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Income Tax Laws – I

Notes 9.1.2 Meaning of Profession

The expression ‘Profession’ has been defined in Section 2(36) of the Act to include any vocation.
In the case of a profession, the definition given in the Act is very much inadequate since it does
not clearly specify what activities constitute profession and what activities do not.
According to the generally accepted principles, the meaning of the term ‘profession’ involves
the concept of an occupation requiring either intellectual skill or manual skill controlled and
directed by the intellectual skill of the operator.

Example: An auditor carrying on his practice, the lawyer or a doctor, a painter, an actor,
an architect or sculptor, would be persons carrying on a profession and not a business.

Did u know? The common feature in the case of both profession as well as business is that
the object of carrying them out is to derive income or to make profit. The process of
making the profit would be the main area of difference between the two while the ultimate
object is common to both.

9.1.3 Continuity of Business or Profession

As has already been mentioned, the existence of continuity in the business or profession is not
an essential condition for making the assessee liable to tax under this head.

Notes Receipts arising from the exercise of a business or profession would still be
chargeable to tax under this head although they may be both casual and non-recurring in
nature.

Consequently, the exemption available under Section 10(3) for receipt of a casual and
non-recurring nature would not be available to income derived from business although carrying
on the business would be casual and the receipt of income may be such that it does not recur at
all. In determining the taxability of profit under the head business or profession arising from
transactions of an isolated nature, the following principle should be taken into account to
ascertain whether the transaction is an adventure in the nature of trade:
1. The transaction is said to be in the nature of trade only if some of the elements of trade are
found in the transaction, the most important being the object of making profit. It is not
essential that all the activities following the main object of the business and which constitute
separate transactions by themselves must be entered into with the idea of making profit.
In other words, a person whose object is to carry on a business may indulge in certain
transactions knowing fully well that he would have to incur loss although he may derive
income from the others (e.g. the case of dealer in shares).
2. The purchase of an asset or property with the intention to resell the same may be one of
the vital factors in determining the nature of the transaction but the intention to resell at
a profit is not to be taken as the only factor for this purpose. This is because of the fact that
the cases where the assessee has no intention of enjoying or holding the property, there
would be a strong presumption that the transaction is in the nature of trade although this
presumption may be rebuttable in certain circumstances depending upon the facts of the
case.

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