1986 (12) TMI 94 - AT - Income Tax

Summary

Issues:
1. Whether the salary received by a High Court Judge is liable to tax under the head "Salaries."
2. Interpretation of the term "employer" in relation to the income tax liability of a High Court Judge.

Detailed Analysis:
1. The appellant, a Judge of the Indore Bench of the High Court, contended that his salary was not taxable as there was no employer-employee relationship between the Government and High Court Judges. The appellant relied on the Supreme Court's decision in Union of India vs. Sankalchand to support his argument. The appellant argued that since a High Court Judge holds office under the Constitution and the salary is paid from the consolidated funds of India, it should not be considered income chargeable to tax under the head "Salaries." The appellant also cited the case of Nalinikant Ambalal Mody vs. CIT to further support his contention that certain receipts are not taxable under specific circumstances.

2. The appellant contended that the term "employer" in Section 15 of the Income Tax Act should be interpreted in a broader sense to include any entity responsible for paying the salary, even if there is no traditional employer-employee relationship. The appellant argued that the word "employer" in the Act may not have a specific significance in cases where it is challenging to identify a clear employer. The appellant highlighted that tax had been deducted at source from the salary, indicating a recognition of tax liability. The appellant compared the situation to high dignitaries like the President of India or Governors of States who also pay income tax unless specifically exempted by Parliament.

3. The Tribunal, after considering the arguments and relevant provisions of the Income Tax Act, dismissed the appeal. The Tribunal emphasized that the language of the Act indicates a broad classification of income under different heads, including salaries. The Tribunal noted that the absence of a direct decision challenging the tax liability of High Court Judges suggested a lack of substance in the argument. The Tribunal concluded that the word "employer" in Section 15 should not be narrowly interpreted to exclude salaries received by individuals without a clear employer, as the intention of the Act was to tax all forms of income. Therefore, the Tribunal held that the salary received by the appellant, despite the absence of a traditional employer, was taxable under the head "Salaries."