Judgment:
A. Pasayat, J.
1. At the instance of the Revenue, the following questions have been referred to this court by the Income-tax Appellate Tribunal, Cultack Bench, Cuttack (in short, 'the Tribunal'), under Section 256(1) of the Income-tax Act, 1961 (in short, 'the Act'), for opinion :
' (1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the shop-pool commission received by the assessee be assessed as income from 'Other sources' and deduction at the rate of 30 per cent, be allowed on account of expenses
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee being an employee in Messrs. Usha Sales Corporation, deriving both salary and commission could not be assessed under Section 16 of the Income-tax Act, 1961, for his commission receipt ?'
2. The background facts as culled out from the statement of case drawn up by the Tribunal and the orders annexed thereto are to the following effect :
Bijay Kishore Kapoor ( hereinafter referred to as ' the assessce ' ) was working as (he shop in charge of a concern named Nalanda Sales Corporation (for short, ' the employee '). In addition to a sum of Rs. 175 per month which he received as salary, sums of Rs. 26,392 and Rs. 34, 968 were paid to him for the assessment years 1980-81 and 1981-82, respectively. The employer had reflected payment of commission under the head ' Salary' in its accounts and deducted tax at source as required under Section 192 of the Act. But the assessee reflected the amounts received under the head 'Income from other sources', after claiming deductions to the tune of Rs. 12,360 and Rs. 17,810 for the two assessment years in question in his returns of income. The Assessing Officer was of the view that the commission received was in fact part of salary and, accordingly, included the amounts received in the computation of the salary and after allowing deductions permissible under Section 16(1) of the Act, assessed the balance as taxable income under the head 'Salary'.
3. In appeal, the Appellate Assistant Commissioner of Income-tax, Berhampur Range, Berhampur, accepted the assessee's contention that the income was taxable as income from other sources. He allowed 30 per cent. of the gross commission received as expenditure incurred by the assessee in earning the commission. He, however, recorded a positive finding that the income was assessable under the head 'Salary', but deduction of 30 per cent, for expenses was allowable. The Revenue carried the matter in appeals before the Tribunal. The assessee filed a cross-objection supporting the order of the Appellate Assistant Commissioner in respect of the two years. The Tribunal came to hold that the income was assessable as income from other sources, and the 30 per cent. deduction allowed by the Appellate Assistant Commissioner was in order. On being moved by the Revenue, the aforesaid two questions have been referred to this court for opinion.
4. In spite of notice, the assessee has not entered appearance.
5. According to Mr. A. K. Hay, learned counsel for the Revenue, the approach of the Appellate Assistant Commissioner and the Tribunal was erroneous. The said authorities have overlooked the basic features of the case. The terms of engagement of the assessee were before the Income-tax Officer who copiously referred to various terms in his orders of assessment. These were not considered by the appellate authorities and, therefore, the conclusions arrived at by the Appellate Assistant Commissioner and the Tribunal are not sustainable.
6. At the outset, we must indicate that the Tribunal committed an error of record by concluding that the Appellate Assistant Commissioner had held that the income in question was to be assessed as income from other sources. In reality, the Appellate Assistant Commissioner has categorically concluded that though the commission has to be assessed under the head ' Salary ' the appellant was entitled to a deduction of 30 per cent. of the gross commission received by him as expenditure incurred for earning such commission.
7. The conditions imposed on the assessee at the time of appointment clearly reflect that both the assessee and the employer construed the terms to be in relation to ' employee ' and ' employer '. The Tribunal has accepted that the commission has to be ordinarily assessed under the head ' Salary '. The position is clear with reference to Section 17(l)(iv) of the Act. There may be cases where, in addition to the employment with the employer, a person undertakes various other jobs thereby earning commission. The Appellate Assistant Commissioner recorded a categorical finding that commission has to be assessed under the head ' Salary' for the two years of assessment. The question of granting any expenditure beyond the limits prescribed under Section 16(1) of the Act does not arise. The Appellate Assistant Commissioner has taken note of the fact that the assessee who was described as the manager was getting a monthly salary of Rs. 175 and was required to look after the affairs of the company on wholetime basis. This itself is an indication of the fact that what was being paid to the assessee as commission formed a part of the emoluments and, therefore, the Assessing Officer had rightly treated the amount as a part of the salary. The, finding of the Tribunal that there is no element of salary involved in earning the commission appears to be contrary to the facts on record. The terms of engagement clearly reflect the relationship between the employer and the assessee. One relevant aspect has also been overlooked by the Appellate Assistant Commissioner and the Tribunal. The employer itself considered the payment as salary and made deductions under Section 192 of the Act while making payment.
8. The categories of income chargeable to income-tax under the head 'Salary' are indicated in Section 15 of the Act. Section 16 deals with deductions from salaries. In terms of Section 17, Clause (iv), 'salary' includes any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages. Section 17 contains definitions within a definition. For the purposes of the section, there is no difference between commission which is wholly dependent upon work done and fixed salary on a periodic footing. In Mudd v. Collins [1925] 9 TC 297, it was observed that commission voluntarily paid by a company to its employee-director for negotiating the sale of a branch of the company's business WHS taxable as 'salary'. In Gesteterr Duplicators P. Ltd v. CIT : [1979]117ITR1(SC) , it was observed as follows (at page 13 ):
' It is thus clear that if under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary and, therefore, such remuneration or recompense must fall within the expression 'salary' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act.'
9. The fact situation is identical here. The Assessing Officer-had rightly assessed the amount under the head ' Salary '. The Appellate Assistant Commissioner, after having correctly concluded that the amount was taxable under the head ' Salary', had erred in directing allowance of expenditure at the rate of 30 per cent. of gross receipt. The Tribunal's conclusions are not defensible,
10. Our answer to both the questions are in the negative and in favour of the Revenue and against the assessee.
11. The references are accordingly disposed of. No costs.
D.M. Patnaik, J.
12. I agree.