1988 (12) TMI 127 - AT - Income Tax

Summary

Issues:
- Allowance of standard deduction under s. 16(2)(i) of the IT Act for honorarium received by a medical practitioner.
- Interpretation of the term 'salary' under s. 17(1) of the IT Act.
- Application of the principle of ejusdem generis in determining the nature of payment.
- Comparison between honorarium and salary in the context of employer-employee relationship.

Analysis:
1. The appeal challenged the allowance of standard deduction for honorarium received by a medical practitioner, contending that the amount was salary and not eligible for the deduction. The Income Tax Officer (ITO) taxed the amount as income from profession, rejecting the claim of standard deduction.

2. The Appellate Assistant Commissioner (AAC) allowed the claim, stating that the honorarium received by the practitioner from hospitals constituted salary under s. 17 of the IT Act due to the existing employer-employee relationship. The AAC emphasized that the practitioner provided professional advice at the hospitals as an employee, justifying the entitlement to the standard deduction under s. 16.

3. The Departmental Representative argued against considering the payment as salary, applying the principle of ejusdem generis. It was contended that the practitioner lacked an employer-employee relationship with the hospitals, as he was not subject to the same conditions as regular staff. The representative highlighted the nominal payment and the absence of personal gain motive in rendering services.

4. The representative cited precedents related to pension payments, emphasizing the significance of an employer-employee relationship. It was argued that honorarium, distinct from salary, did not fall under the category of profit in lieu of salary. The practitioner's submission regarding the inadequacy of remuneration further supported the argument against equating honorarium with salary.

5. The Tribunal concluded that the payment designated as honorarium was intentionally distinct from salary, reflecting the practitioner's preference for honor over monetary compensation. The absence of a salary designation precluded the practitioner from claiming standard deduction, as the payment did not align with the definition of salary under the IT Act.

6. Ultimately, the appeal was allowed, rejecting the claim for standard deduction on the basis that the payment received as honorarium did not qualify as salary. The decision emphasized the distinction between honorarium and salary, highlighting the practitioner's choice for honor over financial benefits, thereby negating the eligibility for standard deduction under the IT Act.