Supreme Court held that while politics is a profession making s.5(a) of Expenditure Tax Act inapt, the assessee's election and party expenses were donations falling under s.5(j) and are thus exempt from tax.
Dismissal of appeal by Commissioner of Expenditure Tax without costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
1017
A COMMISSIONER OF EXPENDITURE TAX, ANDHRA PRADESH
f
v.
SHRI PVG RAJU, RAJAH OF VIZIANAGARAM
September 29, 1975
B
LV. R. KRISHNA lYER AND A. C. GUPTA, JJ.]
Expenditure Tax Act. (29 of 1957), s. 5 (a) and (j) - Politics if a pro- fessio1~ - Gratuitous paynz.ents towards election expenses of party c<indidates. and td office bearers ~ If 'donation'.
Under s. 5 (a) and (j) of the Expenditure Tax Act, 1957. no expenditure tax shall be payable on any expenditure incurred by the assessee wholly and txclu-· sively for the purpose of his business. profession or vocation, and on any expendi-· c ture incurred by the a9S'essee by way of donation.
The respondent-assessee was the Chairman of the State socialist Party and politics was his profession or occupation. He, is a wealthy socialist and spent Rs. 38,832/- towards election expenses of other candidates of his party, and gave Rs. 47,867 / .. to the office-bearers of his party to meet the expenses involved. in party work.
f
D
HELD: The two amounts are eligible 'for exclusion from expenditure tax.
[1021 BJ.
(1) Under modern conditions, politics is a profession or occupation. [1020 q
(2) But the expenses incurred on behalf of other candidates cannot be the assessee's professional expenses. [1020 D] · (3) The amounts, however, fall under s. S(j) of the Act. When a pe.rson gives. money to an_other without any_ material return, he donates that sum. E Therefore, when the assessee gave money to the candidates of his party for their elections exoe-nses, it was money gratuitously given, that is· he made donations. [1020 E-G]
( 4) Similarly, tile amo.unts paid to office-bearers of the party were not for any material return. They were for loyalty or gratitude. Wholly motiveless donation is rare but 1naterial return alone negates a gift or donation. Therefore, F they also were outright gifts. [1021A-<CJ
CIVIL APPELLATE JURISDICTION: Civil Apeal No. 30 of 1971.
Appeal by special leave from the judgment and order dated the 19th February, 1970 of the Andhra Pradesh High Court in case Reference No. 2 of 1967.
G
R. M. Mehta and S. P. Nayar for the appellant.
P. Ram Reddy and A. V. V. Nair for the respondent.
The Judgment of the Court was delivered by KRISHNA IYER, J.
Keynote though.
H
Politics and philanthropy may well fall victims to the contruction. of s. 5(a) and (j) of the Expenditure. Tax Act, 1957 (the Act for
1018
SUPREME COURT REPORTS
[1976] 1 s.c.R.
: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.
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 modem man may dispute that politics is a profession or occupation. Likewise, expenditure by way of gift or donation ini:Urred by the assessec is also excluded and no politically conscious soul will deny that donation to the party in a democracy squarely comes within this exclusionary provision.
A
( B
... '1
c
| The factual l!J.lllrix Expenditure tax under the Actwassought to be levied from the :assesseePV,GRaju, the respondent beforeus. Paradoxical, perhaps, it mayappear-buthere is a case of a rich Maharaja practising the . politicsofsocialism, spending lavishly for furthering his party's popularity and the prospects ofhisfellow candidatesatthe elections to the Andhra Pradesh Legislative Assembly. This expenditure, falling under two heads,wasltaxed by theass~singauthority and upheldup tothe Tribunal level. TheHi_ghCourt, on reference, reversed the findings on both counts and the Commissioner of Expenditure Tax, 1heappellant,, challenges the legality of this verdict. |
D |
|---|---|
| The best beginninginstating the facts may well be to extract :the questions of law referred by the Tribunal in its own words : " (1)Whether on the facts andinthe circumstances of the case the expenditure of Rs.38,832/- claimed tobethe amount incurred by the assessee for the benefit of other candidates for election is excludible from the taxable cxpentliturc either under Section 5(a)or under Section5(j)of the Expenditure TaxAct? |
E F |
| (2)Whetherorithe facts andinthe circumstancesof the case the sumolRs.47,867/- claimed to be party expenses couldbeexcluded from the taxable expenditure of the assessee either under Section 5(a)orunder Section 5 (j)of the Expenditure Tax Act? |
G |
| Wehave to assume the following factsasimplied in the very <JUestionsreferred to the High Court and from the attendant circum- -stances. They are : (a) that the respondent, during the relevantperi.od wasthe Chairman of the State Socialist Party which wasinterestingitsC!fin electoral politics; |
H |
COMMR. EXPENDITURE TAJ<; v. PVG RAJU (Krishna Iyer,!.) !019<
f
j
A
B
c
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 quesiion is whethe1 he is eligible for exclusion of the two sums from expenditure tax either under s. 5~a) or under s. 5(j) of th eAct.
Consideration of the legal issue
It is appropriate to start with reading the relevant portion of S· 5 of the Act :
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0
E
"s. 5. No. expenditure-tax shall be payable under this Act iu 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 bnsiness, profession, vocation or occupatio!J carried on by him or for the purpose of earning income from any other source;
(b) to (i) ...
(j) any expenditure incurred by the assessee by way of, or in respect of any gift, donation or settlement on trust or otherwise for the benefi! of any other person."
1
F
G
The assessec was Party Chairman and politics was undoubtedly his: profession or occupation, it being admitted that his interest in politics was not causal nor sporadic but abiding and ambitious.
The contention of the respondent which met with success beforethe High Court was that the election expenses of other candidates' set up by him as Chairman of the Socialist Party, loosely described as 'party expenditure', were incurred wholly .and exclusivelv for the purpose of his 'profession' or 'occupation'. So, the first point which arrests our attention in examinjng this contention is as to whether politics of the socialist brand or otherwise is a profession or occupa- tion.
There can hardly be any doubt that it is either, or both. Harold Laski treated politics as a science and wrote his well-known book on the Grammar of Politics,, but the art of politics at a practical level~ H has alsQ be~n the subject of· comment and has been praised an'd. denounced on the basis that it is a profession. To Gandhiji it is sacred as reljgion. In Lincoln it rises to noble heights of statesman-
[1976] 1 s.c.R.
1020
SUPREME COURI' REPORTS
A
ship. 4nin, Nehru and a galaxy of other great visionaries 'and makers and moulders of the moUem world have dedicated themselves to politics as a profession. Of course in its vulgar and vicious manifestations, this occupation has been rega_rded by literary giants like Dr. Johnson as 'the. last refuge of a scoundrel'. Robert Louis .Stevenson has used barbed words : . 'Politics is" perhaps the only profession for which no prepara_ti_on is thought necessary (Familiar Studies of Men and Books, 'Yoshida-Torajiro'J. George Ber:nard .Shaw uses stinging language in Major Barbara : 'He knows nothing; .and he thinks he _knows everything. That points clearly to a political .career'. It is thus clear, without reference to the wealth of case-Jaw relied on by the High Court, that politics has been a profession and, _ indeed, under modern cuni!itions in India, perhaps the most popular.and uninhibited occupation-with its perils, of course. Law cannot .take leave of realities and therefore s. 5(a) must bear the construction xhat politics is a profession or occupation.
B
c
The next question is whether the expenditure incurred by the .assessee for the election of candidates set up by him as Chairman of his party can be legitimately regarded as incurred 'wholly and exclusively' for the purpose of his profession or occupation.' We have grave doubts whether meeting the expenses of other candidates .can be fulfilment of his professional expenses, but this question -deserves no deeper probo for the simple reason that s. 5 (j) embraces the expenditure as it does answer the description of a donation. When a person gives money to another without any material return, he donates that sum. An act by ·which the owner of a thing ·voluntarily transfers the titlti and p9ssession of the same from himself to another, without any consideratioit, is a donation. A gift or gratuitous payment· is, in simple English, a donation. We do not require lexicographic learning nor precedential erudition to understand the meaning of what many people do every day, viz., giving donations to some fund or other,. or to some person or other. Political donations are not only common, but are assuming deleterious dimensions in the public life of our country. It is therefore clear that when this Raja a$sessee gave ·money to the candidates of his Party for them to meet their election expen,s.es. he . made donations. Even if he met their election expenditure, it was money gratuitously given on their behalf and tnerefore amounted to donation. Without ·strainin-g language, we reach the -natilral conclusion that what the respondent expended for: the other candidates during the elections was 'donation' in the language of the law. There is no snggestion nor evidence . that· any materiaT·i:eturn was in contemplation when he. spent these sums. Being a politicaJJv important man with plenty . of. money and vitally interested in boosting· his Party's standing in the State. he donated liberally for candid~tes set up by the party. In this view s. 5 (j) aplies to these donations which earn exemption from the expenditure tax. ·
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E
F
G
H
)
•
. "
The next item relates to snms given to the Socialist Party. It is reasonable to ass~me th,at the amounts paid to the office-bearers
'
COMMR. EXPENDITURE TAX v. PVG RAJU (Krishna Iyer, J.) I 021
...
t
1 ~
V.P.S.
1127 SCI/75 -2,500-10-4-76-GIPF.
3 issues framed by the court
Whether politics constitutes a profession or occupation excusing expenditure therefrom.
Whether expenses for election of other candidates by the Chairman amount to his professional expenditure or donations.
Whether party office-bearer expenses constitute gratuitous donations excluding them from taxable expenditure.
Commissioner of Expenditure Tax, Andhra Pradesh
Shri Pvg Raju
L.V.R. Krishna Iyer
A.C. Gupta
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
