43·8
**COMMISSIONER OF INCOME TAX, ASSAM AND.**
**NAGALAND ETC.**
v.
**SHRI** **G.** **HYATT**
_January_ 21, 1971
[J. C. SHAH, C.J., K. S. HEGDE AND A. N. GROVER, JI]
_Inaome-tax Act_ 1961, _ss._ 17 _and 56-Contribution to unrecognised_
_provident fund-Interest thereon-Whether_ _caxab/e_ _under_ _s._ 56.
On the question whether an amount representing the interest on the
amount of the assessee's own contributions to an unrecognised provident
fund was assessable µnder the -residuary s. 56 of the Income-tax Act, 1~61.,
HELD : The arlii;mnt was liable to be assessed.
The receipt of aninterest of any investment is a gain made by the
**investor** **and** **there'fore** **the** **same** **is** **1** **income''.**
**B**
### c
In view of s. 17(1)(iv), all receipts•·bf profits in.lieu of salary have
to be considered as salary. In defining the expression 'profits in lieu of
salary','ithe legislature exclucieclfrom the scope of that expression any D
payments received by the assessee' from a provident fund, his own contributions to the fund or any interest on such contributions. TherE1iore
this receipt cannot be considered as salary, though undoubtedly that is an
**income.** **As** **the** **income** **in** **question** **is** **not salary** **and** **the same cannot**
be said to be either interest on the securities; income from house property,
**profits and gains of business** **of** **profession** **or** **capital gains,** **it** **·IJlas** **to be**
considered as 'income from other sources' and brought to tax un\ler s. 56.
E
Section 56( I) provides that income of every kind which is not to be excluded from the total income under the Act shall be chargeable to incometax' under any of the heads specified in s. 14 item "A" to "E". [439 C-GJ
CIVIL APPELLATE JuR1smcT10N : Civil Appeal No. 1174 of
1967. .
Appeal from the judgment and order dated August 22, 1966
of the Assam & Nagaland High Court in Income-tax Reference
No. 3 of 1966.
_Jagadish Swarup, Solicitor-General,_ _G._ C. _Sharma, R._ _N._
_Sachthe,v_ and _B. D. Sharma,_ for the appellant,
_T._ _A._ _Ramachandran,_ for the respondent.
The Judgment of the Court was delivered by
**Hegde, J.** The Commissioner of Income-tax, Assam and Nagaland has brought these appeal by certificate. The assessment
with which we are concerned in this appeal is for the assessment year 1'963-64, the relevant accounting year Tu the financial
year 1962-63. The assessee was the manager of a Tea Estate
under the managing agency of _Ml_ s. Gilla,nders Arbuthnot &
Co. Ltd. The said Co. had a Provident Fund scheme for its
employees. But that provident fund was not a recognised one.
The assessee retired during the previous year relevant to assess
ment year 1963-64 and received out of this provident **fund** **an**
**F**
G
**H**
C.l.T. _v._ G. HYATT _(Hegde,_ _J.)_ 439
A
amount of Rs. 27,948/- which represented the interest on the
amount of his own contribution to the fund, The Income-tax
Officer assessed this amount as the assessee's income from other
sources. That order was confirmed ~ appeal by the Appellate
Assistant Commissioner. But on further appeal to the tribunal
by the assessee, the tribunal came to the conclusion that the reB ceipt in question being profits 'in lieu of salary', the same was
his salary as defined in s. 17 of the Income-tax Act, 1961 (to
be hereinafter referred to as the Act) ; the SaJ!le having not been
assessed as his salary, the assessment order relating to that item
of receipt WJIS not legal. At the instance of the· Commissioner,
the tribunal referred the following question of law to the High
C Court of Assam and Nagaland for its opinion :
"Whether on the facts and circumstllillces of the
case and having regard to the provisions of section
17(3)(ii) of the Income-tax Act, 1961 the amount
Rs. 27,948/- representing the interest on the amount
of the assessee's own contpbutions to an unrecognised
B provident fund was assessable under the residuary
section 56 of the said Act?"
The High Court answered that question in the negative and
in favour of the assessee. While'it came• to the conclusion that
the receipt in question cannot be considered as salary as defined
in s. 17, in its view the same was exempt from payment of tax
E in view of s. 17 ( 3 )(ii). The Commiss10ner is challenging the
above conclusion.
The receipt of Rs. 27,948/- is undoubtedly an income as
defined by s. 2(24). The receipt of an interest on any invest
ment is a gain made. by the investor and therefore the same is
"income". The next question is whether the said income is ex11
empt from tax or if it is not exempt under what head the same
has to be brought to tax ?
Section. 14 of the Act gives the heads of income. They are :
<A) Salanes; (B) Interest on securities; (C) Income from
house pr~perty;. (D) Profits and gains of business or profession;
G _(E)_ Capital gams and (F) Income from other sources.
The salaries are brought to tax under s. 15 and "the income
from. other sources" is brought to tax under s. 56. In this
appeal we ~re not. co?cerned with the other heads of income
The s~lary 1~. defined m s. 17 as including any "profits in lieu
of o_r m add1t10n to any salary or wages" [s. 17(1) (iv)]. SubH section _(_ 3) of s. 17 say:; :
"profits in lieu of salary" includes.# * •
440 SUPREME COURT REPORTS [1971 ]3 S.C.R
(ii) any payment. . . . . . . . . . due to or received
by an assessee from an employer or a former employer
or from a provident or other fund (not being an ap#### proved superannuation fund) to the extent to which it
_does not_ consis~ _of contribution by the_ _assessee_ _or_ _inte-_
_rest on_ _such_ _contributions."_
(emphasis supplied)
The contributions to recognised provident funds are dealt
with by other provisions of the Act. Herein we are concerned
with the contribution to an unrecognised provident fund. The
learned judkes of the High Court opined that the receipt by ~he
assessee with which we are c0111cemed is exempt from. the payment of tax in view of s. 17(3}(ii). In our opinion they were
clearly in error in arriving at that conclusion. Deductions from
salaries are dealt with by s. 16. In view of s. 17 (1 )(iv), all
receipts of profits in lieu of salary have to be considered ·as
salary. ;But then the question is what is meaint by "profits in lieu
of salary". In defining the expression "profits in lieu of salary",
the legislature excluded from the scope of that expression any
payments received by the assessee from a provident fund, his own
contributions to the fund or any interest ·on such contributions.
From that it follows that 'the receipt of Rs. Z7,948/- by the
assessee in the relevant accounting year cannot be considered as
salary though undoubtedly that is an income. Section 17 has
nothing to do either with deductions or with exemptions. It is
merely a provision defining the expression "salary". As the _ih-_
come in question is not salary and the same cannot be said to
be either_ interest on the securities; income from house property; profits. and gains of business or profession or capital gains.
it' has to be considered as "income from other sources" and
brought to tax under s. 56. Section 56 ( 1) provides.,. that
income of every kind which is not to be excluded
from the total income under the Act shall be chargeable to·
income-tax under the head income "from other sources" if it is
nof chargeable to income-tax under any of the heads specified
in s. 14 items 'A' to 'E'.
In our opinion the meaning of s. 17 ( 3 )(ii) is plain and
unambiguous. Hence there is no need to call into aid any. of
the rules of CQDStruction as was sought to be done by the High
Court.
The respondent was not represented before this Court. We
are obliged to Mr. T. A. Ramachandran for ~cceding t~ our reqiiest to appear on his behalf an _amicus curiae_ and assist us at
the time of hearing of the appeal.
A
B
## c
D
E
F
G
H
A
B
C.I.T. _v._ G. HYATT _(Hegde,_ J.) 441
For the reaso$ mentioned above we allow this appeal, discharge the answer give11 by the High Court and answer the question referred to the High Court in the affirmative and in favour
of the Department. Under the circumstances of the case we make
no order as to costs.
#### Y.P. Appeal al/owed.
