JUDGMENT: AJMAL MIAN, The present reference raises the following question of law:- "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the receipt of Rs. 1,38,867/- was not income in the hands of M/s. Smith Kline & French of Pakistan Ltd."
The brief facts leading to the filing of the above reference are that the respondent company was incorporated in December, 1949 in the name of 'Pharama Company Limited' having paid up capital of Rs. One lac upto 30-11-1963 and its shares were wholly owned by M/s. Smith Kline USA Laboratories. It further seems that the name of the above company was changed into the name of M/s. Smith Kline & French of Pakistan Limited (i.e. The present name) and the capital was raised to Rs.16 lacs, the break up of which was Rs. 11,73,000/- provided by the foreign collaborator and Rs.
4,25,000/- from the indigenous sources. It also seems that there was a sum of Rs. 1,38,867/- which was shown as loss, upto 29-2-1964, which was made good by the foreign collaborator by donating the above sum, which was shown in the account books as a miscellaneous income after June, 1964. The Income Tax Officer calculated the above amount as a trading income. However, upon appeal Income Tax Appellate Tribunal by its order dated 18-10-1972 held that the above amount could not be treated as an income from trading within the purview of section 4 (1) (a) of the Income Tax Act. The applicant has therefore, filed the present reference on the above question.
2. We have noticed that the Tribunal has relied upon the case of H.M. Maharani Shri Vijaykuverba Saheb of Morvi and another v. Commissioner of Income Tax, Bombay City II, reported in 1963, 49 I.T.R. 594, in which it was held by a Division Bench of Bombay High Court that a voluntary payment which is made entirely without consideration and is not traceable to any source which a practical man may regard as a real source of his income but depends entirely on the whim of the donor cannot fall in the category of income. The above case on all fours is applicable to the instant case, as the foreign collaborator were not under any legal obligation to donate the above sum of Rs.
1,38,867/-, but since this was the loss they made it good in order to put the respondent company on sound financial footing.
3. The Tribunal's order seems to be in consonance with law. Our answer, to the above question is therefore, in the affirmative.
There will be no order as to costs.