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Section 16(i) of the income-tax act, 1961 [as it stood prior to 1-4-1981]-Salaries-Standard deduction-Assessment year 1976-77-Whether a pensioner is entitled to standard deduction in respect of pension drawn by him-Held, yes Facts For the assessment year 1976-77, the assessee, a pensioner, claimed standard deduction qua his pension but the same was not allowed to him. On appeal, the AAC and the Tribunal allowed it. On reference, the two Judges of the Division Bench wrote dissenting s. While Dhillon, J. upheld the assessee's claim for deduction, Goyal, J. disallowed the claim on the grounds (i) that unless an assessee was held to be in present employment, which a pensioner was not, he would not be entitled to a deduction of the kind which represented an amount of expenditure incurred incidental to his employment, and (ii ) that prior to the amendment, the said expenditure within the prescribed limit was claimable if the assessee proved the actual incurring of the given amount and if a person was not, for the given assessment year, in employment, how would he prove the actual incurring of the amount in regard to his employment. Thereupon, as per section 259, the matter was placed before the Chief Justice. On reference : Held According to Goyal, J., the aforementioned two circumstances constituted two hurdles in the way of a pensioner-assessee in claiming the given deduction. So far as the first hurdle is concerned, it stands easily demolished by the fact that the Legislature has declared the pension to be salary in section 17, for the purposes of sections 15 and 16. One can receive salary only if one is employed or one is in employment and, therefore, by virtue of the deeming provision, he would be treated to be in employment and, for this purpose, it is not necessary to examine as to what are the reasons for which one is entitled to derive pension, i.e., whether the pension is a deferred payment of the past employment or has some other character. For the purpose of section 16, it is enough that a given amount is indisputably pension. Moreover, it is settled that the Legislature is entitled to engraft a deeming provision on a certain statute. It may even say that…

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