JUDGMENT
Suhas Chandra Sen, J.
1. The Tribunal has referred the following question of law to this court under Section 256(1) of the Income-tax Act, 1961 :
“Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction under Section 1(i(i) of the Income-tax Act, 1061 ?”
2. The assessment year involved is the assessment year 1975-76, for which the corresponding accounting period of accounting year is the financial year ending on March 31, 1975.
3. The assessee is a retired Commissioner of Income-tax and receives pension which was assessed under Section 15 on “salary”. The assessee claimed standard deduction under Section 16(i) of the Income-tax Act, 1961. The Income-tax Officer disallowed the claim on the ground that the assessee was not an employee. The Appellate Assistant Commissioner agreed with the finding of the Income-tax Officer.
4. On further appeal, the Tribunal held :
“The problem is not really free from difficulty. We have very anxiously considered the contentions raised on behalf of both the sides.
We may say straightaway that our task has become easier by virtue of a Tribunal’s decision and it is very proper that we should follow the same. Apart from that, what we find is that, in this particular case, there is income form real salary in the sense that some arrears were received by the assessee which were payable to him while in service. That apart, the assessee has argued before the lower authorities that he had to go to the treasury to collect his pension as also to move about in connection with settling his pension papers (this is the first year after retirement). Necessarily, therefore, he has to incur some expenditure for the purpose of getting his pension.
Over and above what we have staled, if we carefully read Section 17, it is clear that, for the purposes of both Sections 15 and 16, salary includes pension. It, therefore, follows that, for the purpose of assessing the pension under the head ‘Salary’, both Sections 15 and 16 above have to be followed. Section 15 deals with the chargeability of income under the bead “Salary”, while Section 16 deals with deductions. In fact, Section 16 deals with the only type of deduction, namely, ‘standard deduction’ as it is called. Therefore, there will be no meaning when the Legislature stated that, both for the purpose of Sections 15 and 16, salary includes pension unless it is really intended to give the benefit of deduction under Section 16 even in respect of pension. The definition given in Section 17, if it is taken to its logical end, would result in the benefit of gelling a deduction under Section 16. If this is kept in mind, we have no doubt that the assessee is entitled to deduction under Section 16.”
5. We are of the view that the Tribunal has come to a correct decision in this case.
6. The charge of tax on income from “salaries” is imposed by Section 15 of the Act, which is as under :
“15. The following income shall be chargeable to income-tax under the head “Salaries”-
(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.
Explanation.–For the removal of doubts, it is hereby declared that where any salary paid in advance is included in the total income of any person for any previous year, it shall not be included again in the total income of the person when the salary becomes due.”
7. Section 16 enumerates the deductions that are allowable in computing the salary income. At the material time, there were only two types of deductions which were allowed by Section 16. Under Sub-clause (i) of Section 16, standard deduction was allowed and Sub-clause (ii) provided for deduction on account of “entertainment allowances specifically granted to the assessee by his employer, Section 16 lays down :
’16. The income chargeable under the head “Salaries” shall be computed after making the following deductions, namely :–
(i) in respect of expenditure incidental to the employment of the assessee, a sum calculated on the basis provided hereunder, namely ;–
(b) where the salary derived from such employment exceeds Rs. 10,000
Rs. 2,000 plus 10 per cent. of the amount by which such salary exceeds
Rs. 10,000
or
Rs. 3,500,
whichever is less. ….
(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.’
8. The word “pension” normally will not come within the ambit of the expression “Salary”. Section 17, however, has given an extended meaning to “salary”. The material part of Section 17 is set out hereunder ;
’17. For the purposes of Sections 15 and 16 and of the section,–
(1) “salary” includes,–
(i) wages ;
(ii) any annuity or pension ; . . . . (v) any advance of salary ;….’
9. The first question that arises in this case is- that, if salary will not include “pension” in Section 16, then what was the purpose of the inclusive definition of Section 17 ? It specifically states that, for the purposes of Sections 15 and 16, “salary” will include, inter alia, “pension”. No distinction can be drawn on the ground that the assessee, at the material time, was not in employment. The charge imposed by Section 15 is not only on what is paid by an employer but also on what is paid or allowed by a former employer.
10. The other feature of the case is that, in order to get deduction, the assessee does not have to prove the actual expenditure incurred. The actual expenditure incurred incidental to the employment of the assessee may be larger than the permitted deduction or it may be smaller than the amount permitted to be deducted. In either case, the intendment of the Legislature is that the assessee will get standard deduction from income which is to be assessed under the head “Salary”.
11. There is a similar provision in Section 24 of the Income-tax Act, 1961, where deduction is allowed from “income from house property” on account of repairs. The assessee does not have to prove the exact expenditure on account of repairs. These two sections will have to be contrasted with Section 37 where deduction is permitted on all expenditure wholly and exclusively incurred for the purpose of the business in the computation of the business income of the assessee. Similarly, under Section 57(iii), expenditure laid out or expended wholly and exclusively for the purpose of making or earning “income from other sources” has to be allowed as deduction. In these two sections, it is the actual expenditure which has been incurred by the assessee that is allowed. But, unlike Section 37 and Section 57(iii), deductions under Sections 17 and 24 are allowed on the basis of a legislative formula. The assessee does not have to prove that the expenditure was actually incurred.
12. This scheme of the Act goes to show that the legislative intent is to allow the deduction irrespective of the actual expenditure incurred by an assessee incidental to employment.
13. The dispute as to whether the assessee was actually in employment becomes quite immaterial, Even without being in actual employment, the amount received by the assessee as “pension” is being brought to tax under Section 15 by virtue of the extended definition of salary given in Section 17. The extension of the definition of salary to Section 16 will become meaningless if an assessee cannot get the benefit of deduction under Section 16(i) in respect of the amount received as “pension” which is chargeable under the head “Salaries”.
14. Another feature that is to be borne in mind is that an assessee who gets “pension” may have to incur certain expenditure for drawing the “pension”. Every assessee may not have to do this. But the Legislature has evolved a formula which is to be applied irrespective of the actual expenditure incurred by the assessee.
15. Our attention was drawn to a judgment of the Punjab and Haryana High Court in the case of CIT v. Saroop Krishan . We are in respectful agreement with the views expressed in that judgment.
16. The point taken about the employer-employee relationship by the Income-tax Officer is also of no substance. The assessee is getting pension because, under the terms and conditions of his employment, he was entitled to get pension. Because he was actually employed by the Government, he was given salary, pension, gratuity and other benefits. The pension is given because the terms of employment provided for payment of such pension.
17. The question is answered in the affirmative and in favour of the assessee.
18. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
19.I agree.