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    Shourya Garg
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    3 views7 pages

    Salaries

    Uploaded by

    Shourya Garg

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    © All Rights Reserved
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    CHAPTER FOUR Salaries Essential norms of salary income {4g.inorder to understand the meaning of expression “salary’, one has to keep in mind the following norms? = 461 Relationship between payer and payee'- Income under the head *Salaries’ covers all remuneration due/paid to a person in respect of services rendered! by hime underan express or implied contract of emptoyment- Charge under this head of income presumes the relationship ota ‘employer-and-anremployee between the payer and payee in contrast to tha ‘gent. The distinction _between the two types of relationship is vital because income earn n ‘employee from his employer is chargeable under the head “Salaries”, whereas income earned by an agent ISchargeable ther under the head Proftsand guns of Business or profession” or under the head Income from other sources’—Cowan v. Seymour [1920] 1 KB 500 (CA). In this respect, the following broad propositions should be kept in view : {46.1-1 EMPLOYER AND EMPLOYEE VIS-A-VIS PRINCIPAL AND AGENF~An employee works under the direct control and supervision of his employer. He not only receives instructions from his employer but is subject to rig ¢ employer to Control the manner in which he should carry out the instructions. On the other hand, an agent is generally free to carry out his principal's instructions according to his own discretion. me 46.1-2INCOME FROM HOLDING OF AN OFFICE - WHETHER FROM EMPLOYMENT - The emoluments tobe taxable under the head Salaries" must be received by virtue-of an offce-amounting ‘to employment. Mere Kolding of an office is not, however, sufficient to bring the tax incidence under the head “Salaries =< 46.1-3 EMPLOYER AND CONTRACTOR - THEIR RELATIONSHIP -It may be true in a broad sense to say thatone whois employed is an employee and it would certainly sound funny to refer to Tbank president as an employee of his bank. While, however, it is strictly correct to say that everyone who is an employee is employed by anoilier, itis Tot equally true to say that everyone who is employed by another is his employee, Formstance a solctor whois engaged by a len! 10 do cor oe himis employed by him for-that purpose, as his doctor who gives his professional skill to a patient, Rutno one would think of referring to etherof these profeetons| en as an emploves OFFS clea” or his patient—Carter v. Great West Lumber Co.[1919] 3WWR 901. = Sii-contracor- A sub-contractor is ot the employee of the contractor employing him— Rapson v. Cubitt{1842] 9 M & W710. An employee of sub-contractor is prima facienot the employee of the main contractor—Johnson v. Lindsay & Co. [1891] AC 371 (HL). However, an employee of orte employer may become the eniployee of another if services are lent. : 46.1.4 PAYMENT RECEIVED IN CAPACITY OTHER THAN EMPLOYEE - Payment received by an individual from aperson other than his employer cannot be termed as salary and consequently, such payment is not eable to tax under the head “Salaries”. Such payment may be chargeable under the head ‘Profits and gains of business or profession’. For instance, commission received by a director from company is salary if the director is an employee of the company. If, however, the director is not an employee of the company, commission cannot be termed as salary and consequently, it will be ble either under the head “Profits and gains of business or profession” or “Income from other sources" Similarly, emolumentsreceived by acollege lecturer from his collegeis salary, irrespective Of the fact whetherit is received in cash or kind, or whether it is received for academic work or non- 129 Income-tax - Salaries Para 46.2 ; at » same lecturer is paid for s a wardenship allowance). When, howe the same lecturer is paid for ting academic Ore ow epmuneration isnotsala'y.2 sed from the employer, item iol point is that what is noi estion pal yer by and snpable under the hea aeeived from employer carne! js not treated as an employee therefore, not chargeable to (2 er ces"— Circular Letter “Income from other source: : al ve customers anc paid tots own lected by a hotel fro oe hands of employees—ITC Ltd.v. CIT [2016] 68 taxmanne 9 SO senodiference bet oe ages Conceptually not different- COncED y, thereis no nce between aa eee Both concer ensation for work done preersices renseret sheuah gisinarty lary and wages. H L type of worl 2 wages are paid DY aid i wre compervices of non-manual type of WoT in salary avidin connection with Services OF Pom TTT pid. v. CIT (M Sy] LITTIR | @C), Jary from more than one Mmeome from other sources” Te point is | hat i 7 tetermed om alary, A Member of Parliament O° State Legislature ‘allowances received by him a f the Government. end allowances received by him a of the Governing gs put are cargeaPlc ta Ve as ci Fo. 40/29/67-1T (A-D, dated May 22, 1967. Tips amployees, is not taxable as salary inthe on 323 (SC). manual services— gobi with se te - If an individual receives sal 46.8°Salary from more than one source J ‘employer Boe ire’same previous year (maybe due {0 change. of emplosmes or_tlue to ley ‘r simultaneously), salary Trom each source is taxable ‘vent with more than one employe : cere ne emPrOv

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