1. This appeal is by the revenue. The assessee to the appeal is Lt.
Col. G.R. Chopra (retd.) of Agra, an individual. The year of assessment involved is 1978-79, for which the previous year ended on 31-3-1978.
2. Against the pension received by the assessee of Rs. 7,320, he had claimed standard deduction under section 16(i) of the Income-tax Act, 1961 ('the Act'), of Rs. 1,464. The said claim of the assessee was negatived by the ITO on the ground that standard deduction under section 16(i) was not a permissible deduction against the pension amount added to the total income of the assessee.
3. Aggrieved by the said assessment, the assessee brought the matter by way of appeal before the AAC, who has accepted the claim of the assessee for standard deduction under section 16(i) against the pension amount received by him (the assessee) by observing as under : Section 16 of the Income-tax Act, 1961, as it stands after the amendment by the Finance Act, 1974, with effect from 1974-75, deals solely and exclusively with deductions admissible against income assessable under the head 'Salaries'. Section 17 lays down that for the purposes of sections 15 and 16, 'salary' includes, among other things, pension. The plain reading of Section 16(i), read with Section 17(i), does not in any way restrict the statutory deduction to income from salary, excluding pension. In my view, the assessee is entitled to the statutory deduction provided under Section 16(i) against the income from pension assessable under the head 'Salaries'. This view has already been upheld by the Income-tax Appellate Tribunal, Delhi Bench 'E', in an appeal filed by the department against my order in the case of Brigadier B.D. Khurana [IT Appeal Nos. 2867. 2868 and 2869 (Delhi) of 1978-79, decided on 30-12-1978].
4. As there was difference of opinion between various Benches of the Tribunal on the question as to whether standard deduction under Section 16(i) is permissible against the pension amount received by a Central Government pensioner, the said question arising in the present appeal has been referred to the Special Bench by the President of the Tribunal.
5. The assessee, though served, was absent on the date fixed for the hearing of the Special Bench. At our request, Mr. M.S. Syali, advocate, appeared amicus curiae. Mr. S.D. Nargolwala also appeared in the course of the hearing of the appeal as an intervener. We have heard the departmental representative, Mr. J.S. Rao, Mr. M.S. Syali, advocate, and Mr. Nargolwala in person.
6. On appeal before the Tribunal, the departmental representative, Mr.
J.S. Rao, took us through the provisions of sections 15,16 and 17 of the Act and urged that since the expression 'salary' appearing in Clause (a) (b) or (c) of Section 15 was not expressed therein within inverted commas, the said expression should be given the ordinary dictionary meaning and not the meaning given to it in Section 17(i).
The said Section 15, according to Mr. J.S. Rao, enumerates the special head under which the salary income is to be computed for chargeability.
Mr. J.S. Rao, the departmental representative, took us through the provisions of section 16(i), as it stood when the Act was enacted, as also the various amendments thereto from time to time up to the present date. Taking Section 16(i), as it stood in the year under consideration, he laid specific emphasis to the expressions 'incidental to employment' in the opening part of Section 16(i) and 'the salary derived' in Sub-clauses (a) and (b) of Section 16(i). In the presence of those expressions, the departmental representative, Mr. J.S. Rao, argued that before a deduction under Section 16(i) is allowed to an assessee, he has to satisfy two conditions, namely, (i) that he had actually incurred an expenditure, inasmuch as, he has spent some money on matters relating to his employment, and (2) the expenditure must be in relation to employment which means subsisting and not past employment. It would not be correct that the 'employment' mentioned in section 16(i) can be interpreted as present or past employment.
According to Mr. J.S. Rao, under none of the sub-clauses of Section 16(i) any deduction was admissible to the assessee, who had sines retired and was receiving pension from his past employer because he could not possibly have incurred any expenditure on any of the matters covered by the said sub-clauses. Again, a deduction is allowed on account of some expenditure incurred by the assessee in relation to his employment in the accounting year itself. Even in the past, when the assessee was in employment, had incurred some expenses, he could claim deduction only in the relevant assessment year and not in relation to the assessment year thereafter. If the word 'employment' in Section 16(i) is understood to include the past employment also, it would mean that the assessee would be getting deduction in respect of expenditure incurred by him during the year prior to the accounting year and for which he had already claimed the deduction in the relevant year. It was, therefore, not possible to take the stand that the word 'employment' used in Section 16(r) can be interpreted to include in its ambit the past employment on the theory of ah advantage to the employee and disadvantage to the pensioner. Mr. J.S. Rao further urged that the inclusion of 'pension' within the definition of the expression 'salary' in Section 17 was intended to make the said definition of 'salary' of such a wide amplitude so as to include all the benefits received by a person during or after the course of employment. As far as the admissibility of standard deduction under Section 16(i) is concerned, it was admissible only in respect of expenditure incidental to the employment of the assessee and would not be available to a person, whose income consists of pension received by him on account of his past employment. If there is no employment at all, the question of any expenditure incidental to employment cannot possibly arise.
7. Against these arguments, both Mr. Syali and Mr. Nargolwala, took us to the past history of assessment in the case of the latter, i.e., Mr.
Nargolwala, who is a pensioner. The question regarding the standard deduction under Section 16(i) against his pension amount had come up for consideration of the Tribunal at New Delhi for three years. As far as the first year was concerned, the Tribunal on the application by the department has referred a question of law pertaining to the standard deduction allowed against pension income under Section 256(1) of the Act. As far as the second and third years are concerned, the department, according to Mr. Nargolwala, having not filed any reference application, is to be taken to have accepted the decision of the Tribunal that standard deduction under Section 16(i) was permissible in law against pension income to be taxed under the head 'Salaries'.
Similarly, no reference application has been filed by the department against the decision of the Tribunal, Delhi Bench, in the case of ITO v. S.D. Nargolwala  3 Taxman 73.
From what has been stated hereinbefore, it has been urged both by Mr.
Syali and Mr. Nargolwala that it is too late in the day for the department to urge in the present appeal that the assessee over here is not entitled to standard deduction under Section 16(i) against the pension income.
8. Mr. Syali and Mr. Nargolwala next took us through the provisions of Sections 15, 16 and 17. According to them, pension appearing in the definition in Sub-clause (ii) of Clause (7) of Section 17, denning the expression 'salary', also appears in Article 366(17) of the Constitution of India. The meaning to be given to the said expression 'pension' has been the subject-matter of various decisions of the Supreme Court, namely, Deokinandan Prasad v. State of Bihar AIR 1971 SC 1409, D.S. Nakara v.Union of India AIR 1983 SC 130. These decisions, according to them, lay down that the pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and that it creates a vested right in a pensioner for payment for past services rendered. The said statutory right vests in a pensioner because of past employment.
The said past employment is in continuation of the relationship of employer and employee, which existed prior to the retirement of the pensioner. Further, since a pensioner after retirement is subject to the control and supervision of the Central Government under the Central Civil Services (Pension) Rules, 1972 ('Pension Rules') (or earlier such Rules). In this connection, they highlighted that the payment of the pension, in view of Rules 8, 9 and 10 thereto, is dependent upon an additional condition of impeccable behaviour even subsequent to retirement. A pensioner cannot take any commercial employment after retirement without the prior sanction of the Central Government. In case of army personnel, he after retirement is subject to recall for active service in case of emergency. He, as a retired army personnel, is entitled to the facilities of canteen, etc., at par with those enjoyed by the armed force personnel in active service. It is, thus, manifest that the pension paid by the Government to a pensioner is the necessary incident of 'employment' as contemplated by Section 16(i).
Further, according to the intervener and Mr. Syali, the expression 'employment' used in Section 16(i) was comprehensive and wide to include both the past as well as the present employment. This finds support from the scheme of Sections 15 to 17. The Legislature, having given wider meaning to the expression 'salary' in Section 17(1) so as to include 'pension', intended to give relief in the form of standard deduction both in the case of the persons in Government service and the Government servants who had retired. This was also in consonance with the principle of harmonious interpretation of Sections 15, 16 and 17.
In support of the proposition that there should be a harmonious construction to find out the intent and purpose of the legislation, reliance was placed on the ratio of the following decisions--Princess Shri Kumari of Kishangarh v. ITO  1 ITD 85 (Cal.), CGT v. H.H.Sir Shahaji The Chhatrapati Maharajasaheb of Kolhapur  58 ITR 140 (Bom.), J.H. Gotla v. CIT  91 ITR 531 (Mys.) and CIT v. S.K.Nayak  145 ITR 791 (Kar.).
The Legislature having defined the expression 'salary' in Section 17(7) to include 'pension', intended that the fiction so provided therein should be taken to its logical end so as to make available the benefit of standard deduction provided in Section 16(i) to a pensioner. In support of the proposition that a fiction should be taken to its logical end, reliance was placed on the following decisions : CIT v. R.Johnstone  2 ITR 390 (Rangoon), CIT v. S. Tejti Singh  35 ITR 408 (SC) and Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum  129 ITR 440 (SQ.Both Mr. Syali and Mr. Nargolwala, basing themselves on the ratio of the decisions of the Supreme Court in S.G. Jaisinghani v. Union of India  65 ITR 34 and Dinesh Chandra Sangma v. State of Assam AIR 1978 SC 17, have urged that the expression 'employment' used in Section 16(i), which in the present case means the employment under the Government, is a matter of status, one of the incidents of employment whereof being payment of salary including the pension. That status is there in view of what has been argued and stated in the preceding paragraphs even when a Government servant, as the assessee in the present case, has retired.
9. It was further urged by Mr. Nargolwala and Mr. Syali that a pensioner, like the assessee before us, has to incur expenditure to draw pension, inasmuch as a pensioner (i) has to appear twice before the pension paying authority, (ii) has to maintain a bank account and incur expenditure in the collection of the pension payment order, which is to be deposited in the bank account ; and (iii) has to incur expenditure for correspondence with the pension paying authority primarily regarding the interim reliefs allowed or allowable to the pensioner pursuant to the various orders issued by the Government from time to time in this behal. \t was, therefore, clear that a pensioner incurs expenditure incidental to his employment. They further urged that from the scheme of Section 16(i), it was apparent that no proof of incurring of actual expenditure or the incurring of expenditure was required for claiming the standard deduction under Section 16(i)- In support of this argument, reliance has been placed on the ratio of the decision of the Karnataka High Court in H.L. Siddappa v. C/T  126 ITR 641 and the Board's Circular No. 293 [F. No. 200/140/80 IT(A-I)], dated 10-2-1981-- 130 ITR (St.) 5.
10. They next took us through the ordinary dictionary meaning of 'derive' and 'incidental' and urged that a pensioner, like the assessee before us, was entitled to the standard deduction under Section 16(i).
The relationship of employment is there. The pension has been derived from such employment. No actual expenditure is required to be incurred for claiming the standard deduction under Section 16(i). Even otherwise expenditure has to be incurred by a pensioner to draw the pension. All the conditions precedent to the grant of deduction under Section 16(i) were satisfied in the present case.
11. We have given consideration to the above arguments. It is now well established that the income-tax is only one tax levied on the sum total of the income classified and chargeable under the various heads as enumerated in Section 14 of the Act. Section 14 is in the following terms : Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income: -- The only effect of Section 14, as has been held by the Supreme Court in various decisions, is to classify profits and gains under different heads according to the character of the source, for the purpose of providing for each head appropriate rules for computing the amount of income. In that context, income-tax is not a collection of distinct taxes levied separately on each head of income. In other words, assessment to income-tax is one whole and not a group of assessments on different heads or items of income. Viewing Section 14 together with Sections 4, 5 and 15 to 59 of the Act, it is apparent that the scheme of the Act, in short, is that Section 4(1) charges total income, Section 5 defines its range, Section 14, classify it and Sections 15 to 59 quantify it.
12. In the present case, we are concerned with the head'Salaries', as given in Section 14. It is so because the pension received by a pensioner, like the assessee before us, falls within the definition of 'salary' as given in Section 17(7). The relevant sections pertaining to this head 'Salaries' are Sections 15, 16 and 17. That section (section 17) also defines the other expressions used in Sections 15, 16 and 17, namely, 'perquisite' and 'profits in lieu of salary'. Section 15 brings out the items of income, which shall be chargeable to income-tax under the head 'Salaries'. The items of income mentioned therein are as under ; (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not ; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him ; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
This takes us to Section 16, which lays down the various deductions which are to be allowed while computing the income chargeable under the head 'Salaries'. When the Act was enacted and brought into force, this section contained five clauses. Then it read as under, providing the various deductions to be allowed, namely,-- (i) any amount not exceeding five hundred rupees, expended by the assessee on the purchase of books and other publications necessary for the purpose of his duties ; (ii) in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer-- (a) in the case of an assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less ; and (b) in the case of any other assessee who is in receipt of such entertainment allowance and has been continuously in receipt of such entertainment allowance regularly from his present employer from a date before the 1st day of April, 1955, the amount of such entertainment allowance regularly received by the assessee from his present employer in any previous year ending before the 1st day of April, 1955, or a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or seven thousand five hundred rupees, whichever is the least; (iii) any amount paid by the assessee in respect of taxes on professions, trades, callings or employments 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, and owns a conveyance which is used for the purposes of his employment, such sum as the Income-tax Officer may estimate in respect of such use as representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear ; (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.
13. The Finance Act, 1968 substituted the following Clause (iv) with effect from 1-4-1968 ; where the assessee is not in receipt of a conveyance allowance, whether as such or as part of his salary, and owns a conveyance which is used for the purposes of his employment, a sum representing the expenditure incurred by him in its maintenance and as representing its normal wear and tear, calculated in respect of each calendar month or part thereof for which the conveyance has been so used during the previous year, on the basis provided hereunder :-- (1) where the conveyance is a motor car and the amount of the salary due to the assessee in respect of the previous year-- (a) does not exceed Rs. 15,000 Rs. 150 ; (b) exceeds Rs. 15,000 but does not exceed Rs. 25,000 Rs. 200 ; (c) exceeds Rs. 25,000 Rs. 250 ;(2) where the conveyance is a motor cycle, scooter or other moped Rs. 50 ;(3) where the conveyance is a bicycle Rs. 5 ;(4) where it is a conveyance other than a (1) to (3) such amount as the Income-tax For item (1) in the above Clause (iv), which is mentioned hereinbefore, the following item was substituted by the Finance Act, 1969, with effect from 1-4-1970 : (1) where the conveyance is a motor car and the amount of the salary due to the assessee in respect of the previous year--(a) does not exceed Rs. 25,000 Rs. 200 ;(b) exceeds Rs. 25,000 Rs. 250.
14. By the Finance Act, 1970, with effect from 1-4-1971, the following was substituted for Clause (iv) as stated hereinbefore : 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 :-- is used for the purposes of his employment Rs. 200 ;(b) where the assessee owns a motor cycle, the purposes of his employment Rs. 75 ;(c) in any other cas Rs. 50 ; 15. By the Finance (No. 2) Act, 1971, with effect from 1-4-1972, 'Rs. 60' and 'Rs. 35' in Sub-clauses (b) and (c) of Clause (iv), as mentioned hereinbefore, were substituted respectively by 'Rs. 75' and 'Rs. 50'.
16. By the Finance Act, 1974, with effect from 1-4-1975, Clauses (iii), (iv) and (v), as they stood prior to that, were deleted. Clause (i) of Section 16 was substituted by the following : (i) in respect of expenditure incidental to the employment of the assessee, a sum calculated on the basis provided hereunder, namely :--(a) where the salary derived from such 20 per cent of employment does not exceed Rs. 10,000 such salary ;(b) where the salary derived from such Rs. 2,000 plus 10 employment exceeds Rs. 10,000 per cent of the amount by which (i) where the assessee is in receipt of a conveyance allowance from his employer ; or (ii) where any motor car, motor cycle, scooter or other moped is provided to the assessee by his employer for use by the assessee, otherwise than wholly and exclusively in the performance of his duties ; or (iii) where one or more motor cars are owned or hired by the employer of the assessee and the assessee is allowed the use of such motor car or all or any of such motor cars, otherwise than wholly and exclusively in the performance of his duties, the deduction under this clause shall not exceed one thousand rupees ; 17. By the Finance (No. 2) Act, 1980, with effect from 1-4-1981, the expression 'in respect of expenditure incidental to the employment of the assessee' in Section 16(i) reproduced immediately hereinbefore, was substituted by the expression 'a deduction of. By that very Act, the expression 'derived from such employment' in Sub-clauses (a) and (b) of Section 16(i) were also deleted. Thereafter, there have been some minor amendments in Section 16(i) regarding the quantum of the standard deduction allowable under Section 16(i).
18- Having stated hereinbefore that 'pension' paid to a pensioner, like the assessee before us, is covered by the expression 'salary' as given in Section 17, let us first examine as to the nature of employment of the Government servant vis-a-vis the Central Government. A perusal of the Constitution of India shows that unless a case falls within the four corners of Article 310(2) of the Constitution of India, which is not so in the case of the assessee before us, the relationship of all Government servants as a class and the Government cannot be said to be contractual. As laid down by the Supreme Court in Dinesh Chandra Sangma's case (supra), it is well settled that except in the case of a person who has been appointed under a written contract stipulated in Article 310(2), employment under the Government is a matter of status and not a contract, even though it may be said to have started initially by a contract in the sense that the offer of appointment is accepted by the employee.
19. Reading Articles 309 and 310 of the Constitution of India and the service rules framed by the Government of India, pension like seniority, as was before their Lordships of the Supreme Court in the case of S. G. Jaisinghani (supra), is one of the incidents of service conditions governing a Government servant. In Deokinandan Prasad's case (supra), their Lordships of the Supreme Court have given burial to the antiquated notion of pension being a bounty, a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced. Therein, the Supreme Court has authoritatively laid down that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters, that it may be necessary for the authority to pass an order to that effect, but the right to receive pension flows to the officer not because of any such order but by virtue of the rules.
20. In D.S. Nakara's case (supra), their Lordships of the Supreme Court in para 28 have laid down that pension to civil employees of the Government and the defence personnel as administered in India appear to be a compensation for service rendered in the past. However, as held in Dodge v. Board of Education  302 US 74, a pension is closely akin to wages in that it consists of payment provided by an employer, is paid in consideration of past service and serves the purpose of helping the recipient meet the expenses of living. This, according to their Lordships of the Supreme Court, appears to be the nearest to the approach of pension in this country with the added qualification that it should ordinarily ensure freedom from undeserved want. Their Lordships in the case of D.S. Nakara (supra) have, subsequently, in para 31, laid down as under : From the discussion three things emerge : (z) that pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and that it creates a vested right subject to 1972 Rules which are statutory in character because they are enacted in exercise of powers conferred by the proviso to Article 309 and Clause (5) of Article 148 of the Constitution, (n) that the pension is not an ex gratia payment but it is a payment for the past service rendered ; and (iii) it is a social welfare measure rendering socio-economic justice to those who in the hey day of their life ceaselessly toiled for the employer on an assurance that in their old age they would not be left in lurch. It must also be noticed that the quantum of pension is a certain percentage correlated to the average emoluments drawn during last three years of service reduced to ten months under liberalised pension scheme. Its payment is dependent upon an additional condition of impeccable behaviour even subsequent to retirement, that is, since the cessation of the contract of service and that it can be reduced or withdrawn as a disciplinary measure.
21. This takes us to Rules 8, 9 and 10 of the Pension Rules. Rule 8 lays down that future good conduct was an implied condition of every grant of pension and its continuance under these rules. The pension sanctioning authority has been authorised thereunder to withhold or withdraw a pension or part thereof, whether permanently or for a specified period, if the pensioner is convicted of a serious crime or is found guilty of grave misconduct. For this purpose, that authority has to make an order. Rule 8 lays down various formalities to be followed before making such an order. Under Rule 9, the President has reserved to himself the right to withhold or withdraw a pension or part thereof, whether permanently or for a specified period and of ordering recovery from a pension of the whole or part of any pecuniary loss caused to the Government if in any departmental or judicial proceedings, the pensioner is found guilty of grave misconduct or negligence during the period of his service including service rendered upon re-employment after retirement. The rule further lays down the procedure to be followed before the President exercises the said right, etc. We now come to Rule 10, under this rule, if a pensioner, who immediately before his retirement was a member of Central Service, Class I, wishes to accept any commercial employment before the expiry of two years from the date of his retirement, he shall obtain the previous sanction of the Government to such acceptance. Thereunder it is open to the Government to grant the said sanction or to refuse it.
Various matters pertaining to the grant of the sanction are detailed in this rule. It is also laid down in the pension rules pertaining to retired army personnel that the Government has the right to recall a retired army personnel for active service in case of certain contingencies/emergency. He as a retired army personnel is entitled to the canteen and other facilities like any active armed personnel. These pensionary rules read with the nature of the 'pension' paid by the Government to a pensioner, whether he is a civilian or an army personnel, shows, when considered in the light of the ratio of the decision of the Supreme Court in Dinesh Chandra Sangma case (supra), that the employment under the Government of a person is a matter of status and there is a passive employment link between the pensioner and the Government, though that link is an active link of employer-employee prior to his retirement. In a broader sense, the passive link between a pensioner and the Government, when the Government has the right to claim impeccable behaviour of a pensioner eve subsequent to the retirement and to control his taking a commercial employment after retirement, as brought out above, retains the character of 'employment'.
22. We now come to the ordinary dictionary meaning of the expression 'derived' as appearing in Section 16(i), as it stood in the year under consideration. In the Living Webster Encyclopedic Dictionary of the English Language by the English Language Institute of America, Chicago, the word 'derived' given therein has the meaning given below : Derive, v.t.-derived, deriving [L. Derivare], To draw or obtain from a source or origin ; to take, as a word, from a particular source ; form from a root, stem or the like ; chem. to obtain as one substance or compound, from another. To trace from a source or origin, as a custom or word ; declare to come from a particular source ; to obtain by reasoning ; deduce-v.i. To come from a source ; originate.
Derived, a drawn, obtained, or descended from a source.
De-RIVED-UNIT, n. Phys. any of the units of area, velocity, etc., which are derived from fundamental units-DE-RIV.--ER, n DE-RIV-A-BLE.a.
Taking this ordinary dictionary meaning of the expression 'derived' in conjunction with what we have stated in the immediately preceding paragraphs, it emerges that the salary in the shape of pension in the present case of the assessee before us, is derived from the employment of the assessee, as laid down in Sub-clauses (a) and (b) of Section 16(i) as it stood in the year under consideration. This also finds support when we give harmonious construction to the provisions of Sections 15,16 and 17. Such a harmonious construction is to be resorted to, as laid down by various High Courts and the Supreme Court to find out the true intent and purpose of. the Legislation, with which we are concerned in the present case. Another principle which is also to be kept in mind while construing these provisions is, as laid down by the Supreme Court in the cases of S. Teja Singh (supra) and Gurupad Khandappa Magdum (supra) that "If you are bidden to treat an imaginary state of affairs as real, you must also imagine as real the consequences and incidents which, if the putative state of affairs had in fact, existed, must inevitably have flowed from or accompanied it ; and if the statute says that you must imagine a certain state of affairs, it cannot be interpreted to mean that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." 23. As already stated, Section 17(1) defines 'salary' to include pension. This is an inclusive definition and by a deeming provision, pension is to be taken to be 'salary' for the purposes of Sections 15 and 16. When we come to Section 15, it lays down the diverse items of income which are chargeable to income-tax under the head 'Salaries'.
Clause (a) of Section 15 thereto by way of example enumerates an item of income to be "any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not". Reading this item in conjunction with Section 17(7), wherein pension is included in the definition of 'salary', it follows in the light of the principles enunciated by us in the preceding paragraphs 21 and 22, when read in conjunction with Section 17(1), that the expression 'employment' used in Section 16(i) is to be given a broader meaning and not a restrictive meaning and in that broader sense it would include the relationship in the case of a Government pensioner, as that of the relationship of an employer and employee, i.e., in the shape of a former employee and a former employer, comprehending thereby the broader sense of 'employment' provided for in Section 16(i). It is in this sense that the Tribunal has been consistently holding as in the case of the intervener S.D. Nargolwala (supra) or in the case of H. Venkatasubban [IT Appeal Nos. 2905 and 2906 (Mad.) of 1977-78, dated 4-5-1978] by the Madras Bench 'D', or in the case of Gopal Rao Ekbote [IT Appeal Nos.
1868 and 1869 (Hyd.)(SMC) of 1977-78, dated 17-7-1978] or in the case of S.K. Deb [IT Appeal No. 63 (Gauhati) of 1979, decided on 2-4-1980] that the 'employment' referred to in Section 16(i) comprehends not only the past active service, but also passive present employment between the pensioner and the Government. Further, the pension being taxed under the head 'Salaries' leaves no matter of doubt that in the computation of income under that head, all the deductions, including the standard deduction that follow and/or provided under the statute, are admissible. The standard deduction cannot be disallowed on the premises as urged by the departmental representative that the word 'employment' means 'the state of being employed'. The assessee being a pensioner was not at present in the year under consideration in the state of being employed. Simply because a person is entitled to the pension because of his past service, he, according to the departmental representative, can never be said to continue in employment. This approach of the department, in our view, in the light of our above discussion, does not appear to be correct.
24. The ordinary dictionary meaning of the words 'incident' and 'incidental', as given in the Living Webster Encyclopedic Dictionary of the English Language by the English Language Institute of America, Chicago, is to the following effect : Incidental : a. Occurring or liable to occur in connection with something else ; happening in fortuitous or subordinate conjunction with something else ; casual or incidental ; liable to happen or naturally appertaining to-n. Something incidental, as a circumstance ; pi. incidental items, esp. expenses.
Incident : .n. A distinct occurrence or event ; something that occurs casually in connection with something else ; an event or matter of accessory or subordinate character ; a distinct episode within a story or play ; a seemingly minor occurrence likely to touch off more serious consequences, as in international relations.
a. Liable or apt to happen ; naturally appertaining ; conjoined or attaching, esp. as subordinate to a principal thing ; befalling ; falling or striking, as of rays of light on a surface.
Legal Glossary of 1970 published by the Official Language (Legislative) Commission, Government of India, Ministry of Law, at page 131, defines 'incidental' to mean "occurring or likely to occur in fortuitous or subordinate conjunction with something else".
25. As rightly urged by the learned counsels, Mr. Syali and Mr.
Nargol-wala, actual expenditure is to be incurred by a pensioner to draw pension. We say so because he has to appear twice before the pension paying authority for verification. He has to maintain a bank account. For collection the pension paying slip, he has to go and collect the pension pay order and/or to deposit the same in his bank account. He has also to incur diverse expenditure on correspondence "with the pension paying authority as and when interim reliefs are allowed or allowable to the pensioner by the Government of India.
Further, as rightly argued by Mr. Syali and Mr. Nargolwala, the assessee is not required to prove that he is actually incurring an expenditure in relation to the employment in the sense in which we have interpreted the said expression. In this connection, we also accept the interpretation given in this behalf by the above Benches of the Tribunal, as also by the Allahabad Bench of the Tribunal in the case of Swaroop Kishan [IT Appeal No. 15 (All.) of 1978-79, decided on 10-8-1978].
26. We, therefore, on the facts and in the circumstances of the case and our above discussion, uphold the order of the AAC in the present case.
27. In the result, the appeal by the revenue fails and is hereby dismissed.