Case: 509 Karmachari Union, Agra Vs. U.O.I.

of this specific inclusion and exclusion in the meaning of the word `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 an `advantage or `gain by receipt of any payment by the employee. Websters Comprehensive Dictionary gives meaning of the word `profit inter alia to mean advantage or benefit. It states : "Profit - Synonyms : advantage, avail, benefit, emolument, expediency, gain, good, improvement, proceeds, receipts, return, returns, service, utility, value.....Advantage is that which gives one a vantage ground, either for coping with competitioners or with difficulties, needs, or demands; as, to have the advantage of a good education; it is frequently used to what one has beyond another or secures at the expenses of another; as, to have the advantage in argument, or to take advantage in a bargain." 22. Applying the aforesaid general meaning of the word `profits and considering the dictionary meaning given to it under Section (17)(1)(iv) and 3(ii), it can be said that `advantage in terms of payment of money received by the employee from the employer in relation 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 would include `any payment due to or received by an assessee from an employer, even though it has no connection with the profits of the employer. It is true that Legislature might have avoided giving of inclusive meaning to the word `salary by stating that any payment received by the employee from an employer would be considered to be salary except the payments which are excluded by Section 17(3)(ii) i.e. clause (10), (10A), (10B), (11), (12), (13) or (13A) of Section 10. However, it is for the Legislature to decide the same. This would not mean that by giving exhaustive and inclusive meaning, the word `profits can be given a meaning only when it pertains to sharing of profits by the employer. For the assessee, the receipt of such amount would be a profit, gain or advantage in addition to salary, even though it is not named as salary. Therefore, the word `profits in context is required to be understood as gain or advantage to the assessee. Hence, it is not possible to accept the contention of the learned counsel for the employees that as the CCA amount is paid to meet the additional expenditure as contemplated by the statutory Service Rules, it cannot be said to be profit, gain or additional salary. Under the Act, such receipt of the amount as conceded is covered by the definition of the word "income" and as provided it would be in addition to salary. Hence, it would be part and parcel of income by way of salary, which would be taxable one. 23. Learned counsel for the appellant further submitted that assuming for the purpose of `profits in lieu of salary, employer is not required to give any share out of the profits, yet even in the hands of the employees, receipt of the amount must be `profits. It is his contention that whatever CCA, Government or Statutory Corporations pay to the employees, cannot be termed as `profits by any standard because the amount is calculated in such a manner that it reimburses less than extra costs incurred by them at a station where they are posted. It is further submitted that by including these payments as taxable, it would cause hardship to the honest employees whose source of income is limited and are required to meet extra expenses at the station where they are transferred and posted for which service rules provide for reimbursement of extra cost. He referred to the decision rendered by the Bombay High Court in C.I.T. v. D.R. Pathak, (1975)99 ITR 14 , wherein the Court considered whether CCA was taxable as perquisite as contended by the revenue. The Court negatived it by holding that "payment of taxable allowance under the order of the Government is neither an emolument nor fee nor profit, but it is a reimbursement of personal expenses required by the Government servant to be incurred on account of expenses of living at a particular place." 24. May be that this is true to the extent that Government or statutory corporations do pay something less than what is required to be reimbursed and the receipt of CCA cannot be termed as `profit in common parlance. However, for `income, `salary and its taxability under the Act, the dictionary meaning given by the Legislature is to be taken into consideration as for that purpose, it is a complete code. Income tax is attracted at the point when the income is earned. Taxation of income is not dependent upon its destination or the manner of its utilisation. Re. Tuticorin Alkali Chemicals & Fertilizers Ltd., Madras v. Commissioner of Income Tax, Madras (1997)6 SCC 117 . Therefore, there is no question of referring to the Fundamental Rules framed by the Central Government or by the statutory authorities for payment of CCA, HRA or other such allowance for reimbursing the expenditure incurred by the employees. Further, equity or hardship would hardly be relevant ground for interpretation of tax law. It is for the Government or the statutory bodies to be the needful. However, equitable it may be that CCA cannot be held to be `profit in the hands of the assessee or it is not share out of profit, yet it cannot be helped in view of inclusive and exclusive meaning given under the Act. 25. In the result, we hold that DA, CCA and HRA would be taxable income. Since, counsel for the employees did not make any submission with regard to other allowances like, night allowance, tuition fee, leave enacashment linked with leave travel concession, running allowance etc. we do not pass any order with regard to those allowances.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]21. In our view, even though three is much substance in the contentions raised by the learned counsel for the assessee yet it is to be stated that 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) of the Act 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 sub-section (3) is any payment referable to clause (10) [clause (10A)], [clause 10(B)], clause (11), clause (12), clause (13) of [clause (13A)] of Section 10. In view of this specific inclusion and exclusion in the meaning of the word `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 an `advantage or `gain by receipt of any payment by the employee.May be that this is true to the extent that Government or statutory corporations do pay something less than what is required to be reimbursed and the receipt of CCA cannot be termed as `profit in common parlance. However, for `income, `salary and its taxability under the Act, the dictionary meaning given by the Legislature is to be taken into consideration as for that purpose, it is a complete code. Income tax is attracted at the point when the income is earned. Taxation of income is not dependent upon its destination or the manner of its utilisation. Re. Tuticorin Alkali Chemicals & Fertilizers Ltd., Madras v. Commissioner of Income Tax, Madras (1997)6 SCC 117 . Therefore, there is no question of referring to the Fundamental Rules framed by the Central Government or by the statutory authorities for payment of CCA, HRA or other such allowance for reimbursing the expenditure incurred by the employees. Further, equity or hardship would hardly be relevant ground for interpretation of tax law. It is for the Government or the statutory bodies to be the needful. However, equitable it may be that CCA cannot be held to be `profit in the hands of the assessee or it is not share out of profit, yet it cannot be helped in view of inclusive and exclusive meaning given under the Act.