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TMI Blog2012 (10) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... tial questions of law as follows:- "(A) Whether the receipt of the amount of dearness relief Rs. 53,640/- to the appellant, a pensioner (retired High Court Judge), in the assessment year 1998-99, is income and taxable as 'profit in lieu of salary' (Section 17(3)(ii) of Income Tax Act? (B) Whether dearness relief can be said to be profit in lieu of salary within meaning of Section 17(3)(ii) of the Income tax Act? (C) Whether dearness relief and dearness allowance can be said to have same meaning and authority below erred in law in treating dearness relief and dearness allowance to be meaning the same thing?" 4. The appellant assessee filed a return in the capacity of individual showing total income of Rs. 1,72,800/- on 30.10.1998 for the assessment year 1988-99. The return was processed under Section 143(1) on 14.12.1999 on the income returned. A notice under Section 148 dated 17.2.2000 was issued and was served on the assessee. In reply the assessee sent a letter on 4.5.2000 stating that he has already filed a return, which may be treated as the return filed in compliance to the notice under Section 148 of the Act. During the course of assessment proceedings he file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness relief does not fall under any of the clauses of section 10 specified in the parenthetical clause of section 17(3)(ii)." 8. The Tribunal after referring to the definition of income under Section 2(24) and the definition of salary under Section 17, which includes profits in lieu of salary and which also includes the amount of any compensation under sub-clause (i) due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification and the terms and conditions relating thereto, held that the dearness relief satisfies all the ingredients as contained under Section 17(3)(ii) of the Act and being profits in lieu of salary is liable to be treated as salary. The payment is relatable to employment; it is not based on personal or extra employment consideration and it is a payment falling in parenthetical clause of Section 17(3)(ii). It is in the nature of recompense or reward for the services rendered by the employee and is thus clearly covered under the expression 'profits in lieu of salary'. It cannot be regard as payment made on personal or extra employment considerations. The words 'due to or received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary cannot be said to profits in lie of pension. There is no expression in the Income Tax Act like profits in lieu of pension. Any payment under Section 17(3) of the Act pertains to pensionary benefits like compensation, gratuity, commutation, leave to encashment etc. Pension is income chargeable to income tax by virtue of Section 4, 15, 16, 17(1) and not by virtue of Section 17(3)(ii). If a receipt is not specifically made taxable, such as dearness relief, it cannot be included in the total income chargeable to income tax. The dearness allowance and dearness relief are two distinct terms. While dearness allowance is taxable as income under Section 2(24)(iii)(b), the dearness relief is not taxable as income. The expression dearness relief does not find mention anywhere in the definition of income under Section 2(24) of the Act. 12. Shri P.K. Jain submits that dearness relief is not a revenue receipt. It is gratuitous in nature. Such payment do not fall in the category of taxable income. The taxing statute has to be construed strictly and literally. No extensive and inclusive interpretation can be given to the words and expression used in the taxing statute. Since the term 'dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the judges are entitled to receive over and above the amount of pension payable to them. The High Court did not express any opinion as to whether the ad hoc relief is a condition of service, which cannot be varied to the disadvantage of the judges in lieu of proviso to Art. 221(2) of the Constitution. The High Court granted relief by issuance writ of mandamus directing the Central Government to compute and determine the retirement gratuity payable to an officer of the rank of Secretary to the U.P. State Government of the Indian Administrative Service at the time of retirement of the petitioner and to pay same to them along with interest. 18. The other judgments cited by Shri P.K. Jain are not relevant to the questions raised in this appeal. 19. Section 17 of the Act defines salary, perquisites and profits in lieu of salary. The dearness relief is neither salary nor perquisite. It would thus fall within the meaning of 'profit in lieu of salary', under Section 17(3) and would fall under Clause (ii), which includes any payment other than any payment referred to in Clause 10, Clause 10A, Clause 10B, Clause 11, Clause 12, Clause 13 or Clause 13A of Section 10 due, to or received ..... X X X X Extracts X X X X X X X X Extracts X X X X
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