Commissioner of Expenditure Tax, Andhra Pradesh v. Shri Pvg Raju, Rajah of Vizianagaram

KRISHNA IYER, J. Keynote though.

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 :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 '1 occupation. Likewise, expenditure by way of gift or donation in-i: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.

The factual l!J.lllrix Expenditure tax under the Act was sought to be levied from the :assessee PV,G Raju, the respondent before us. Paradoxical, perhaps, it may appear-but here is a case of a rich Maharaja practising the politics of socialism, spending lavishly for furthering his party's popularity and the prospects of his fellow candidates at the elections to the Andhra Pradesh Legislative Assembly. This expenditure, falling under two heads, wasl taxed by the ass~sing authority and upheld up to the Tribunal level. The Hi_gh Court, on reference, reversed the findings on both counts and the Commissioner of Expenditure Tax, 1he appellant,, challenges the legality of this verdict.

The best beginning in stating the facts may well be to extract :the questions of law referred by the Tribunal in its own words :

" ( 1) Whether on the facts and in the circumstances of

the case the expenditure of Rs. 38,832/- claimed to be the 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 Section 5(j) of the Expenditure Tax Act?

(2) Whether ori the facts and in the circumstances of

the case the sum ol Rs. 47,867 /- claimed to be party expenses could be excluded from the taxable expenditure of the assessee either under Section 5 (a) or under Section 5 ( j) of the Expenditure Tax Act?

We have to assume the following facts as implied in the very <JUestions referred to the High Court and from the attendant circum- -stances. They are :

(a) that the respondent, during the relevant peri.od was the Chairman of the State Socialist Party which

was interesting itsC!f in electoral politics;

(b) the respondent was .a wealthy socialist;

( c) that he was meeting not only the expenditure of his

own elections but spending moneys for the benefit of other candidates belonging to his party;

(d) that he was issuing cheques to the Secretary and

other office-bearers of his party to meet the expenses involved in party work.

He expended Rs. 38,832/- for propelling the election prospects of j 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 :

"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 I 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."

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 before-the 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~ 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-

1020 SUPREME COURI' REPORTS [1976] 1 s.c.R.

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 mani-festations, 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 pro-fession 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.

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 under-stand 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. ·

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 of the party were _without an eye on any material return other than loyalty or gratitude. The_y were outright gifts. Indei:d, many rich people out of diverse motives make donations to political parties. t The hope of spiritual benefit or political goodwill. the spontaneous

affection that benefaction brings, the popularisation of a good cause or the prestige that publicised bounty fetches-these and other myriad consequences or feelings mai not mar a donation to make it a grant for a quid P!O quo. Wholly mqtiveless donati011 is rare, but material return alone negates a gift or donation. We need not investigate the propl1iety or political donations 'unlimited' and often invisible. All that we need consider is whether such sums are gifts and donations or are non-gratuitous payments with a tag of return. We have no doubt that on the question as framed, and on the facts and circumstances present, these sumi WJ!re paid purely as gifts and donations to his Party by the respondent. It is not surprising either, because he was the Chairman of the said pl(rty, had a long and liberal purse from which m-draw and a large circle of support to build up in the long run~

The inevitable conclusion from our discussion is that both the heads of elglenditure fall under s.5 (j) of the Act and, therefore, flow out of th~sessable zone. The ~gh Court's conclusion is sound and the appeal deserves to be am is hereby dismissed, but without costs.

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.

R. M. Mehta and S. P. Nayar for the appellant.

P. Ram Reddy and A. V. V. Nair for the respondent.