COMMISSIONER OF INCOME TAX v. INTERNATIONAL CLEARING & SHIPPING AGENCY.
TC Nos. 2091 to 2094 of 1984, decided on February 19, 1998.
HIGH COURT OF MADRAS
C. V. Rajan, for the Applicant : P. P. section Janarthana Raja, for the Respondent
R. JAYASIMHA BABU, J. :
The question referred to us, at the instance of the Revenue, is :
“Whether, on the facts and in the circumstances of the case, the assessee carrying on the business as clearing and shipping agents is entitled to be assessed at the tax rates applicable to a professional firm ?”
2. The assessment years relating to which this question has arisen are 1978-79 to 1981-82. The claim of the assessee international Clearing and Shipping Agency, Madras, was that it is carrying on a profession and should therefore be taxed at the lower rate applicable to firms which carry on profession as provided in the Finance Act, 1979. The CIT(A) as also the Tribunal accepted the plea of the assessee on the ground that a similar plea had been accepted in respect of another shipping and clearing agency by the Tribunal, Bombay Bench-D.
3. Learned counsel for the Revenue placed before us the decision of the Bombay High Court which has disapproved the view of the Bombay Bench of the Tribunal in the case of CIT vs. Jivanlal Lalloobhai & Co. (1994) 122 CTR (Bom) 259 : (1994) 206 ITR 548 (Bom) : TC S13.1344. In that case, the Bombay High Court held that the activity of clearing, forwarding and shipping agents does not amount to a “profession” and a firm carrying on such activity is not entitled to the benefit of the lower rate of tax applicable to registered firms provided in sub-para II of para C of Part I of Schedule I to the Finance Act, 1976, and the Finance (No. 2) Act, 1977. In so holding the Court relied on a earlier decision rendered by it in CIT vs. Lallubhai Nagardas & Sons (1993) 114 CTR (Bom) 58 : (1993) 204 ITR 93 (Bom) : TC 13R.253.
4. Learned counsel for the assessee fairly submitted that he is unable to support the order of the Tribunal.
5. The terms “business” and “profession” are defined in the Act in section 2(13) and section 2(36) respectively. Though the scope of the term “business” is wide, if the activity is properly to be characterised as profession then that activity cannot also be regarded as business. The distinguishing feature of a profession is the possession of the practitioner of the profession, of specialised knowledge involving intellectual skill and higher education in learning. The services rendered by a professional while practising the profession, are the services for which he has been trained. The practice of a profession cannot be regarded as a commercial activity though the practice is not without compensation or profit. The compensation earned by the practitioner of a profession is by reason of the personal qualification possessed by him or her.
6. The observations of Scrutton L.J. in this regard in IRC vs. Maxse (1919) 12 Tax Cases 41 (C.A.) : TC 12R.170 follows :
“‘Profession’ in the present use of language involves the idea of an occupation requiring either purely intellectual skill, or if any manual skill, as in painting and sculpture, or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production, or sale, or arrangements for the production or sale of commodities.”
7. The activity of a shipping and clearing agent was considered by the Supreme Court in the case of Cochin Shipping Co. vs. E.S.I. Corpn. AIR 1993 SC 252 wherein the Supreme Court held that the activity is a ‘shop’ for the purpose of Shops and Establishments Act as the activity carried on by a shipping, clearing and forwarding agency is a commercial activity. The assistance rendered by the clearing and shipping agent to those who import or export by attending to the documentation and ensuring the clearance of goods, cannot be regarded as profession based on intellectual attainments or personal service rendered on account of possession of specialised skill and knowledge based on higher learning and intellectual skill.
8. The Tribunal, therefore, was in error in holding that the assessee which admittedly carried on the business of clearing and shipping agents is entitled to be taxed at rates admissible to a professional firm.
9. Our answer to the question referred to us is, therefore, in the negative, in favour of the Revenue and against the assessee. The Revenue is entitled to costs of Rs. 1,000.