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TMI Blog2012 (12) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... rmally expected to do, i.e. work for the said firm in his area of expertise. He was given salary for that; in addition, he was also given commission for not competing with his employer, during his employment, in regard to the same line of business, in which he worked as an employee of the firm. Therefore, the commission amount clearly was part of salary answering the description under the inclusive definition u/s 17 of the Act - question of law is answered in favour of the revenue, and against the assessee. - IT APPEAL Nos. 602, 607 AND 921 OF 2010 - - - Dated:- 30-11-2012 - S. RAVINDRA BHAT AND R.V.EASWAR, JJ. JUDGMENT S. Ravindra Bhat, J. - The revenue claims to be aggrieved, in these three appeals, by a common judgment of the Income Tax Appellate Tribunal, and prefers these appeals under Section 260-A of the Income Tax Act. The substantial question of law urged, and which arises for consideration is whether the income from amount earned in terms of a non-Compete Agreement with Uzind Corporation falls under the head of income from salary or income from business. 2. The brief facts are that the assessee was a General Sales Agent (GSA) of Uzbekistan Airway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. Further, an arrangement where the source follows the mercantile system of accounting and the recipient follows the cash system is well recognized and followed, and was thus not a colourable device to evade taxes. Since it is specifically assessable under Section 28 (va), it will be classifiable as income from business and not salary. Further, if UC continued to only show that the amount was credited without the assessee receiving the amount, the revenue has a right to enforce other remedial provisions in the hand of the firm to bring the amount not paid to tax. The Tribunal also based its finding on the contractual clauses of the Non-compete agreement which stated that the relationship was not employer- employee relationship. 5. The revenue argues that the non-compete fee was part of 'salary' under Sections 16 17 of the Income Tax Act which includes, within its definition any fees, wages, commission, bonus, perquisite or profit in lieu of or in addition to salary. Thus the whole amount of fees received should have been taxed as income from salary. It was contended that the assessee had been paid salary by UC since its inception and the employer- employee relationship thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply are that (1) there should be a business or profession, (2) carried on by the assessee, (3) for some time during the previous year. (4) The charge is in respect of the profits and gains of the previous year of the business and extends to any business or profession carried on. 10. In this case, the assessee has argued that he is the controller of the firm, which translates to him carrying on the business of the firm. Therefore, according to his showing, the control needed to establish an employer- employee relationship is absent. However, if that is correct then he cannot claim the Rs. 1,32,000 received by him to be the salary paid by the firm to him in his capacity as an employee. Consequently, all the amounts received by him should be income from business. However, that is not what he contends. Apart from this anomaly, another unexplained factor is why the assessee had to enter into a non-compete agreement with a firm that he controls. In any case, it would have been taxed under the head "income from business" under Section 28 (va). 11. UC was deducting the amount being paid under the non-compete agreement as business expenditure. However, under Section 36 (1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sarily involves the rendering of services by the employee to the employer and the use of his skill, energy and time for the benefit of the business in which he is employed. If the employer chooses to remunerate those services by adopting different measures for different aspects of the services received from the employee, the payments nevertheless retain the character of compensation to the employee for the skill, labour and the time put in by the employee for the benefit of the employer. The definition of salary in Section 17 of the Act is couched in wide terms to take into account the remuneration paid to the employee, whether it is labelled as salary or otherwise by the employer. It is not the label given to the payment that is determinative of the question as to whether it is salary. The definition of salary in Section 17(1) of the Act is an inclusive definition. Sub-clause (iv) of Section 17(1) of the Act makes a specific reference to commission paid in lieu of or in addition to any salary or wages. As observed by Lord Denning the words of the statute are ultimately to be regarded as decisive. When the language of the statute is plain and unambiguous, the width of its meaning c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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