Law:

Section:

Section 56, read with section 17, of the Income-tax Act, 1961 - Income from to her sources - Chargeable as - Assessment year 1962-63 - Assessee was employee of company which had an unrecognized provident fund scheme - He retired from company and received out of this provident fund certain amount which represented interest on amount of his contribution to fund - Whether since expression 'profits in lieu of salary' defined in section 17(1)(iv) excluded from its scope any payments received by assessee from provident fund, his own contributions to fund or any interest on such contributions, receipt in question by assessee could not be considered as salary - Held, yes - Whether said receipt should be considered as income from other sources and be brought to tax under section 56 - Held, yes Words and phrases : Expression 'Profits in lieu of salary' as occurring in section 17 of the Income-tax Act, 1961. FACTS The assessee was a manager in a company. The said company had a provident fund scheme for its employees. But that provident fund was not a recognised one. The assessee retired during the previous year relevant to assessment year 1963-64 and received out of this provident fund certain amount which represented the interest on the amount of his own contribution to the fund. The ITO assessed this amount as the assessee's income from other sources. That order was confirmed in appeal by the AAC. On appeal by the revenue, the Tribunal came to the conclusion that the receipt in question being profits 'in lieu of salary', the same was his salary as defined in section 17, the same having not been assessed as his salary, the assessment order relating to that item of receipt was not legal. On reference, while the High Court came to the conclusion that the receipt in question cannot be considered as salary as defined in section 17, in its view the same was exempt from payment of tax in view of section 17(3)(ii). On appeal to the Supreme Court: HELD The receipt in question was undoubtedly an income as defined by section 2(24). The receipt of an interest on an investment is a gain made by the investor and, therefore, the same is 'income'. Deductions from salaries are dealt…

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