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TMI Blog1988 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee's argument was that dearness allowance was not specifically included in the definition under s. 17 of the definition in r. 2(h) of Part A, Part B and Part C of the Fourth Schedule to the Act. It was also argued that dearness allowance was not included under the Payment of Wages Act 1936, Payment of Bonus Act 1965 and Payment of Gratuity Act 1972.Further, the assessee argued that the definition of 'salary' for the purpose of s. 36(1)(ii)(a) and s. 40A(5) does not include dearness allowance. The assessee argued that since dearness allowance is not fixed but fluctuating from time to time and varies with the cost of living index, the amount thereof is not part of the salary. This was, according to him, the case of the Department in the case of Addl. CIT vs. P. Krishna Kamat 1975 CTR (Karn) 57: (1975) 99 ITR 74 (Kar). He also argued that dearness allowance is not taken into account for payment of house rent allowance, compensatory city allowance, contribution to provident fund, payment of rent by Government servants occupying Govt. Quarters. It is not an emolument, commission fee, perquisite or profit within the meaning thereof under ss. 17 (1)(iv) and 17(2).Dearness all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles that the issue raised before us in the present appeals has to be considered. 4. When we apply the above test to the receipts like dearness allowance or city compensatory allowance, we find that these amounts are received by the assessee by virtue of his being an employee of the State Govt. These amounts are received from a definite source, namely, the Government of Maharashtra. These are received by virtue of his employment under that Government. There is nothing in the Act which provides for the exclusion of receipts of this type from the scope of taxation. In other words, no exemption from inclusion in total income is provided in respect of dearness allowance or city compensatory allowance. For these reasons, among others, the assessees' claim for exemption from taxation of these receipts is liable to be rejected. 5. We may now turn to the specific arguments taken by the assessee. The assessee has first referred to the definition in r. 2(h) of Part A, Part B and Part C of the Fourth Schedule. It is the case of the assessee that whereas in r. 29(h) of Part A of the Fourth Schedule, dearness allowance is included in salary, it is not so included in s. 17.We cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include dearness allowance for a specific purpose because that Schedule dealt with provident fund and the rules framed in the context refer to dearness allowance for a specific purpose. This fact by itself does not throw any light whatsoever on the controversy before us, namely, whether dearness allowance is taxable. The assessee's reference to the definition of 'salary' under the Payment of Wages Act 1936, Payment of Bonus Act, 1965 and Payment of Gratuity Act, 1972 is for the same reason equally irrelevant as such definition of 'salary' appears in the respective Acts for the purposes mentioned in that Act and does not help the assessee in his claim that dearness allowance is not a taxable receipt. Reference may be made to a decision of the Karanataka High Court in Addl. CIT vs. P. Krishna Kamat. In this case, the following observations of the Karnataka High Court only support our finding given above that the definition of the word 'salary' in r. 2 of Part A of the Fourth Schedule is for the purpose of that Para only: "The word "salary' is not defined in s. 2 of the Act, which contains definitions. Though that word has been defined in s. 17 of the Act, that definition is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r meeting the increasing cost of living, the quantum of dearness allowance would be the same in all grades of employees. However, it is common knowledge that the grades of dearness allowance very with the grades of pay. It is also common knowledge that so far as government servants are concerned, the Pay Commission has taken this fact into account while considering the revised pay structure in various grades of the government employees. 'Dearness allowance' is distinguishable from 'travelling allowance' or 'daily allowance' which is granted specifically to meet a specific type of expenditure already incurred by an employee and is in the nature of a reimbursement of expenditure so incurred. We are not satisfied that dearness allowance is paid as reimbursement of any specific expenditure. It is paid as conditions of service and can well be considered as coming within the inclusive definition of 'salary' or "wages". 6. Turing now to city compensatory allowance, a decision in this regard has already been taken by D-Bench of the Tribunal in ITA No. 339 (Bom)/84 in the case of Addl. ITO, SBI vs. M.A. Twigg on 29th Sept., 1986, (to which one of us was a party).It is seen that s. 10(14) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (v)(a) indicated that compensation for surrender of earned leave was not normally taxable or, in any case, not taxable for the period prior to the amendment. In Krishna Mirthy's case, the Court was interpreting s. 17(3)(ii) which gives inclusive definition of what consistutes 'profits in lieu of salary'. The observations of the Court in respect of amounts received by way of leave encashment are in this context. The insertion of cl. (v)(a) by Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1st April, 1978 has to be considered only classificatory. Further, it would appear that the Court considered cl. (10AA) of s. 10, which was introduced by the Finance Act, 1982 with retrospective effect from 1st April, 1978 in this context but did not have occasion to consider cl. (5A) possibly because the amendment brought about by the Taxation Laws (Amendment) Act, 1984 was not before the Hon'ble Court at the relevant time. What is relevant is that the contentions advanced with reference to cl. (10AA) of s. 10 were dismissed by the Court in the following words at page 171: "We have, however, no hesitation to dismiss the contention, faintly advanced though that cl. (10AA) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled in respect of residential accommodation occupied by him. The assessee's argument in this connection is two-fold: He first argues that the flat which he occupies in a Co-operative Housing Society is not owned by him and, secondly, he argues that the payments made by him to the Society are in the nature of rent and, therefore, cl. (a) and (b) of the Explanation, which carved out an exception to the general exemption granted under cl. (13A), are applicable in his case. Sec. 27 of the IT Act defines 'owner of house property' and cl. (iii) of s. 27 provides that a member of a Co-operative Society to whom a building or a part thereof is allotted or is leased under a wise building scheme of the society shall be deemed to be the owner of that building or part thereof. Although this definition is for the purposes of ss. 22 to 26, it is ultimately relevant for deciding computation of income from house property and therefore relevant for all purposes under the IT Act. One cannot have one definition of 'owner' in the context of one section of the Act and another concept in context of the other particularly when ownership of the residential accommodation is not separately defined in the Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M. Krishna Murthy and Ors vs. CIT. We, therefore, reject the claim of the assessee that house rent allowance received by him is exempt under s. 10(13A). 9. Since, in our opinion, the assessee is an owner of the premises occupied by him, his case is covered by Explanation to s. 10(13A). 10. As regards the claim for deduction of professional taxes, it is clearly not admissible in view of s. 40A(2), which provides that any sum paid on account of any rate of tax levied on the profits or gain of any business or profession or assessed at a proportion or otherwise on the basis of any such profits or gains not a deductible expenditure. What is deductible from salary income is specifically provided under s. 16(1).The assessee's reliance on a decision in 6th ITO vs. Narendara V. Patel (1985) 11 ITD 587 (Bom) (TM) is misplaced because in that case the Tribunal by majority decision held that other expenses incurred for procuring business for the LIC were admissible deduction against incentive bonus. That decision has a limited application and has to be considered in the context of the facts of that case. It cannot be said to have a general application particularly when the law provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent paid sales-tax in respect of its forward transactions in pursuance of assessment orders passed by the Sales-tax Officer for the years 1949 to 1951, but in 1952, the Allahabad High Court held that the levy of sales-tax on forward transactions was ultra vires. The respondent applied for a refund and on these facts the Supreme Count held that the term 'mistake' in s. 72 of the Indian Contract Act comprises within its scope a mistake of law as well as a mistake of fact. The Supreme Court, however, specifically held that where there is a clear and unambiguous provision of law which entitles a party to the relief claimed by him, equitable considerations cannot be imported. In the present case, there is no clear and unambiguous pronouncement of law supporting the assessee's stand. Further, a mistake can be rectified under the IT Act if it is a mistake apparent from record. We are, therefore, satisfied that no refund is due to the assessee both for asst. yrs. 1973-74 and 1976-77 in which he had included dearness allowance and compensation for surrender of earned leave in his return as salary income. 14. The next cross objection is that the compensation of Rs. 240 received for use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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