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TMI Blog1985 (1) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 61, dealing with deductions from salary is available even in respect of income derived from pension which is taxed under the head ' Salaries ' ? " The income-tax reference in question at the first stage came up for hearing before a Division Bench consisting of late B. S. Dhillon J. and S. P. Goyal J. Both the judges wrote separate opinions dissenting from each other. The papers were then placed before the Hon'ble Chief justice in view of the provisions of s. 259 of the Act, and that is how this matter is before me. The assessee rested his claim for deduction on the ground that his pension amount constituted salary by virtue of the provisions of s. 17 of the Act, which, inter alia, has declared pension to be salary for the purpose of ss. 15/16, which permits, inter alia, standard deduction from salary. Dhillon J. reasoned that pension was one of the very important terms and conditions of employment. Pension was earned by an employee by rendering a requisite period of service and the receipt of pension was one of the incidents of employment. In other words, the receipt of pension could be easily termed as deferred payment of remuneration for the services rendered by an employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand, laid stress on the fact that unless the assessee could be held to be in present employment, he could not become entitled to claim a deduction under s. 1.6(i) of the Act. According to him, a pensioner cannot be considered to be in present employment. Reliance for the above view was placed on Rajagopalachari v. Corporation of Madras [1964] 53 ITR 454 (SC). Ratio of General Manager, Southern Railway, v. Rangachari, AIR 1962 SC 36, which was relied upon by Dhillon J. was distinguished by observing that the said authority did not justify a finding that the state of being a pensioner is the state of being employed. The learned judge observed that the right to pension would be covered by the words " matters relating to the employment ", according to this decision, not because it related to actual employment but because it was a matter incidental to employment and directly flew from the past employment. While dealing with the contention that if deduction under s. 16(i) of the Act was not to be permitted, from pension, then, why was pension declared to be " salary " for the purpose of s. 16, the learned judge observed that prior to the substitution of the present clause (i), the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied under any State or Provincial Act; (iv) where the assessee is not in receipt of a conveyance allowance, whether as such or as part of his salary, in respect of expenditure on travelling for the purposes of his employment, a sum calculated in respect of each calendar month or part thereof comprised in the period of his employment during the previous year, on the basis provided hereunder, namely: Rs. (a) where the assessee owns a motor car which is used for the purposes of his employment 200; (b) where the assessee owns a motor cycle, scooter or other moped which is used for the purposes of his employment 75; (c) in any other case 50; (v) any amount actually expended by the assessee, not being an amount expended on the purchase of books or other publications, or on entertainment or on the maintenance of a conveyance, which, by the conditions of his service, he is required to spend out of his remuneration wholly, necessarily and exclusively in the performance of his duties. " The Finance Act of 1974 amended s. 16 with effect from April 1, 1975, and the amended s. 16 is as follows : " 16. The income chargeable under the head 'Salaries' shall be computed after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to a deduction of the kind which represents an amount of expenditure incurred incidental to his employment, and (ii) that prior to the amendment, the said expenditure within the prescribed limit was claimable only if the assessee proved the actual incurring of the given amount. If person is not, for the given assessment year in employment, how would he prove actual incurring of the amount in regard to his employment. In other words, according to Goyal J., the aforementioned two circumstances constituted two hurdles in the way of a pensioner-assessee in claiming the said deduction. So far as the first hurdle is concerned, it stands easily demolished by the fact that the Legislature has declared pension to be salary for the purpose of s. 16. One can receive salary only if one is employed or one is in employment and, therefore, by virtue of the deeming provision, he would be treated to be in employment and for this purpose it is not necessary to examine as to what are the reasons for which one is entitled to derive pension, i.e., whether the pension is a deferred payment for the past employment or has some other character. For the purpose of the provisions of ss. 16 and 17, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re so declares him for certain, purposes. The ratio of the aforesaid decision would not thus be applicable to the present case. The Legislature for the purpose of the I.T. Act has deemed pension to be salary. Salary is received by a person who is in present employment and, therefore, the pensioner is to be treated, by virtue of the deeming provision in question, in present employment for the purpose of s. 16(i) of the Act. No plausible argument is coming forth from the side of the Revenue, nor one has been advanced by the learned judge to counter the plea of the assessee that if pension was not to be treated as salary for the purpose of s. 16(i), then why was it necessary to declare the pension to be salary in s. 17 for the purpose of ss. 15 and 16. In my view, the only reason for declaring pension to be salary for the purpose of ss. 15 and 16 is to enable the assessee to claim deductions permitted by s. 16, for the Legislature was aware that a pensioner was likely to incur some expenditure in retrieving his pension, if he happens to be living away from the place from where he has to collect his pension. As a result of the Finance (No. 2) Act of 1980, the words " expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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