Vocation in income Tax

The word “profession” & “vocation” have not been defined in the Act while as per section 2(36) of the Income Tax Act, 1961, “profession” includes vocation. The word “vocation” is a word of wider import than the word ‘profession”.

The words “business” and “vocation” are not synonymous, Upon a proper construction of the words “business” and “vocation” in the context of the Indian Income-tax Act, there must be some real, substantive and systematic course of business or conduct before it can be said that a business or vocation exists the profits of which are taxable as such under the Act (Upper India Chamber of Commerce, Cawnpore vs. CIT (1947) 15 ITR 263 (All).

Also it was observed in Addl CIT vs. Ram Kripal Tripathi (1980) 125 ITR 408 (All) that the expression “profession” involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an occupation or business which is substantially the production or sale, or arrangements for the production or sale, of commodities. “Profession” is a word of wide import and includes “vocation” which is only a way of living and a person can have more than one vocation, and the vocation need not be for livelihood nor for making any income nor need it involves systematic and organised activity.

It was observed in Dr. P. Vadamalayan vs. CIT (supra) at page 96) that the term “business” as used in the fiscal statute cannot ordinarily be understood in its etymological sense. According to the Shorter Oxford Dictionary, “business” includes a state occupation, profession or trade; profession in a wide sense means any calling or occupation by which a person habitually earns his living.

Even so, “trade” is explained as the practice of some occupation, business or profession habitually carried on. As is not unusual several jurists and eminent judges while attempting to define the limits of one or the other of the words “business”, profession and trade”, entered the “labyrinth together but made exits by different paths”.

The Supreme Court in Narain Swadeshi Weaving Mills vs. Commissioner of Excess Profits Tax (1954) 26 ITR 765 (SC), said that the word “business” connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. Venkatarama Aiyar J.,speaking for the court in Mazagaon Dock Ltd. vs. CIT (1958) 34 ITR 368 at page 376 (SC), explained “business” as a word of wide import and in fiscal statutes it must be construed in a broad rather than a restricted sense.