Law: Income Tax Act, 1922

Section: 7(1)

Section 15 of the Income-tax Act, 1961 [Corresponding to section 7(1) of the Indian Income-tax Act, 1922] - Salaries - Chargeable as - Assessment year 1949-50 - Assessee who was employed on monthly salary and certain percentage of commission on all sales, claimed that amount of commission could not be assessed to tax in his hands on ground that in employer's assessment this amount was not allowed as revenue expenditure - Whether in view of fact that assessee was to be paid commission only when there was sales, it could be concluded that commission paid to assessee was paid out of profits of business of employer - Held, yes - Whether in such circumstances, Tribunal having regard to Notification No. 878-F dated 21-3-1922 as amended by Notification No. 8 dated 24-3-1928, rightly held that assessee was entitled to exemption from payment of tax on amount of commission - Held, yes Circulars & notifications : 1. Notification No. 878-F dated 21-3-1922. 2. Notification No. 8 dated 24-3-1928. FACTS In terms of appointment as manager, the employer had agreed to pay to the assessee a monthly salary as also commission of half per cent on all the sales. In the assessment of the employer for the assessment year 1949-50, the employer, inter alia, claimed the payment of commission as revenue deduction, but the claim was rejected by the ITO on the ground that the payment of commission was only a way to reduce his income and his tax liability. The order became final in absence of appeal against the assessment. The assessee accordingly claimed that inasmuch as the payment of the said commission was disallowed to the employer in his assessment and inasmuch as the said amount had been charged to tax in the hands of his employer, he was entitled to exemption from payment of tax on the said amount of commission. The claim was made on the strength of the Notification No. 878-F, dated 21-3-1922, as amended by Notification No. 8, dated 24-3-1928. This claim of the assessee was rejected by both the ITO and the AAC. However, the Tribunal allowed the appeal and accepted the claim made by the assessee. On reference : HELD A perusal of the aforesaid Notification clearly indicated that…

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