1960-VIL-49-MAD-DT

Equivalent Citation: [1960] 40 ITR 501

 

MADRAS HIGH COURT

 

Case Referred No. 87 of 1956

 

Dated: 15.09.1960

 

DR. P. VADAMALAYAN

 

Vs

 

COMMISSIONER OF INCOME-TAX, MADRAS

 

For the Assessee : T. V. Balakrishnan

For the Commissioner : C. S. Rama Rao Sahib, S. Ranganathan

 

Bench

Rajagopalan And Srinivasan, JJ.

 

JUDGMENT

Rajagopalan, J.

The assessee, a leading surgeon of Madurai with a Lucrative practice, undertook a tour abroad in 1953, in course of which he visited a number of hospitals and clinics in the United States of America and the United Kingdom, to study the latest technique in surgery and treatment. The tour cost him Rs 19,538, the whole of which he claimed as a deduction under section 10(2)(xv) of the Income-tax Act, in computing his assessable income in the assessment year 1954-55. The Income-tax Officer disallowed the claim in its entirely. He held that the expenditure was of a capital nature, incurred by the assessee to secure to himself a benefit of an enduring nature. The Assistant Commissioner differed and found that no portion of the expenditure was of a capital nature. He, however, held that only onehalf of the expenditure satisfied the test having been wholly and exclusively incurred for the purpose of the assessee's profession. The other half was treated as the personal expenses of the assessee while abroad. The Assistant Commissioner allowed a deduction of Rs 9,769. The Department appealed to the Tribunal. The Tribunal agreed with the Income-tax Officer that the expenditure of Rs 9,769 was of a capital nature, but did not disturb the finding of the Assistant Commissioner, that that half of the expenditure incurred by the assessee did satisfy the other requirement of section 10(2)(xv), that it had been incurred wholly and exclusively for the purposes of the assessee's profession.

The Tribunal recorded in its order on appeal:

"The assessee's case is that he, a specilised surgeon, undertook a study tour in advanced countries, so as to bring his already expert knowledge in line with modern developments in his branch of surgery. It was not a study tour undertaken specifically with reference to or in connection with any particular professional engagement or engagements of his, undertaken by him in the course of his carrying on of his profession in India, By undertaking this tour, he hoped to perfect his surgical knowledge to stand him in good stead on his return to his native country in the competitive field that he had to face. The mental equipment obtained by the tour is, therefore, of a general and enduring nature and benefit of such tour is expected to be far- reaching and not merely confined to a short span. The amount in question is, therefore, only capital in nature and not allowable as a deduction under section 10(2)(xv).

At the request of the assessee, the Tribunal refereed the following question to this court under section 66(1) of the Act:

"Whether the outlay of Rs 9,769 on the foreign tour of the assessee is capital in nature, not allowable as a deduction under section 10(2)(xv)?"

The scope of the question is limited to the issue whether the expenditure was a capital nature. The amount involved is not in issue. It is Rs 9,769, the amount estimated by the Assistant Commissioner. That the expenditure of that amount satisfied the other test of section 10(2)(xv) and that it was expended wholly and exclusively for the purpose of the assessee's profession as a surgeon, is not in issue either.

We do not propose to embark upon the task eminent Judges in England and India have declined consistently to undertake. We shall not attempt to evolve a formula, infallible, and of universal application, to decide what marks off revenue from capital expenditure either for a profession or for a business./s The dividing line in some cases may be thin, but it is a clear and perceptible one. Courts have always addressed themselves to the comparatively less difficult task of deciding whether a given item of expenditure falls on one side or the other of that dividing line. We need not embark either on a review afresh of the case-law on the subject, when practically nothing new can be added. The case-law was reviewed at length by the Supreme Court in Assam Bengal Cement Co. Ltd., v. Commissioner of Income-tax [1955] 27 I.T.R. 34.

It should be taken as well-settled that the question what is the inference to be drawn from the facts established in a given case, is the expenditure of a capital nature, is a question of law.

The Tribunal obviously accepted the assessee's claim that he had undertaken the study-tour to bring the expert knowledge he already had in line with modern developments in his branch of surgery, but the Tribunal held that the mental equipment which resulted from this tour was a benefit of an enduring nature. Certainly the expenditure incurred by the assessee did not bring him any tangible asset, capital or otherwise. The question is, whether an expenditure incurred by a surgeon to keep abreast of the latest technique of the profession in surgery and treatment is expenditure for a capital nature. the expenditure was not incurred to initiate any new business or profession, nor even to enlarge the scope or character of the profession that the assessee was already practicing. He was and continued to be a surgeon, one of the leading surgeons of Madurai. The expenditure was not incurred to obtain any additional qualifications. to practice his profession. The Department could claim at best, in the circumstances of this case, that the assessee incurred the expenditure to maintain his efficiency in his profession. As in the Australian case noted in paragraph 1278 at page 440, in Gunn's Commonwealth Income Tax Law and Practice, fourth edition, it would be much less correct to say that the assessee gained an enduring benefit by his study-tour broad than to say that he took steps to maintain his efficiency in his chosen profession as a to surgeon.

Suppose, a surgeon at Madurai, less fortunately placed than the assessee, incurred periodical expenditure for a refresher course of study at a place like Madras, surely it would be incorrect to view it as an expenditure of a capital nature incurred to obtain any enduring benefit. If, without a defined refresher course, the surgeon periodically visited the larger institutions at Madras to study the technique and keep himself abreast of the latest professional knowledge available, the expenditure he incurred for that purpose would not be expenditure of a capital nature. That he made such a study at more places than one, say at Madras, Bombay and Delhi, can make no difference. That the study-tour was outside India, again, could made no difference in the principle by which to judge whether the expenditure incurred was of a capital nature. All these would be cases of expenditure incurred by the surgeon to maintain his efficiency, even if it resulted in a mental equipment which enabled him to carry on his profession as a surgeon in a better and more scientific way.

During the arguments before us we were referred to passages in paragraphs 1277 and 1278 at pages 438 following, in Gunn's Commonwealth Income Tax Law and Practice, 4th edition. The reports of the cases on which those passages were based are not available, and that handicaps us. The details of the cases are, however, instructive and help us to keep in view the distinction between expenditure incurred, for example, in launching on a profession or adding to it, and expenditure incurred on gaining income from an existing profession practice. The latter is not expenditure of a capital nature, and the doctrine of enduring benefit cannot apply to such an expenditure. It is in that class that the assessee's claim fell. It was not an expenditure of a capital nature.

We answer the question in favour of the assessee. The assessee will be entitled to the costs of this reference. Counsel's fee Rs 250.

Reference answered accordingly.