Law: Income Tax Act, 1922

Section: 7,12

Income-tax Act, 1922 -- Sections 7, 12, 15A -- Salary -- Commission -- Earned income relief -- In terms of Articles of Association contractual relationship of master and servant between employer-company and Director -- Commission received by Director for services rendered to company -- Whether assessable under Sec. 7 -- Held yes -- Earned income relief, whether admissible on the amount of commission -- Held yes -- Salary -- Director (assessee) appointed to render services to the company in capacity of employee -- Remuneration received by such Director whether in shape of salary or commission or both -- Held chargeable under section 7 and not section 12 -- ORDER The order was passed by A. AHMAD, Accountant Member.-This is a Departmental appeal which arises out of an order of the Appellant Assistant Commissioner, dated 4th June, 1965. The objection taken by the Department is to the following effect:- "In the facts and circumstances of the case, the learned Appellate Assistant Commissioner of Income-tax was not justified in holding that the commission of Rs. 19,709 paid to the assessee on the basis of net profit should be assessed under the head 'salary' and that earned income relief which is applicable to the income assessed under the head 'salary' should be allowed." 2. The facts of the case have been summarised by the Appellate Assistant Commissioner in the following terms:- "The appellant is a Director of M/s. M ,,,.. (Pakistan) Ltd. During the relevant accounting year he received Directors' remuneration form the company of Rs. 14,400 and commission on the basis of net profit of Rs. 1,97,009. The aggregate figure of receipt amounted to Rs. 34,109. The Income-tax Officer assessed the above figure of receipt under the head other source. The learned advocate of the appellant argues that the amount is assessable under the head salary and not other source. It was shown in the return under the head salary but the Income-tax Officer did not give any reason for assessing the amount under the head other source. Accordingly, the I. T.O. allowed earned income relief of Rs. 4,000 instead of Rs. 6,000 which is applicable only to income under head salary." The Appellate…

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