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TMI Blog2012 (10) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT 1. The appellant-assessee retired serving as a Judge of the Allahabad High Court. In this Income Tax Appeal he is aggrieved by the order of the Income Tax Appellate Tribunal, Delhi Bench; SMC-VI, New Delhi in ITA No. 1263/Del/2003, for the assessment year 1998-99, dated 10th June, 2004 dismissing the appeal of the assessee with the findings that the 'dearness relief' is covered within the expression, 'any payment received from a former employer by the assessee', and would be included in the definition of, 'profits in lieu of salary', to be taxed under Section 17(3)(ii) of the Income Tax Act, 1961. 2. We have heard Shri Pramod Kumar Jain, Sr. Advocate assisted by Shri Amitabh Agrawal, learned counsel for the appellant. Shri R.K. Upadhyaya appears for the respondents. 3. The appeal was admitted on the substantial questions of law as follows:- "(A) Whether the receipt of the amount of dearness relief Rs. 53,640/- to the appellant, a pensioner (retired High Court Judge), in the assessment year 1998-99, is income and taxable as 'profit in lieu of salary' (Section 17(3)(ii) of Income Tax Act? (B) Whether dearness relief can be said to be profit in lieu of salary within mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t my finding that dearness relief is covered under the definition of profits in lieu of salary as contained under section 17(3)(ii) of the Act: (i) 'Profits in lieu of salary', is income as per section 2(24)(iii) of the Income-tax Act; (ii) By virtue of section 17(1)(iv) salary includes profits in lieu of salary; and (iii) The definition of 'profits in lieu of salary' under section 17(3)(ii) is all embracive and omnibus and brings within its sweep "any payment due to or received by an assessee from an employer or a former employer". Dearness relief is clearly covered within the expression any payment received from a former employer by an assessee. In view of wide sweep of the definition, dearness relief is clearly covered under section 17(3)(ii) of the Act. (iv) Dearness relief does not fall under any of the clauses of section 10 specified in the parenthetical clause of section 17(3)(ii)." 8. The Tribunal after referring to the definition of income under Section 2(24) and the definition of salary under Section 17, which includes profits in lieu of salary and which also includes the amount of any compensation under sub-clause (i) due to or received by an assessee from his emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment. The dearness relief is clearly covered under Section 17(3)(ii) as 'profits in lieu of salary', and hence it is liable to tax as salaried income. 11. Shri P.K. Jain, learned counsel appearing for the assessee submits that dearness relief is paid to the retired judges under general notification issued by the Department of Justice, Ministry of Law and Justice, Government of India. The notification for retired judges of High Court and Supreme Court was issued by the Department of Pension and Pensioner's Welfare (Ministry of Personnel, PG and Pension Government of India) and is governed by Rule 2 of the High Court Judges (Condition of Service) Rules, 1956. The dearness relief is not part of pension. Salary and pension are not convertible terms. The profits in lieu of salary cannot be said to profits in lie of pension. There is no expression in the Income Tax Act like profits in lieu of pension. Any payment under Section 17(3) of the Act pertains to pensionary benefits like compensation, gratuity, commutation, leave to encashment etc. Pension is income chargeable to income tax by virtue of Section 4, 15, 16, 17(1) and not by virtue of Section 17(3)(ii). If a receipt is not spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable extent of deductions on export profits of the assessee, who were engaged in creating and manufacturing and exporting tea, claiming deduction under Section 80HHC. It was held that the word income as defined under Section 2(24), also find place in Rule 8(1) and would include profits and gains. The word income is an expression of illusory ambit. It is not exhaustive and that is why Section 2(24) defines income as including particular category of receipts. Mere gross receipt cannot be taxed as income. The words 'as if' occurring in Rule 8(1) stands for legal fiction. 17. In M.C. Desai (supra) the Court held that the ad hoc and graded relief given to the judges in addition to the pension by the Central Government is paid in order to meet the rising cost of living, which the judges are entitled to receive over and above the amount of pension payable to them. The High Court did not express any opinion as to whether the ad hoc relief is a condition of service, which cannot be varied to the disadvantage of the judges in lieu of proviso to Art. 221(2) of the Constitution. The High Court granted relief by issuance writ of mandamus directing the Central Government to compute and de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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