NDLI: Gestetner Duplicators (pvt.) Ltd. Vs. Commissioner of Income-tax, West Bengal

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income-tax Act 1961
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Income Tax Act, 1961 (43 of 1961)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Income-tax Act, 1961 - s. 17(1) (iv) and r. 2(h) of Part A of Fourth Schedule - Scope of.Salesmen entitled to commission in addition to salary - Assessee credited into the provident fund accounts of salesmen its share of PF contribution calculated on both salary and commission - Assessee's contribution of PF on commission, ff could be claimed as an allowable deduction under s. 36(1) (iv).Words and phrases: Salary-Meaning - salary, if includes commission. The expression "salary," under s. 17(1)(iv) of the Income Tax Act, 1961, includes "any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages"; under r. 2(h) in Part-A of the Fourth Schedule to the Act, which contains Rules relating to recognised Provident Funds, the term 'salary' includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites, where an assessee, as an employer, has paid any sum by way of contribution towards a recognised provident fund, s. 36(1)(iv) allows such sum as a deduction in computing the income subject to such limits as may be prescribed for the purpose of recognising the provident fund. The term "contribution' is defined in r. 2(c), of part A of the Fourth Schedule as any sum credited by or on behalf of any employee out of his salary or by an employer out of his own moneys to the individual account of an employee but does not include any sum credited as interest.The assessee maintained a provident fund which was recognised by the Commissioner of Income-tax in 1937. Under r. 2 of the Provident Fund Scheme Rules "salary" meant not only fixed monthly salary but also commission and dearness allowance as might be paid by the company to its employees.As a term of the contract of employment, in addition to monthly salary, the assessee paid to each of the salesmen commission at a fixed percentage of turnover achieved by them. The assessee's share of the contribution to the provident fund was calculated on the basis of both salary as well as the commission paid to each of the salesmen.In respect of assessment years 1962-63, 1963-64 and 1964-65 the assessee claimed the whole amount paid by it towards provident fund contributions, as a deduction allowable under s. 36(1)(iv) of the Income-tax Act and for this purpose it relied on r. 2 of its Provident Fund Scheme Rules.Out of the total Provident Fund contributions claimed as allowable deduction under s. 36(1) (iv) the Income-tax Officer disallowed that part of the assessee's contribution which related to the amounts calculated on the basis of commission paid to the salesmen on the ground that under r. 2(h) of Part A of the Fourth Schedule the expression "salary" did not include commission paid to the employees.The assessee's appeal in respect of the assessment year 1962-63 was rejected by an Appellate Assistant Commissioner; but in respect of the other two assessment years another Appellate Assistant Commissioner allowed its appeals. On further appeals both by the assessee and the Department the Appellate Tribunal held that the commission paid being a part of the contractual obligation, it was a part of the salary paid to the employees and therefore contributions made towards provident fund on the commission were allowable as a deduction under s. 36(l)(iv) of the Act, and secondly since the provident fund was a recognised fund which fulfilled the conditions laid down in r. 4(c) of Part A of the Fourth Schedule, the employer's contributions were entitled to be deducted. The High Court answered the reference in favour of the Department. It held that since commission, unlike salary, was not a fixed monthly payment it could not be included within the meaning of "salary" and that the meaning of the term "salary" could not be extended by the assessee by defining it in a particular manner in its provident fund scheme rules for the purpose of recognition of its fund. The High Court relied upon a circular dated January 16, 1941 issued by the Central Board of Revenue which provided that unless commission and bonuses were fixed periodical payments not dependent on a contingency, they were not covered by the term "salary". On further appeal to this Court it was contended on behalf of the Revenue that the definition of "salary" in r. 2(h) clearly showed that it did not include commission and since commission was nothing but an allowance paid without reference to any time factor which is associated with salary or wages, it is not deductible under s. 36(1)(iv).
Judge	Hon'ble Mr. Justice V.D. Tulzapurkar
Neutral Citation	1978 INSC 259
Petitioner	Gestetner Duplicators (pvt.) Ltd.
Respondent	Commissioner Of Income-tax, West Bengal
SCR	[1979] 2 S.C.R. 788
Judgement Date	1978-12-14
Case Number	565-570

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