Judgment:
Jawahar Lal Gupta, J.
1. In these six references under the Income-tax Act, 1961, the following question has been referred to this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in affirming the order of the Appellate Assistant Commissioner of Income-tax holding that the income from the paying clinic should be taxed under the head 'Profit or gains of profession' and not under the head 'Salary'?'
2. Counsel for the parties have referred to the facts in I. T. R. No. 47 of 1985. These may be briefly noticed.
3. Dr. (Mrs.) Usha Verma was employed with the Government Medical College, Rohtak. She filed her income-tax return for the year 1980-81 and declared a total income of Rs. 52,160. This included the income of Rs. 32,985 received by the assessee from the pay clinic. A deduction of Rs. 13,100 was claimed as deduction from Rs. 32,985 on account of expenses.
4. The Assessing Officer-disallowed the deduction and held that the taxable income was Rs. 65,260.
5. Aggrieved by the order, -the assessee filed an appeal. She claimed that the share of fees given to her for working in the paying clinic, viz., Rs. 32,985 could not be assessed as salary. It fell under the head 'Profit or gains of profession'. She also claimed that in addition to the standard deductions from the 'salary' permissible under Section 16 of the Act, she was entitled to the expenses on account of salary to assistant, telephone, postage and stationery and car from the share of fees paid to her at the 'paying clinic'.
6. The appellate authority accepted the assessee's claim and held that the share of fees from the paying clinic was taxable as income from profession. Thus, the claim for deduction of Rs. 13,100 on account of expenses was sustained.
7. The Revenue filed an appeal before the Tribunal. The appeal having been dismissed, the Revenue filed a petition under Section 256(1) of the Act. Hence, this reference.
8. Learned counsel for the parties have been heard.
9. Mr. Sawhney, appearing for the Revenue, has contended that the share of fees paid to the assessees is a part of the salary. As such, it cannot be treated as income from profession. On the other hand, Mr. Amrit Paul, learned counsel for the assessees, has contended that the payment is made by the patient and not by the Government. The Government derives income on account of the professional skill of the doctor. The share of fees collected by the doctor is income from profession and not salary.
10. The short question that arises for consideration is-- Does the share of fees from paying clinic paid to the assessees fall within the mischief of Section 17(1)(iv) of the Act ?
11. The doctors working in Government hospitals used to examine patients at their residences. It appears that in the year 1971, the Government conveyed its decision that 'the private practice in its present form should stop and that paying clinics be started in various departments where the doctors should be allowed to work and to share income from these clinics after deducting the administrative charges, etc., . . .'. Detailed instructions in this behalf were issued vide memorandum dated December 21, 1971. A copy of this memorandum is at annexure D with Income-tax Reference No. 25 of 1987. In this memorandum it was, inter alia, provided as under :
1. That paying clinics should be run in the Medical College, Rohtak, with effect from January 1, 1972.
2. The paying clinics shall work on all days including Sundays and holidays from 4 to 5/6 : 00 p.m.
3. The doctors who opt for a share of income of these clinics shall 'work in the paying clinic for a minimum period of 8 hours in a week but those willing to work more may be allowed additional four hours including the time spent on Sundays and holidays'.
4. The paying clinics will be provided with the additional staff consisting of three cashiers/receptionists ; two ward attendants and one sweeper,
5. The rate of fees for different categories of doctors was also prescribed.
6. The income 'accruing from the paying clinics shall be distributed between the doctors, the para-medical staff and the Government as under :
Government: 40 per cent.
Consultation : 60 per cent out of which 10 per cent will be given to para-medical staff.'
7. It was further provided that the doctors 'making visits outside the town shall be considered on duty . . .'.
12. Various other provisions were also made.
13. On a perusal of this scheme, it is clear that the provisions for paying clinics was made within the official premises. The para-medical and other staff was provided by the employer. The rate of fees and the share therein was also prescribed. It is in the background of this factual position that the question as posed above has to be considered.
14. Section 15 of the Act provides for tax on salary. Section 16 delineates the permissible deductions. For the purposes of these two provisions, salary has been defined in Section 17 to include, inter alia, the 'fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages'.
15. The Roman soldiers were paid in the form of 'Sal'-- Salt. The word 'salary' is derived from the word 'salarium'. In a nutshell it means compensation for 'rendition of some sort of service'. According to Corpus Juris Secundum the word 'salary' is 'usually applied to the reward paid to a public officer for the performance of his official duties... '. It is paid 'at stated intervals'. Under the Income-tax Act, 1961, it is not merely defined to mean the compensation for services rendered but by providing an inclusive definition the scope of the provision has been widened. Even the pension, which is paid after the relationship of employer and employee ceases to exist, has been included in the definition of 'salary'. Similarly, gratuity which is paid on retirement is included within the term 'salary'. Thus, the legislation does not confine 'salary' within the narrow limit of compensation for services rendered during the subsistence of a relationship of employer and employee but even includes the benefits which may become available at the end of that relationship. In Clause (iv) of the Act it has been provided that even fees, commissions, perquisites or profits which are paid to a person 'in lieu of or in addition to any salary or wages' shall be included in income taxable under Section 15 of the Act.
16. What is fee ?
17. According to Corpus Juris Secundum (volume 36, page 628) 'fee' is 'in a generic sense, the word implies compensation or salary ; but if used in its narrow, distinctive sense it signifies the compensation for particular acts or services rendered in the line of official duties'. It 'has been defined as a charge fixed by law for the service of a public officer, or for the use of a privilege under the control of the Government; a charge for services; a charge or emolument.., '. This meaning conforms to the provisions of Section 17 of the Act and it is in consonance with the broad concept of salary as compensation for services rendered.
18. It is in this background that the factual position in the present case has to be examined.
19. Admittedly, the assessees were serving in the Government Medical College. By virtue of their employment with the Government, they were permitted to work in the paying clinics run in the college. Those who chose to work were given a share in the fees. The permission to work in the paying clinic, the rate of fees, the share therein was given by the Government. This share as paid by the Government to its employees would fall within the expression 'fees paid in addition to the salary'. The doctors got this share by virtue of their being employed in the hospital. They used the facility and infrastructure provided by the employer. Their share of fees was determined by the employer. Thus, it is in addition to their salary for the services permitted to be rendered by the employer. It would fall within the mischief of Section 17(1)(iv) of the Act.
20. Mr. Amrit Paul contended that the payment is not made by the employer but by the patients. Thus, it should be treated as income from profession and not as a part of the salary. The contention is wholly misconceived. In one sense everyone draws salary out of the money paid by the citizen either in the form of tax or in some other form. However, in the present case, the share of fees is given to the doctors in accordance with the terms laid down by the employer. In the circumstances of the case, it cannot be treated as income from profession.
21. Mr. Amrit Paul submits that prior to the year 1971, the doctors were doing private practice. The income was assessed under the head 'Profits or gains from profession'. After the introduction of the scheme in the year 1972, no change has taken place except in the location of the place of practice. Thus, the old practice should continue.
22. This contention cannot be accepted. There is nothing on record to indicate as to what was the position prior to the introduction of the Scheme from January 1, 1972. At the relevant time the doctors were paid their share of fees for working in the paying clinics. These paying clinics were run by the employer. The doctors were paid their share of the fees in accordance with the conditions laid down by the employer. These fees form a part of the salary as contemplated under Section 15 of the Act.
23. Counsel for the parties have referred to the observations of their Lordships of the Supreme Court in Karamchari Union v. Union of India : (2000)IILLJ603SC . In this case it was clearly held that (headnote) 'the inclusive definition of the word 'salary' given in Section 17 provides that apart from salary received by the employee, it includes ... any fees ... received by an employee ... In common parlance, fees, commissions, perquisites or payments of profits in lieu of salary may not be considered to be salary, But by this inclusive definition, it has been provided so'. These observations do not help the assessee in any manner.
24. No other point has been raised.
25. In view of the above the question as posed at the outset is answered in favour of the Revenue and against the assessees.
26. In I. T. R. No. 47 of 1985, the following additional question has been raised: 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was relationship of employees and employers worked in the paying clinic run by the Government ?'
27. In view of the above findings, even the second question is answered in favour of the Revenue.
28. In the circumstances, there will be no order as to costs.