Individual has received royalty from a Indian publisher on sale of text book written by the individual. Where he can show this income? as Income from Profession or Income from other sources? enrichme@rediffmail.com
Simple questions have no simple answers under I T Act. The royalty received can be income from profession as an author or it can be income from other sources. It all depends on the facts of the case. Under the I T Act, there is no clear cut provision so as to show the income under income from business . What is important to see:
- Whether the income of royalty for the author of books is something is actually his main job or his livelihood is based on writing books or there is greater frequency of writing books and earning royalty? or ;
- Whether the income of royalty is for a book or two and actually author has other profession or business or depends on other kind of services?
If the book was written not on regular interval or frequency of writing books are such that although some one has written books and getting royalty, but you can not say that the authorship is profession for that individual. As an example someone who is a very good lawyer , may write a book on law, and he may be involved in his actual profession of law . In that case , as an author , it can not be said that writing books is a profession for him.There can be other example of an editor of news paper who also writes books on fiction on regular interval. In that case, his income from royalty can certainly be put under income from profession as an author.
Therefore, in your case, if the book was one time twice phenomena , you can advise the individual to show the income as income from other sources .But if he regularly writes the book or articles or his livelihood is based on authorship of books, you can show the royalty as income from business or profession.
A Kolkata tribunal decision in case of ACIT vs Chittaranjan Dutta [48 ITD 428] made this distinction very clear. Facts of the case was that , Sri Dutta was a Barrister of Lincoln’s Inn practising in the Calcutta High Court. He wrote a book on Company Law. In the year 1970 he entered into an agreement with M/s. Eastern Law House (ELH), Calcutta by which he granted permission to the publishers (i.e. ELH) to publish the book, subject to payment of royalty. The book itself came to be written later. The first edition was published in 1973 and the second edition in 1976. There was no further edition of the book brought out by ELH and the agreement with ELH was terminated on 21-2-1982 by a written agreement. Among the two questions decided by Tribunal was the one “Is the assessee a professional author, so that the receipts in question can be treated as professional income ?” Para 6 & 7 of the said order is reproduced below:
6. The fate of these appeals must largely depend upon the answers to two main questions : Is the assessee a professional author, so that the receipts in question can be treated as professional income ? Do the amounts received under the agreement represent amounts for the assignment of the copyright and the sale of the goodwill or is it a case of a mere licence to use both ?
7. The first question must, in our opinion, be answered in the
negative. It is not disputed that the assessee is a Barrister practising in the Calcutta High Court. It is no part of a Barrister’s profession to write books. His profession is to appear before the Courts on being instructed by Solicitors. In his life so far the assessee has written only one book. The fact that the assessee was able to utilise the knowledge and expertise gained in practising law in writing the book on Company Law cannot automatically lead to the conclusion that writing of the book was part of the assessee’s profession.
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