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Issues involved:
Reference under s. 256(1) of the I.T. Act, 1961 for assessment years 1963-64 and 1964-65. Judgment Details: The assessee, an individual and an employee of a company, received tax-free salary amounts of Rs. 23,900 and Rs. 27,667 for the relevant accounting years. The Income Tax Officer (ITO) added tax payable on these amounts, resulting in a determined salary of Rs. 46,857 for 1963-64 and Rs. 41,292 for 1964-65. The Tribunal referred questions under s. 256(1) of the Act regarding the grossing up of the salary and the credit of tax for the salary income difference. The counsel for the assessee argued that the agreement for tax-free salary was illegal under s. 200 of the Companies Act, 1956, and thus the salary cannot be considered tax-free. However, the court held that income tax law does not concern itself with any illegality associated with income earning. Citing various cases, the court answered both questions in favor of the revenue. The court relied on precedents like R. B. D. D. Datar v. CIT [1952] 21 ITR 558 (Nag) and others to support its decision. The judgment was unanimous, and no costs were awarded. *(End of Summary)*
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