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Issues:
1. Interpretation of a Finance Department notification regarding tax exemption on commission received by an employee. 2. Application of the concept of "charged" in the context of income tax liability. 3. Examination of the distinction between assessment, charge, levy, and payment of tax under the Income-tax Act. 4. Consideration of the impact of exemption granted under section 25(4) on the tax liability of an assessee. Analysis: The judgment by the Bombay High Court involved an assessment of tax liability on commission received by an employee from his employer, Dadajee Dhackjee & Co. The employee claimed exemption from tax on his share of the commission based on a Finance Department notification. The notification exempts sums received by an assessee on account of salary, bonus, commission, or other remuneration for services rendered, provided they are paid out of the profits of the business and the profits are charged to income tax. The court clarified that the source of the commission must be the profit of the employer, and in this case, the commission was indeed paid out of the profits, as evident from the assessment order. Regarding the concept of "charged" in the Income-tax Act, the court explained that charging tax means the subject becomes liable to pay tax under the relevant provisions of the law. The court distinguished between assessment, charge, levy, and payment of tax, emphasizing that once the income is assessed, it becomes liable to pay tax under section 3 of the Act. The court highlighted that an exemption can only be claimed if there is a pre-existing liability to pay tax, and the mere grant of exemption does not negate the assessment or charging of tax. The judgment also discussed the application of section 25(4), which grants exemption to an assessee who has paid tax twice in the past. The court noted that even though the assessee received exemption under this section, it does not mean that the income was not assessed or charged to tax. The court rejected the contention that the assessee was not entitled to exemption due to the employer's exemption under section 25(4), emphasizing that the assessee's case fell within the ambit of the Finance Department notification. In conclusion, the Bombay High Court held that the assessee was entitled to tax exemption on his share of the commission received from his employer. The court's decision affirmed that the conditions specified in the Finance Department notification were satisfied, and the assessee's claim for exemption was valid.
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