Law: Income Tax Act, 1961

Section: 2(24),17,17(1)(iv),17(3)(ii)

Law: Income Tax Act, 1961

Section: 2(24),17,17(1)(iv),17(3)(ii)

Section 17 of the Income-tax Act, 1961 - Salary - Profits in lieu of salary - Whether receipts on account of CCA, HRA and DA are in nature of income forming part and parcel of salary entailing tax liability - Held, yes FACTS The question that arose for consideration was whether the receipts on account of CCA, HRA and DA are in the nature of income entailing tax liability. HELD In view of the amendment of clause (24 ) of section 2, it was conceded that the amount received as CCA or HRA would be covered by the inclusive definition of the word 'income'. Thus, the only question that would survive is - whether it is taxable under the head 'Salary'. The Act is a self-contained Code and the taxability of the receipt of any amount or allowance is to be determined on the basis of meaning given to the words or phrases in the Act. Section 2(24) gives wide inclusive definition to the word 'income'. Similarly, for levying tax on salary income, exhaustive definition is given under section 17, which includes perquisites and profits in lieu of salary. Only exclusion provided under clause (3) of section 17 is "any payment referable to in clause (10), clause (10A), clause (10B), clause (11), clause (12), clause (13) or clause (13A) of section 10". In view of this specific inclusion and exclusion in the meaning of the words 'income' and 'salary', it is rightly submitted that payment received by the assessee has no connection with the profits of the employer. The word 'profits' is used only to convey any 'advantage' or 'gain' by receipt of any payment by the employee. Applying the general meaning of the word 'profit', as given in Webster's Comprehensive Dictionary and considering the dictionary meaning given to it under section 17(1)(iv ) and 17(3)( ii), it can be said that 'advantage' in terms of payment of money received by the employee from the employer in relation to or in addition to any salary or wages would be covered by the inclusive definition of the word 'salary'. Because of the inclusive meaning given to the phrase 'profits in lieu of salary' it would include 'any payment' due to or received by an assessee from an employer, even though it has no connection with the…

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