High Court Of Madras
CIT vs. R. Rajendran
Sections 15, 16
Asst. Year 1975-76, 1977-78
R. Jayasimha Babu & K. Raviraja Pandian, JJ.
Tax Case Nos. 789 to 791 of 1995
2nd September, 2002
Counsel Appeared
T. Ravikumar, for the Applicant : None, for the Respondent
JUDGMENT
R. Jayasimha Babu, J. :
The question referred to us which is common for the asst. yrs. 1975-76, 1976-77 and 1977-78 which question has been referred at the instance of the Revenue is: “Whether, on the facts and in the circumstances of the case, the Tribunal, having held that the commission received by the assessee from M/s Kunal Engineering Company Ltd. apart from his regular salary income would form part of his salary income, was right in holding that only the net commission claimed by the assessee, after deduction of various expenses, such as canvassing, salary, travelling, telephone, postage, etc. expenses and depreciation on car should be assessed to tax as the assessee’s income from salary.” The assessee during these years was working as the regional sales organiser of Kunal Engineering Company Ltd. Besides salary paid to him he was also given sales commission which was on volume of sales effected by him. The assessee claimed that the expenses incurred by him for earning the commission should be allowed as a deduction. That claim was negatived by the AO. That disallowance was upheld by the CIT(A). The Tribunal, on further appeal, held that in principle the assessee was entitled to deduction and remitted the matter to the AO to verify the claim of the assessee with reference to vouchers, etc. The Tribunal did so even after holding that the commission is salary and taxable under the same head.
This Court in the case of CIT vs. Abdul Wahid and Co. (2000) 243 ITR 467 (Mad) held that where the employer chooses to remunerate the services of the employee by adopting different measures for different aspects of the services received from the employee, the payment made to the employee for those services retain the character of being regarded as an amount paid to the employee for the skill, labour and the time put in by such an employee for the benefit of the employer. It was also observed by the Court that, “It is not the label given to the payment that is determinative of the question as to whether it is a salary. The definition of salary in s. 17(1) of the Act is an inclusive definition. Sub-cl. (iv) thereof specifically refers to commission paid in lieu of, or in addition to, any salary or wages.” The commission paid to the assessee here was with reference to the volume of sales. The assessee was employed as a regional sales manager and the commission paid was obviously to enthuse the employee to effect a higher volume of sale. The commission so paid in addition to what the employer had fixed as a salary would also form part of salary. The question of allowing any deduction therefrom on the ground that the assessee had incurred expenses to earn that commission, therefore, does not arise. The question referred to us is, therefore, answered in favour of the Revenue and against the assessee.
[Citation : 260 ITR 476]
