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Issues: Interpretation of Section 16(i) of the Income-tax Act, 1961 regarding deduction from salary derived from multiple employments.
The judgment of the Bombay High Court addressed the interpretation of Section 16(i) of the Income-tax Act, 1961, specifically regarding the deduction from salary derived from multiple employments. The case involved an individual receiving salary income from two employers and claiming standard deduction under Section 16(i) of the Act from each employer. The primary issue was whether the deduction should be calculated based on the aggregate salary received by the assessee or separately for each employer. The court analyzed the relevant provisions of Section 16(i) and the subsequent Explanation inserted in 1984 to clarify the computation of deductions in cases where an assessee receives salary from multiple employers. The court examined the provisions of Section 16(i) of the Income-tax Act, 1961, which allowed deductions from salaries, subject to certain conditions. The deduction was calculated based on a graded scale with reference to the amount of salary derived by the assessee, with a maximum limit of Rs. 3,500. The court highlighted that the deduction under Section 16(i) was subject to a monetary ceiling and analyzed the language of the provision to determine the correct method of computation when an assessee receives salary from more than one employer. The court discussed the controversy that arose regarding the computation of deductions under Section 16(i) in cases where an assessee receives salary from multiple employers. The insertion of an Explanation in 1984 clarified that the deduction should be computed with reference to the aggregate salary due to the assessee from all employers and should not exceed the specified monetary limit. The court emphasized that the Explanation aimed to remove doubts and provided a clear guideline for calculating deductions in such scenarios. Based on the legal position established by the Explanation, the court concluded that the assessee was only entitled to a deduction of Rs. 3,500 under Section 16(i) of the Act, irrespective of the number of employers from whom the salary was received. The court held that the Commissioner of Income-tax (Appeals) and the Tribunal were incorrect in allowing separate deductions for each employer, exceeding the monetary ceiling specified in the provision. Therefore, the court answered the question in favor of the Revenue and against the assessee, emphasizing the need to compute deductions based on the aggregate salary received by the assessee from all employers.
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