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TMI Blog1973 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... icer considered that the tax borne by the employer of the assessees was a "perquisite", that it represented a fixed regular payment and that, therefore, it should have been included in the sum in arriving at the value of the rent-free accommodation. Both the assessees filed appeals to the Appellate Assistant Commissioner. It was contended before him that the tax borne by the employer was neither fixed nor regular in nature and that it was in the nature of an ad hoc benefit given to the employees and, therefore, should have been excluded in computing the value of the perquisites in the form of rent free accommodation. Objection was also taken against the inclusion of the cost of fuel and electricity in the amount of salary for the same purpose. The Appellate Assistant Commissioner thought that all these items formed part of the profits derived from the employment and was, therefore, salary. In that view he confirmed the orders of the Income-tax Officer. In the appeal before the Tribunal, the assessees disputed only the inclusion of the income-tax paid by the employer in the salary. The Tribunal held that it would not be proper to include the tax borne by the employer as part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are exempted from payment of tax." Under section 15 of the Income-tax Act, 1961, the income chargeable to tax under the head "salaries" is stated. Section 17 defines "salary" as including wages, any annuity or pension, any gratuity, any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages, any advance of salary' etc. "Perquisite" is defined in section 17(2) as including, among others, the value of rent-free accommodation provided to the assessee by his employer and any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee. It was the contention of the learned counsel for the revenue that the definition of "salary" in rule 3 is an inclusive definition and that, therefore, the ordinary and natural meaning of the word "salary" is not restricted but enlarged. Per contra the learned counsel for the assessees contended that the word "includes" in the definition of "salary" in the rule should be understood as "means and includes" and that the definition is exhaustive and that, therefore, there is no scope for taking in anything which will not come under the expression "pay and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as normally understood and includes in its connotation several other receipts set out in the definition." This court considered a similar question in Mammad Keyi v. Assistant Controller of Estate Duty with reference to the interpretation of section 7(1) of the Estate Duty Act, 1953. It was held therein: "There are several enactments where the definition clause contains the expression 'to mean and include', in which event it may be regarded that an exhaustive explanation of the things intended to be caught in the net of the section is specified. But where the expression is merely 'including' it does not seem to us that the expression is used to have a restrictive operation and to confine the scope of the section only to those things specified in the words following. Considering also that this is a taxation measure, which is intended to be quite general in its operation, a more reasonable construction to place upon this expression would to our minds be that it enlarges the meaning of the words or phrases occurring in the section." The question for consideration in this case is whether there is anything in the context of the definition of "salary" in rule 3 suggesting any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same view was also expressed by the other learned law Lords in that case. In Hartland v. Diggines, a similar question arose for consideration. In that case there was no specific agreement between the employer and the employee to pay the salary free of income-tax, but in accordance with the custom of the employer-company the income-tax payable by the employee was paid by the company. It was held that that makes no difference and the principle in North British Railway Company v. Scott, would be applicable. The following opinion of the Court of Appeal which was approved by the House of Lords may be quoted here: "So we come back to this position, that Mr. Hartland is responsible to the revenue to pay the tax in respect of his emoluments and salary and perquisites which he receives; and in effect what he has received he has received as stated in the Ashton case, and in the other cases--he has received a certain amount of money into his hands, and he has received an indemnity against any liability to pay any part of it to the revenue. In effect, therefore, what he has received is the money paid into his hands, plus that immunity; and, as Lord Atkinson puts it, one has to look at the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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