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Issues involved:
The issue involves determining whether the tax paid by Ballarpur on behalf of the assessee in the assessment years 1974-75 and 1975-76 is taxable as income under the heading 'Other sources'. Summary: The matter pertains to the assessment of the assessee for the two assessment years 1974-75 and 1975-76. Ballarpur entered into agreements with Krebs and Escher Wyas Zurich for setting up a Caustic Soda/Chlorine manufacturing plant, under which the assessee provided services. Ballarpur made payments to the assessee as per the agreements. The Income-tax Officer considered the tax paid by Ballarpur as a perquisite added to the salary of the assessee. The Appellate Assistant Commissioner disagreed, stating that the tax paid by Ballarpur was to be treated as the assessee's income from other sources. The matter was taken to the Income-tax Appellate Tribunal, which observed that Ballarpur was under a legal obligation to pay the tax on behalf of the assessee. The Tribunal concluded that the tax paid by Ballarpur was taxable under the heading "Income from other sources". The assessee challenged this conclusion. The assessee argued that the payment by Ballarpur should not be considered as income under the head "Income from other sources" as it did not fall under the specific provisions of the Income-tax Act. However, the court held that the definition of "income" is inclusive and not exhaustive, and the benefit received by the assessee from Ballarpur constituted income assessable and taxable. The court rejected the argument that the benefit should be considered under the head "Salaries" due to the absence of an employer-employee relationship between Ballarpur and the assessee. In conclusion, the court answered the question in the affirmative and in favor of the revenue, ruling that the tax paid by Ballarpur on behalf of the assessee is taxable as income from other sources. The assessee was directed to pay the costs of the reference to the revenue.
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