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income-tax Officer Vs. Shrenikbhai Kasturbhai - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Ahmedabad
Decided On
Judge
Reported in(1983)5ITD242(Ahd.)
Appellantincome-tax Officer
RespondentShrenikbhai Kasturbhai
Excerpt:
.....of the heads there which is relevant for our purpose. a head of income is not the same thing as a source of income. by source of income is meant the specific source from which a particular income springs or arises. consequently, for the same head of income there can be more than one source of income and ample judicial authority exists in support of this proposition-sobhag mal lodha v. cit [1967] 63 itr 424 (all.), satya narain bagla v. cit [1968] 67 itr 240 (all.) and smt. sneh lata v. cit [1966] 61 itr 139 (all.).3. the next question that arises is whether while allowing deductions from salaries under section 16 income from all sources of employment liable to tax should be aggregated as gross income from such employments and then deductions have to be allowed, together for all of them......
Judgment:
1. The assessee had salary income from two sources : (1) Anil Starch Products Ltd. and (2) Saraspur Mills Limited. He claimed standard deduction, of Rs. 1,000 under Section 16(7) of the Income-tax Act, 1961 ('the Act') as Anil Starch Products Ltd. had provided him with a car, He claimed further standard deduction of Rs. 3,500 in respect of salary income from Saraspur Mills because this company had not provided him with a car. The ITO allowed him the deduction only to the extent of Rs. 1,000 on the ground that salaries from all the employments had to be aggregated for working out standard deduction as the word 'employment' used in Section 16(i) referred to the assessee being employed.

2. The Commissioner (Appeals) relying upon the decision of this Tribunal Delhi Bench 'B' in the case of ITO v. Bimal Kumar Jain [IT Appeal No. 2635 (Delhi) of 1978-79], held that the assessee was entitled to the deduction of Rs. 3,500. According to him, the Tribunal there held that, since car was provided to the assessee by only one of his employers, the assessee could not be denied standard deduction in full. He, however, rejected the assessee's claim of standard deduction of Rs. 1,000 over and above the deduction of Rs. 3,500 agreeing with the ITO that the salaries from all employments had to be aggregated for the purpose of Section 16(i).

3. This appeal is on the ground that 'the learned Commissioner (Appeals) has erred in law and on facts in holding that the assessee is entitled to full deduction of Rs. 3,500 under Section 16(i) of the Income-tax Act, 1961'.

4. Section 16(i) grants deduction to the assessee from salary. However, the provisos reduce that deduction in certain circumstances stated therein. If those circumstances exist, the deduction is not to exceed Rs. 1,000. If the motor car is provided to the assessee by employer otherwise than wholly and exclusively for the performance of his duties, the deduction is not to exceed Rs. 1,000. In this case the assessment order states that Anil Starch had provided a car to the assessee partly for the purpose of his duties and partly for personal purpose. The above decision of this Tribunal mentions that in that case there seems to be no material before the ITO to conclude that company's car was available to the assessee for use otherwise than exclusively for the employer's business. In this case as indicated above, there is material on record to show that the car was available to the assessee for use otherwise than exclusively for the employer's business. Section 16(i) allows the deduction 'in respect of an expenditure incidental to the employment of the assessee'. Therefore, first of all the employment has to be taken as a whole. We should concern ourselves with the entire fact of employment and not with the number of employers. Secondly, the section has to be construed as a whole including the proviso. The right to deduction from its inception is subject to the proviso. Thirdly, the deduction is in respect of expenditure incidental to the employment. If the employer gives him a conveyance allowance then that deduction has to be reduced according to the proviso because that expenditure is reduced. This is the simple idea. If a conveyance is provided to the employee-assessee which he can use for the purposes other than his employment, the deduction is reduced. Insofar as he uses it for another employment he can be said to have used it for the purpose other than his duties to the employer who provides the conveyance. That being so, the condition in the proviso has been fulfilled. The learned departmental representative has rightly emphasised that 'salaries' is a specific item under Section 14 of the Act, and, therefore, the deduction under Section 16 would apply to the entire income from the salaries as a whole.

5. In CIT v. M.N. Rajam [1982] 133 ITR 75 (Mad.) the High Court held that the assessee who lived in one half of a house owned by her was entitled to the exemption under Section 2(m)(ii) of the Wealth-tax Act, 1957 ('the 1957 Act') but that was because it held that the property could not be said to be one on which wealth-tax was not chargeable at all under Section 5(1)(iv) of the 1957 Act. In other words when there were two facts one according to which the tax was chargeable and the other according to which the tax was not chargeable, the Court took into account the former. Therefore, this case would support the view that in this case the fact that one employer does provide a conveyance to the assessee, has to be taken into consideration. In the light of the above we must hold that the proviso to Section 16(i) is applicable to the assessee's case and the assessee is entitled to the deduction of Rs. 1,000 only and no more.

1. Unfortunately I could not persuade my brother, the Judicial Member, to my view despite a Division Bench decision of the Tribunal, Delhi Bench B, in the case of Bimal Kumar Jain (supra), etc., having been cited before us by the assessee's counsel. Apart from the fact that with the help of Delhi Division Bench decision, this becomes a case of three opinions to one, I have been a party as a Member of Amritsar Bench to a still more liberal interpretation than that of the Delhi Bench. This further appears to me to be a case where the statute being silent, a view favourable to the subject, i.e., the assessee, be preferred than a possible view adverse to him.

2. Section 14 lays down the heads of income under which income is to be classified and computed and 'salaries' is one of the heads there which is relevant for our purpose. A head of income is not the same thing as a source of income. By source of income is meant the specific source from which a particular income springs or arises. Consequently, for the same head of income there can be more than one source of income and ample judicial authority exists in support of this proposition-Sobhag Mal Lodha v. CIT [1967] 63 ITR 424 (All.), Satya Narain Bagla v. CIT [1968] 67 ITR 240 (All.) and Smt. Sneh Lata v. CIT [1966] 61 ITR 139 (All.).

3. The next question that arises is whether while allowing deductions from salaries under Section 16 income from all sources of employment liable to tax should be aggregated as gross income from such employments and then deductions have to be allowed, together for all of them. It is difficult to accept the view that income from each source of employment has not to be considered separately and then deductions allowed for each such source. This is so for two reasons : Firstly, under taxation statutes it is permissible to work out the income from each source falling under the same head separately, e.g., the business head of income. Secondly, the conditions of employment may vary for each different employment and it may be more logical to work out the deductions taking note of conditions of service of each employment.

In Section 16 as it stood for the assessment year 1980-81 the words 'in respect of expenditure incidental to the employment of the assessee' still existed and these words were substituted by the words 'a deduction of by the Finance (No. 2) Act, 1980, with effect from 1-4-1981. Because of the absence of this amendment, the question of giving meaning to the word 'employment' has arisen for the assessment year under appeal. As far as I can read the section, it has to be read as referring to each single employment and not to all the employments an assessee may be having in a particular accounting year. It is quite valid and proper to read the section on the same lines as are applicable for the computation of income under the head 'Profits and gains of business or profession', i.e., working out the income in respect of each employment after allowing the necessary deductions relevant and available as per conditions of service and thereafter aggregating the net income under the head 'Salaries'. There is nothing express in Section 16 to hold otherwise. The section is fully workable if each employment is considered individually and in my humble opinion, it may be more logical. It is another thing that it may result in a more favourable interpretation in case of an assessee having more than one employment, such as, the assessee now before us. The section, it appears to me, does not lay down anything to restrict the deduction only in respect of one employment and not in respect of the other, when an assessee is having more than one employment. It is this factor implicitly which is responsible for the view of the Delhi Bench to the effect that 'since the car was not provided to the assessee by both of his employers, he could not be denied standard deduction in full by only considering the employer who had provided a car to the assessee for the performance of his duties'. In other words, if the case of the assessee is viewed from the angle of salary received from Saraspur Mills amounting to Rs. 55,277. the assessee will be entitled to full standard deduction of Rs. 3,500. But if the case is viewed only from the angle of employment with Anil Starch Products Ltd., from which remuneration amounting to Rs. 1,05,238 was received and which had provided a car to the assessee partly for personal and partly for the purpose of his official duties, the standard deduction will be Rs. 1,000. I share the view of the Delhi Bench of the Tribunal that there was no warrant for reducing the deduction available of Rs. 3,500 to Rs. 1,000. I feel that my approach is similar to the approach of Madras High Court in the case of M.N. Rajam (supra). Balasubramanyan, J. was dealing with the question of deduction of debts under Section 2(m)(ii) of the 1957 Act relating to a house property which was to the extent of one half was used for personal residence by the owner and to the extent of other half was let out. The learned Judge observed that a position of a house like the one under consideration was not visualised and provided for in Section 2(m)(ii) and in such a situation the rule of interpretation preferred by him was that it was a property of a kind about which nobody could confidently assert, without fear of contraction that it is a property in respect of which wealth-tax is not chargeable. In the instant case, in my opinion, Section 16 does not provide for an assessee having more than one employment in the same accounting year and his standard deduction being restricted only to one employment. Here, further in my view, the principle of interpretation favourable to the assessee being adopted gets attracted. Consequently, I uphold the view of the Commissioner (Appeals) and reject the contention of the revenue.

4. There may be another way of reaching the same conclusion. When looking to one employment of the assessee a deduction of Rs. 3,500 is available. I do not find anything in the section to reduce that deduction by taking note of the circumstances of another employment, i.e., another source of income under the same head. A benefit which is available to an assessee in respect of one employment under the law cannot be diminished by looking to the facts and circumstances in respect of another employment without the statute permitting in specific terms to do that. In the instant case what has happened is that in fact the Commissioner (Appeals) has allowed the assessee the higher of the two standard deductions as there was no provision to reduce the deduction already available qua one employment by relying on the conditions of service of another employment. Consequently, in my view, this is not a case where standard deduction has been allowed in respect of each employment separately, a situation which came to be considered by me as a Member of Amritsar Bench, but the principle there is only partly applicable in the facts and in the circumstances of this case.

5. In the result, I will uphold the order of Commissioner (Appeals) and dismiss the appeal of the revenue.

ORDER Under-Section 255(4) OF THE INCOME-TAX ACT, 1961 - As there is a difference of opinion between us in respect of the following question, we refer the case to the President of the Tribunal as provided in Section 255(4) of the Act.

Whether, in the facts and circumstances of the case, the standard deduction under Section 16 of the Income-tax Act admissible to the assessee will be Rs. 3,500 or Rs. 1,000 1. This Third Member case has come up before me for hearing on account of a difference of opinion between the two members worded as under : Whether, in the facts and circumstances of the case the standard deduction under Section 16 of the Income-tax Act admissible to the assessee will be Rs. 3,500 or Rs. 1,000 The assessee has salary from Anil Starch Products Ltd. and Saraspur Mills Ltd. He received a sum of Rs. 1,05,238 from the first employer and Rs. 55,277 from the second employer. Anil Starch had provided the assessee with a car for his personal purposes in addition to its use for the company's own purposes. Saraspur Mills has not made any provision for conveyance to the assessee. In the return of income the assessee claimed a standard deduction of Rs. 1,000 but before the ITO he claimed a further deduction of Rs. 3,500, the former in respect of the employment under the Anil Starch Products Ltd. and the latter in respect of Saraspur Mills Ltd. The ITO held that the assessee was entitled to a deduction of only Rs. 1,000 as the assessee has been provided with a car by one of the employers. On appeal, the Commissioner held that the assessee was entitled to a deduction of Rs. 3,500. He rejected the assessee's claim for grant of an allowance of Rs. 1,000 in addition to Rs. 3,500. The department came up on appeal against the the order of the Commissioner granting the deduction of Rs. 3,500. The assessee did not come on appeal or cross-objection against the rejection of his claim for a further allowance of Rs. 1,000.

2. In dealing with the appeal the learned Judicial Member held that the proviso to Section 16(i) was applicable to the assessee's case and he was entitled to a deduction of Rs. 1,000 only and no more. According to him the employment was to be taken as a whole ; the section has to be construed as a whole including the proviso so that the right to deduction from its inception was subject to the proviso and thirdly, the expenditure to be deducted being incidental to the employment if the employer gave a conveyance allowance the deduction had to be reduced. The Judicial Member also held that insofar as the assessee used the conveyance for another employment he can be said to have used it for a purpose other than his duties to the employer who provided the conveyance.

3. The learned Accountant Member disagreeing with the Judicial Member explained the provisions of Section 14, holding that head of income is not the same thing as a source of income so that for the same head of income there could be more than one source of income. According to him it was difficult to accept the view that income from each source of employment has not to be considered separately and then deductions allowed for, each source. According to the learned Accountant Member, this section was fully workable if each employment was considered separately ; it would in fact be more logical to do so. The learned Accountant Member also held that while looking to one employment of the assessee a deduction of Rs. 3,500 was available, there was nothing in this section to reduce the deduction by taking note of the circumstances of another employment. Whereas the learned Accountant Member followed a decision of the Delhi Bench of the Tribunal, the learned Judicial Member found that to be distinguishable on facts. The decision of the Madras High Court in the case of M.N. Rajam (supra) was relied upon by the learned Judicial Member to support his case whereas according to the learned Accountant Member the principle of an interpretation favourable to the assessee being adopted was relevant in the circumstances.

4. The learned counsel for the department has pointed out referring extensively to the provisions of Sections 14, 15 and 16 that deduction under Section 16(7) is to be granted on the basis of the overall income assessable under the head 'Salaries'. Section 15 requires aggregation of all the income from salaries so that where an assessee is in receipt of salary from more than one employer all the amounts relating to the different employments should be aggregated. Section 16(7) operates on the aggregated amount of salaries as will be clear from the wordings of the section which according to the learned counsel specifically refers to 'employment'. In support of his case, the learned counsel has referred to certain passages in Chaturvedi's Income-Tax, Vol. 1, page.

637 According to the provisions of Section 16 as it existed during the relevant year if the assessee wanted nothing more than what is provided for in Section 16(i)/(ii) he should prove that he has actually incurred the expenditure. Whereas the main provision fixed the maximum amount available in respect of the employment irrespective of the number of employers at Rs. 3,500, the proviso in fact restricted it to Rs. 1,000 where the conditions stated therein are satisfied. The assessee being provided a motor car otherwise than wholly and exclusively in the performance of his duties by one employer, according to the learned counsel, whether the other employer provided him with a conveyance or not the overall allowance should be limited to the sum of Rs. 1,000.

'His employer' means, according to the learned counsel, all the employers taken together as otherwise it would be meaningless. The learned counsel has also questioned the rationale of approaching the problem from the point of reducing a deduction already granted as is done by the learned Accountant Member. The sum of Rs. 3,500 or Rs. 1,000 as the case may be comes up for deduction only after all the amounts of salary received from the various employers are aggregated.

This being so, there is no question of the assessee being entitled to or eligible for a deduction of Rs. 3,500 to start with from the salary received from any employer, in this case, namely, the Saraspur Mills.

5. The learned counsel for the assessee referring to the law on this subject during the prior years has pointed out that the statute earlier provided for specific allowances of Rs. 200 for a motor car, Rs. 75 for a scooter, etc. This clearly indicated that separate account was to be taken of the position of the particular type of vehicle used and as a natural corollary of different employments with different employers.

Referring to Sections 14 and 15 it is pointed out that Section 14 dealt with heads of income whereas Section 15 referred to 'salaries'. Nothing much should be read into this expression as such in view of the clear provisions of Section 15 than that it deals with salaries received from different types of employers. The statute thus considers the salary received from each employer independently and cannot be regarded as referring to any aggregation of all the salaries received from different employers. Emphasis is also laid on the obligation to give the deduction of Rs. 3,500 from the salary received from Saraspur Mills whether the assessee had any other income from any other source or not.

6. A combined reading of Sections 14, 15 and 16 throws up the issue of deciding whether in the case of an assessee having more than one employment, the salaries received from all the employments are to be aggregated before a deduction under Section 16 is granted. The Delhi Bench of the Tribunal dealt with a case where the assessee was in receipt of salary from two employers and the decision given therein may be helpful in deciding the question before us but since the very question of the assessee being in receipt of a conveyance allowance seems to have been raised as a point of doubt in that decision, it may not be proper to treat that decision as a guide for the present case.

The matter, therefore, has to be decided afresh. Section 15 deals with the head 'Salaries' specified in Section 14 but expends the concept of salaries as covering the items mentioned at clauses (a), (b) and (c) of that section. These clauses refer to the 'salary' from a single employer.

The assessment of this income has to be made under the head 'Salaries'.

The apparent plural appearance of this word 'salaries', therefore, does not add any extra weight to the liability to tax or the deductions to be granted. The ordinary rule of working out an income for inclusion in the total income of an assessee is to workout the income from each source whether that source falls under the head 'Salaries', 'Interest on securities', 'Income from house property', etc., detailed in Section 14. All the additions referring to the incomings and all the deductions meaning the subtractions with reference to any source have, therefore, to be done only with regard to that source. There is not a single instance of the aggregation of the receipts or incomings from several sources and reducing that total by any definitive deduction provided in the statute. Thus if an assessee carries on several independent businesses one cannot think of adding the receipts of all businesses and reducing from the aggregate amount the expenses or deductions pertaining to any business or all the businesses of any kind. This principle applies to the income from every source under every head mentioned in Section 14. In the face of this general principle I really do not know how we can impart in respect of salaries' alone a principle that all the 'salary' should be aggregated together and the deduction given from the sum total.

7. The deduction from 'salaries' obtaining in Section 16 is specifically stated to be 'in respect of the expenditure incidental to the employment of an assessee'. This is a provision similar to what obtains in respect of the income from any other source under any other head specified in Section 14. The expenditure pertaining to one employment and incidental to that certainly cannot be relevant to another employment. Nor is the concept of an 'employment of the assessee' conceptually possible unless we take into account the employer as an entity. If an assessee is employed under several persons it would be preposterous to hold that he is in the employment of 'all the employers together'. The assessee may be an 'employee' but the employment he has with each' employer is an independent acitivity and the expenses incidental to that employment will also be relevant to that employment but independent of all other employments.

Interpretation, therefore, of Sections 15 and 16 apart from the general concept of deductions under the statute also clearly leads to the position that where an assessee is under different employments the income from each employment has to be separately worked out. Section 15 and Section 16 along with the other relevant sections such as Section 17 support this and not a contrary view. There is no support for the proposition advanced by the learned counsel for the department or for the view expressed in Chaturevedi's Income-tax that all gross salaries are to be aggregated before applying Section 16.

8. In the above view of the matter the present assessee having a salary income from Saraspur Mills to which the proviso to Section 16(i) will not apply is prima facie entitled to a deduction under Section 16(i) of Rs. 3,500 from the salary from Saraspur Mills. The only other question would be whether he is entitled to a further deduction under Section 16 in respect of his salary from Anil Starch Products. In view of our exposition as above it is possible that he is entitled to this additional deduction in computing the salary income from this source but since the assessee has not come up on cross-objection or cross-appeal against the Commissioner's decision and the learned counsel for the assessee has before me clearly given up his claim for additional allowance of Rs. 1,000 it is not necessary to go into, this question. There is no provision for reducing the deduction under Section 16(7) already allowable as above in respect of the salary from the Saraspur Mills since under the Act no provision exists for reducing the deduction allowable under one source of income on account of whatever happens in the case of some other and different source. This applies to all sources under the different heads under Section 14. I agree with the decision of the learned Accountant Member that the order of the Commissioner (Appeals) to the extent that the assessee is entitled to a deduction of Rs. 3,500, should be upheld. Since I have not gone into the question of the allowability of a deduction of Rs. 1,000 over and above Rs. 3,500 this part of the Commissioner's order which would also seem to be implied in para 5 of the learned Accountant Member's order, cannot be upheld.9. The matter will go back to the Bench which heard the appeal for the final disposal of the same.


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