for ~haritable purposes and I would create a public charitable trust thereof I agreed to conduct the case. The case is now over. The accused and their relatives have given' me Rs. 32,500/- for charity and creating a. trust. Tho said amount has been deposited in the Bank. If they pay any other amount that will also be included in that. Accordingly, I create this trust with the following conditions and with tho said amount and any other amount which may be realized afterwards or included in the trust;". (then followed the name and objects of the trust, etc.). The Trib9nal accepted as correct the statements of the respondent that he was at first. unwilling to accept the brief in the Farrukhnagar case; he was then persuaded to accept it at the request of some members of tho Bar and some influential local people on the understanding, as tho respondent put it, that the accused persons of that case would provide Rs. 40,000/- for a charitable trust which the respondent would create. Eventually, the sum of Rs. 32,500/; was pa.id by or on behalf of the accused persons, and as the Tribunal has put it, ,. charitable trust was created by the respondent by the trust deed dated August 6, 1945, the recitals whereof we have quoted above. The question before us is what is the proper legal inference from the aforesaid facts found by the Tribunal. Both the Tribunal and the High Court have drawn the inference that & charitable trust was created ·- 1 s.c:R. SUPREME COURT REPORTS 79 by the persons who paid. the money to the assessee, and all that the assessee did uuder the .feed of trust · dated August 6, 1945, was to reduce the terms of the trust to writing. The High Court, therefore, a pp lied the principle laid down J:>y the Privy Council in Raja Bejoy Singh Dudhuria v. Commissioner of Income-tax, Bengal(') and observed that by· tlie overriqing obligation imposed on the assessee by the persons ·who paid the money, the sum of Rs. 32,500/- never became the income of the assessee; and the amount became trust ·property as soon as it was paid, .there being no question of the application of part of his.: income by the assessee. On.behalf of the appellant it has been contended that the inference which the Tribunal and the High Court drew is not the:. proper legal inference which flows from the facts found, and according to the learned Attorney-General who appe~red for the appeHant the proper legal inference is that the amount was received by the assessee as his professional income in respect of which he later created a trust by the deed . of. trust dated August 6; 1945. He has submitted t~~t there_ was no trust nor any ~egal obligation imposed on tl!e assessee by the persons wlio paid the money, at the time when. the money was received, which pre- . vented. the amount from becoming the profes.sional incom