Craib v. Commissioner of Income Tax.
Present: Moseley S.PJT. and Soertsz J.
CRAIB v. COMMISSIONER OF INCOME TAX.
S. C. (Inty.) 136.
Income tax—Payment to superintendent of estate for exceptional servicesrendered—Personal gift—Profits from employment—Ordinance No. 2of 1932, s. 6 (2) (a).
Where the appellant, the superintendent of an estate, was given by theDirectors of the Company, which owned the estate, a sum of money forexceptional services rendered,—
Held, that the payment was a personal gift and could' not be regardedas profits from any employment within the meaning of section 6 (2) (a)of the Income Tax Ordinance.
HIS was a case stated by the Board of Review constituted under
X the Income Tax Ordinance at the request of the assessee, appellant.The assessee, who is the Superintendent of an estate received a sum ofRs. 10,000 in terms of a resolution passed by the Directors of the Company,which employed him. The resolution was as follows: — “In view ofMr. Craib’s exceptional services to the Company and in consideration ofthe fact that he has to undergo medical treatment while at Home, it wasresolved to grant him a special bonus of Rs. 10,000 ”.
The question was whether the payment was “ profits from employment ”within the meaning of section 6 (2) (a) of the Income Tax Ordinance.
H. V. Perera, K.C. (with him Aiyar, Renganathan and C. C. Rasaratnam),for assessee, appellant.—The sum of Rs. 10,000 cannot be included aspart of the assessee’s taxable income. It is not a profit from employmentwithin the meaning of section 6 of Ordinance No. 2 of 1932. To beginwith, it was a voluntary payment. Secondly, it was a payment made inspecial circumstances personal to him and not for services rendered.The immediate reason for the payment was the assessee’s illness. Thereason of “ exceptional services ” mentioned in the resolution of theDirectors was merely a motive. The Board of Appeal have interpretedsection 6 (2) (a) too literally. A bonus to be taxable must proceed fromthe employment. The corresponding provisions in English law appearin the Income Tax Act of 1918, Schedule E, rule 1. Certain Englishdecisions throw light on the expression “ profits from employment ”—Seymour v. Reed.1, Dewhurst v. Hunter *, Blackiston v. Cooper % Benyon v.Thorpe'. The real purpose of the gift was to enable the assessee to takea holiday and recuperate his health.
S. J. C. Schokman, C.C., for Income Tax Commissioner, respondent.—The resolution of the Directors shows that the payment was intendedas a bonus. • Our section is much wider than the English law; it speci-fically includes “ bonus ”. The wider definition in our Ordinance makesit difficult to apply English decisions. Even in the light of Englishdecisions, the money in question in the present case is taxable. Thei (1927) A. C. 554.3 (1909) A. C. 104.
* (1932) 146 L. T. R. 510.* 14 Tax Cases 1.
MOSELEY S.P.J.—Craib v. Commissioner of Income Tax.
resolution states that it was given for services to the Company. (Dennyv. Reed Mudd v. Collin', Davis v. Harrison) Each case, therefore,depends on its own facts.
The Indian law is also wider than the English law, although not sowide as our law—Section 7 (1) of the Indian Income Tax Act, No. 11 of1922—Saunders v. Commissioner of Income Tax, United Provinces', Iyerv. Commissioner of Income Tax, Madras'.
Under our law any bonus received from an employer or even othersis taxable. The reason why it was given does not matter. The words“ bonus ” and “ perquisite ” in Section 6 (2) (a) are quite sufficient torender the assessee liable.
H. V. Perera, K.C., in reply.—The words “ profits from an employment ”do not appear in the Indian Act. The meaning of that expression wasexamined in the English cases which have already been cited. Theword “ perquisite ” in the English law is wide enough' to cover our"bonus”. It cannot be said that our law is wider than the English law.
The judgment of Rowlatt J. in Mudd v. Collins (supra) , particularlythe latter part of it, is applicable in our favour. In Davis v. Harrison(supra), the money given to the footballer was in accordance with theterms of his employment. The other cases cited on behalf of therespondent can be similarly distinguished.
Cur. adv. vult.
March 27, 1939. Moseley S.P.J.—
This is a case stated by the Board of Review constituted under theprovisions of the Income Tax Ordinance, 1932, at the request of Mr. A. P.Craib (the assessee-appellant) who is the Superintendent of the Lello-pitiya Estate, the property of the L. L. P. Estates, Ltd. The Directorsof the Company passed a resolution in the following terms : —
“ In view of Mr. A. P. Craib’s exceptional services to the Company,and in consideration of the fact that he has to undergo medicaltreatment while at Home, it was resolved to grant him a specialbonus of Rs. 10,000.”
The payment was included by the Company in the return furnishedunder section 55 (2) of the Ordinance as a “ bonus ” paid to the appellant,whereupon the assessor included the sum as part of the appellant’s.income. The assessment was confirmed, upon appeal, by the Commis-sioner and the appellant appealed to the Board of Review. The Boarddismissed the appeal and the appellant made an application as providedby section 74 of the Ordinance requiring the Board to state a case for theopinion of this Court.
The point, for decision is whether the payment to the appellant can beregarded as “ profits from any employment ” within the meaning ofsection 6 of the Ordinance. Sub-section (2) (a) of that section definesthe expression “ profits from any employment ” as including “ anywages, salary, fee, pension, commission, bonus, gratuity, or perquisite,whether derived from the employer or others ”. Counsel for the appellant1 18 Tax Cases 854.3 II Tax Cases 707,
19 Tax Cases 297.* 5 Indian Tax Cases 454.
5 6 Indian Tax Cases 69.
MOSELEY SP.J.—Craib v. Commissioner of Income Taa.
contended that in order to be taxable such a payment must be profitsfrom employment, and relied upon the wording of the resolution as indi-cating that the appellant’s “ exceptional services to the Company ”provided merely a motive for the payment which was not, said he, areward for those services. He cited the case of Seymour v. Reed', inwhich Seymour (the appellant), a professional cricketer, had been assessedon a certain sum, the proceeds of a benefit, which had been paid to himby the Club which employed him. The assessment was made underSchedule E, rule 1, of the Income Tax Act, 1918, which renders liableto tax the “ salaries, fees, wages, perquisites or profits whatsoever ” from“ an office or employment of profit ”. It was held that the appellantwas not assessable in respect of the payment, inasmuch as it was apersonal gift, and not a profit or perquisite arising from his employmentwithin the meaning of the Schedule and rule. Lord Atkinson, whodissented, thought that when no reason is shown for such a gift it mustbe assumed that it was given for the efficient and satisfactory dischargeof the duties the recipient was employed to discharge. It will be ob-served that the term “ bonus ’’ which appears in the corresponding passageof the local Ordinance does not appear in the English Act.
In the case before us, can it be said that the payment to the appellant,notwithstanding that it is described as a bonus, is anything more than a'personal gift or testimonial ?
Seymour v. Reed (supra) was considered and approved in Dewhurst andanother v. Hunter ’ in which Lord Warrington expressed the view thatSeymour v. Reed showed that the mere fact that the payment was madeto the employee as the result of or in connection with his employmentis not enough to render it liable to tax.
In Blackiston v. Cooper3 the assessability of voluntary Easter offeringsgiven to a vicar for his personal use was considered. The view wastaken that the object of the gifts was to increase the stipend of the vicar,and that the offerings were therefore assessable as profits accruing to himby reason of his office.i
Counsel for the Commissioner contended that the guiding factorshould be the actual wording of the resolution authorising the paymentwhich, as has been seen, was described as a “ special bonus ”, and so, saidhe, was clearly within the meaning of section 6 (2) (a). The wordingof the resolution seems to me to be beside the point. It may well havebeen the intention of the Company to make the payment a properdeduction from their own profits, and it was open to them to give to thepayment any name which, in their opinion',_ would best serve that end. Itwould be manifestly unfair to bind the assessee to the strict meaningof a word the selection of which might be a mere whim of his‘employer.Counsel referred to the non-appearance, in the corresponding Englishprovision, of the word *' bonus ”, the effect of which is to make the localsection wider, and to require care in applying English decisions to thelocal enactment.
We were referred, on behalf of the Commissioner, to the case of Denny v.Reed*, in which the appellant, managing clerk to a firm of stock-brokers,,received for three years’ in succession varying' sums in addition to his
1 (1927) A. O’. 554.* (1909) A. C. 104.
* (1932) 146 L. T. R. 510.4 18 Tax Cases 254.
Wijeyesekere v. Meegama.
salary. These payments were held to be assessable since, in the opinionof Finlay J., there was no evidence that it was paid in respect of anythingbut the work done by the appellant on behalf of the firm. That case isclearly distinguishable from the one before us, particularly if we do whatthe Commissioner asks us to do and allow ourselves to be guided by thephraseology of the resolution.
In Mudd v. Collins' the appellant was assessed in respect of a paymentfor services rendered outside the scope of his duty. Even so, it seems to methat the mere fact that the payment was for services rendered, grantedthat those services were additional to the appellant’s ordinary duties,clearly brings it within the profits of his employment. '
In Davis v. Harrison * a payment to a professional footballer “ as areward for loyal and meritorious service ” was held to be remunerationfor services rendered in his employment, and assessable. Rowlatt J.expressed the view that it must always be a question of fact how aparticular payment is to be regarded.
A consideration of all the authorities cited to us on behalf of the Com-missioner leads me to the conclusion that in each case the payment whichwas held to be assessable was, beyond all doubt, in respect of servicesrendered and, as such, is distinguishable from the payment to the appellantin the present case. This payment I prefer to regard in the light of apersonal gift the motive for which, no doubt, but not the consideration,was the long service rendered to the Company by the appellant. Thepresent situation has risen out of the description of the payment as a“ bonus ” and, as I have already hinted, I do not think the appellantshould be penalized for the choice of a word, whether it be deliberate oraccidental, by the party making the payment.
For these reasons I think the appeal should be allowed with costs. Thesum of fifty rupees deposited by the appellant under section 74 (1) of theOrdinance will be refunded to him. .
Soertsz J.—I agree.
CRAIB v. COMMISSIONER OF INCOME TAX