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PETITIONER: KARAMCHARI UNION, AGRA

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       29/02/2000

BENCH: M.B.Shah, D.P.Wadhwa

JUDGMENT:

     Shah, J.

     Leave granted in special leave petitions.

     Civil  Appeal  No.1843 of 1989 & C.A.  NO.  OF 2000 SLP(C) No.  15477-80 of 1988:

     The  Appellants,  in  C.A.No.1843  of  1989,  are  all employees  of  the 509 Army Base Workshop, Agra, working  in different  offices  and governed by the Rules framed by  the Government.   Apart from their salary and other  perquisites they  are getting compensatory allowance in the form of City Compensatory  Allowance (hereinafter referred to as  CCA), Dearness  Allowance  (hereinafter referred to as  DA)  and House  Rent  Allowance (hereinafter referred to  as  HRA). Appellants  filed  Civil  Misc.  Petition No.470/98  in  the Allahabad  High Court challenging the inclusion of DA, HRA & CCA  paid to them in their income for the purpose of  Income Tax.   Various  other petitions raising similar  contentions were filed by the central government employees, employees of central  government  undertakings,   bank  employees,  state government  employees and general insurance employees.   One such petition is before us being Civil Appeal No.  of 2000 S.L.P.(C  ) Nos.15477-80 of 1988 disputing the taxability of various   allowances,   namely,  D.A.,   CCA,   HRA,   Leave encashment,  linked  with leave, travel concession,  running allowance,  night  allowance, etc.  All the  writ  petitions were  disposed  of  by  common   judgment  and  order  dated 12.9.1988 by the High Court of Allahabad.

     The  question for consideration before the High  Court was - whether the receipts on account of CCA, HRA and DA are in  the  nature of income entailing tax  liability?   Before deciding  the  above  question,  the  Court  considered  the legislative intent behind the passing of relevant section 17 which  defines salary, and the addition of Explanation  to sub-section  (14)  of Section 10.  The High Court  dismissed the  writ petitions holding inter alia that:  (1) the Income Tax,  1961 is a self contained code to judge the  taxability of  a particular receipt and the taxability of D.A.,  H.R.A. and  CCA will have to be seen only within the scheme of  the Act.   That  HRA, CCA and DA are not the  reimbursements  of

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necessary  disbursements.   It is only for determination  of CCA  that  the Central Govt.  will take care that  grant  of compensatory allowance does not become a source of profit to the  employees,  but it does not mean that the allowance  in the nature of HRA, CCA and DA do not amount to an advantage. The  allowances  are  surely in addition to  pay.   (2)  The tuition fees reimbursement is fully covered by S.17(3)(ii), and  the  payment  is not covered by any of the  clauses  of Section  10.   (3)  The leave encashment linked  with  leave travel  concession is taxable, being the profits in lieu of salary  within  the meaning of section 17(3)(ii).  (4)  The running  allowance and night allowance come to the employees as  an  advantage by virtue of their employment.  They  are, therefore,  perquisite  within the meaning of  s.17(I)(iv) read  with  s.17(2)  and hence are taxable  under  the  head salaries under s.14, read with s.17.

     The Court held that any type of reimbursement is fully covered  by  Section 17(3)(ii) of the Income Tax  Act,  1961 (hereinafter  referred  to  as the Act)  inasmuch  as  the payment  is not covered by any of the clauses of Section  10 as  mentioned in parenthetical clause of Section  17(3)(ii). The  Court, therefore, held that CCA, HRA and D.A.  would be taxable income.

     Civil Appeal Nos.1784-86 of 1988.

     These  appeals are filed by the Commissioner of Income Tax, West Bengal-II, Calcutta against the judgment and order dated  24th July, 1987 of the High Court of Calcutta  passed in  Income-tax Reference No.97 of 1977 holding that the  CCA paid  to  the assessee did not have the character of  income within  the meaning and scheme of the Income Tax Act,  1961. Following three questions were referred to the High Court by the Tribunal for decision:  -

     1.   Whether, on the facts and in the circumstances of the  case  the  Tribunal was right in  holding  that  C.C.A. cannot  come within the charging sections and/or within  the meaning of income of a Government Servant in accordance with Section  2(24)  of  the Income Tax Act, 1961 read  with  the Fundamental  Rules  and  cannot  come within  the  ambit  of meaning of total income as contained in section 2(45) of the Act?   2.  Whether on the facts and in the circumstances  of the  case  when the assessees case cannot come  within  the provisions  of  sections 15 and 17 of the Act, the  Tribunal was  right  in  not  considering the  applicability  of  the provisions  of section 16(v) of the Act?  3.  Whether on the facts  and  in  the  circumstances  of  the  case  upto  the assessment  year 1974-75 because of the deletion of  section 16(v)  of  the Act with effect from Ist April,  1975  C.C.A. could  be  allowed as an admissible deduction under  Section 16(v) of the Act.

     It was contended before the High Court that the amount received  by  way  of CCA cannot be included  in  the  total income  of the assessee inasmuch as the same was  receivable by  him by virtue of the Fundamental Rules which govern  the terms  and  conditions of service of a Government  employee. The  Fundamental  Rules indicate that CCA is given not as  a source  of  profit or gain.  In support of  this  submission counsel  relied upon the decisions in Commissioner of Income Tax,  Bombay  City-I v.  D.R.  Pathak 99 ITR 14;   Bishambar Dayal  v  Commissioner  of Income Tax, MP 103  ITR  813  and Commissioner  of Income Tax, Gujarat v.  S.G.  Pgnotale  124

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ITR  391.   It  was  also contended  that  the  assessee  is entitled  to claim exemption in respect of CCA under Section 10(14)  of  the Income Tax Act and in any case,  CCA  cannot come  either  within  the  scope of  salary  or  within  the definition  of  special allowance or perquisite.  Hence,  it cannot  be termed as income and cannot be included  within the  total  income  and  cannot be assessed to  tax  as  per sections 4 and 5 of the Income Tax Act.

     After  a careful consideration of the facts, the  High Court  held that C.C.A.  paid to the assessee was neither an emolument  nor a fee nor a profit nor perquisite but was  only  a  payment for part reimbursement  of  the  extra expenses  incurred by the assessee as of necessity by reason of  his  posting.   The  said allowance does  not  have  the character  of  income within the meaning and scheme  of  the Income  Tax Act, 1961.  This is not an allowance granted  to the assessee specifically to meet his personal expenses, but it is an allowance meant for part reimbursement of the extra expenditure necessarily to be incurred by him as a result of his  being posted in a city.  Amount paid to the assessee on account  of  this  allowance  does   not  come  within   the definition  of income or total income nor within the purview of the computation or charging sections under the Income Tax Act,  1961.  The High Court answered Question Nos.1 and 2 in the  affirmative and in favour of the assessee.  In view  of answers  to  the  said  questions, the High  Court  did  not consider it necessary to answer question no.3.

     C.A.  Nos.6054/94 and 6058/94.

     Respondents-employees of the L.I.C.  and G.I.C.  filed petitions  under Article 226 of the Constitution before  the High  Court  of Calcutta in Matter No.  nil of 1988  praying inter  alia  for  issue  of a writ or  order  directing  the appellants  herein not to treat CCA paid and payable to  the employees  of  the  appellants-Companies  as  their  taxable income and not to deduct income tax at source on CCA paid to them.   The High Court by order dated 21.3.1988 following an earlier  decision given by it on 17.3.1988 in Syndicate bank Officers  Association  and  Others vs.  Union of  India  and Others  allowed  the  writ  petitions and  passed  an  order restraining  the  appellants-Companies and  other  Insurance Companies from deducting any tax on C.C.A.  or any allowance in  the  nature of CCA.  in computing taxable income of  the employees  for  the  year  1987-88  onwards.   Hence,  these appeals by special leave are filed by the Corporations.

     Whether CCA, HRA or other such payment to the employee is covered by the word income as defined under the Act?

     In  all  these appeals it is conceded that in view  of the  amendment  of clause (24) of Section 2 of the  Act,  it would be difficult to say that the amount received as CCA or HRA  would not be covered by the inclusive definition of the word  income.   Relevant clauses of Section 2(24) read  as under:  -

     2(24) Income includes (i) to (iii)

     (iiia)  any  special allowance or benefit, other  than perquisite  included  under sub-clause  (iii),  specifically granted to the assessee to meet expenses wholly, necessarily and  exclusively  for  the performance of the duties  of  an office or employment of profit;

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     (iiib) any allowance granted to the assessee either to meet  his personal expenses at the place where the duties of his  office or employment of profit are ordinarily performed by  him  or  at a place where he ordinarily  resides  or  to compensate him for the increased cost of living..

     The  said  clauses  are  added by  Director  Tax  Laws (Amendment)  Act,  1989,  w.e.f.    1.4.1962.   In   C.I.T., Calcutta  v.  R.R.  Bajoria (1988) 169 ITR 162, the Calcutta High Court considered this argument in detail and arrived at the conclusion that considering Rule 44 of Fundamental Rules applicable  to the Central Government employees, CCA paid to them is neither an emolument nor a fee nor a profit nor even a  perquisite  but  was  only  a payment  for  part  of  the reimbursement of the extra expenses incurred by the assessee as  of  necessity  by  reason of  his  posting.   The  Court observed  the said allowance does not have the character of income  within the meaning and scheme of the Income-tax Act, 1961.   This  is  not an allowance granted to  the  assessee specifically  to  meet  his personal expenses but it  is  an allowance  meant for part reimbursement of the assessee  for the extra expenditure necessarily to be incurred by him as a result of his being posted in a city.

     In  view  of  the afore-quoted amendment of  the  word income,  any  special  allowance or  benefit  specifically granted to the assessee to meet expenses wholly, necessarily and  exclusively for the purpose of the duties of an  office would  be  included in the word income.  It has also  been pointed  out  that  under sub-clause (iii b)  any  allowance granted to the assessee either to meet his personal expenses at  the place where the duties of his office are  ordinarily performed  by him or a place where he ordinarily resides  or to  compensate him for the increased cost of living is  also to  be  included in income.  Therefore, it is conceded  that the  payment  of  HRA or CCA, would be covered by  the  word income.   Hence, the basis of the decision rendered by the Calcutta High Court would not survive.

     Whether such amount is taxable?

     Once  it  is conceded that receipt of such  amount  is income  of the assessee, the only question would be  whether it is taxable under the head salary.  For that purpose, we have  to  refer to Section 17 of the Act to find out  as  to what  meaning can be given to the phrase profits in lieu of salary.   For  appreciating the contentions raised  by  the learned  counsel for the parties, we would straightway refer to  the relevant part of Section 17 of the Act, which is  as under:  -

     17.   For  the purposes of sections 15 and 16 and  of this section

     (1) Salary includes

     (i)  wages;   (ii) any annuity or pension;  (iii)  any gratuity;   (iv)  any  fees,   commissions,  perquisites  or profits  in  lieu of or in addition to any salary or  wages; (iv)  any advance of salary;  {(va) any payment received  by an employee in respect of any period of leave not availed of by  him;}  (v)  the annual accretion of the balance  at  the

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credit   of  an  employee   participating  in  a  recognised provident  fund, to the extent to which it is chargeable  to tax under rule 6 of Part A of the Fourth Schedule;  and (vi) the  aggregate  of  all  sums  that  are  comprised  in  the transferred  balance as referred to in sub-rule (2) of  Rule 11  of  Part  A  of  the  Fourth  Schedule  of  an  employee participating  in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; (2) Perquisites include

     (3) Profits in lieu of salary includes

     (i)  the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection  with  the termination of his employment  or  the modification of the terms and conditions relating thereto;

     (ii)  any payment (other than any payment referred  to in  clause (10) [clause (10A], [clause 10(B)], clause  (11), [clause 12) [clause (13) or clause (13A] of section 10), due to  or received by an assessee from an employer or a  former employer or from a provident or other fund, to the extent to which  it does not consist of contributions by the  assessee or [interest on such contributions or any sum received under the  Keyman insurance policy including the sum allocated  by way of bonus on such policy

     Explanation.   For  the purposes of this  sub-clause, the  expression  Keyman  insurance policy shall  have  the meaning assigned to it in clause (10D) of section 10.]

     Reading  of  sub-section (1) of Section 17 of the  Act makes  it  abundantly clear that the word salary is  given exhaustive  meaning as stated in clauses (i) to (vii).   The inclusive  definition of the word salary given in  Section 17 provides that apart from salary received by the employee, it includes wages, any annuity or pension, any gratuity, any fees,  commissions, perquisites or profits in lieu of or  in addition  to any salary or wages, any advance of salary, any payment  received by an employee in respect of any period of leave  not  availed by him and other payments  mentioned  in clauses (va), (vi) and (vii).  These clauses (i) to (vii) of sub-  section  (1)  indicate that  Legislature  intended  to include  in salary the specified or named amount paid to the employee  in  respect of services rendered by  him.   Clause (iv)  of sub-section (1) provides inclusion of four types of payments  in  the word salary  (i) fees (ii)  commissions (iii) perquisites and (iv) profits in lieu of or in addition to   salary.   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.  After  giving  this exhaustive   definition  of  the   word  salary,   further inclusive definition is given to the word perquisite, with which  we  are not concerned in these appeals.   Thereafter, sub-section  (3)  provides for inclusive definition  of  the phrase  profits  in  lieu  of   salary.   Clause  (i)   of sub-section  (3)  inter  alia  includes the  amount  of  any compensation  received  by an assessee from his employer  or former  employer at or in connection with the termination of his  employment  or  the  modification   of  the  terms  and conditions  relating  thereto.  Inclusion of this amount  of compensation  has  direct connection with the employment  or terms  and  conditions relating thereto.  In the context  of the  aforesaid  sub- sections (1), (2) and (3),  appropriate

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meaning  to the words and phraseography used in clause  (ii) is to be given.

     It  has been contended by the learned counsel for  the Revenue  that  clause (ii) of sub-section (3),  inter  alia, provides  that  profits  in lieu of salary  includes  any payment  received  by  an assessee from an  employer.   He, therefore, submitted that City Compensatory Allowance (CCA), House Rent Allowance (HRA) and Dearness Allowance (DA) would be  covered  by  clause (ii) of  sub-section  (3).   Learned counsel  submitted that salary includes profits in lieu of salary  and  profits  in  lieu  of  salary  includes  any payment  received by the assessee from the employer  except which are excluded.

     As  against this, the learned counsel for the assessee submitted  that  the  contention raised by  the  Revenue  is without any substance.  If any payment de hors the profits was  to  be included then Legislature would not  have  given such   exhaustive  definition  of   the  word  salary  and thereafter would not have given further meanings to the word perquisite  and  the phrase profits in lieu  of  salary. Legislature,  without  anything  more,   could  have  easily provided  that salary would include any payment due to  or received by an assessee from an employer except the payments which are exempted under the Act.  The contention is, if the Legislature  wanted  to include any payment received by  the employee in its widest sense, there was no necessity to give such  an  exhaustive  definition  of the  word  salary  in Section  17  of the Act and to connect it with  profits  in lieu  of salary.  If such a simple definition that salary includes  any  payment received by the employee  from  the employer was intended to be given, the legislature would not have  given inclusive meaning to the expression profits  in lieu  of salary and the phrase any payment received by the employee would be sufficient for all the purposes.  Further the legislature could have easily avoided giving of not only such  exhaustive  definition  but number of  amendments  and additions  to the said section.  The learned counsel for the appellant  further  made it clear that for D.A., he  is  not pressing  the contention that it is not included in the word salary.   He submitted that C.C.A.  and H.R.A.  cannot  be included in the word salary as defined under Section 17 of the Act.

     Hence, the question would be, what does the expression profits  in  lieu of salary signify?  Whether profits  in lieu  of salary would include any payment received from the employer relatable to or out of profits or it has nothing to do  with the profits as understood in common parlance?  Or whether  profits  is  to  be understood  as  any  gain  or advantage  in  lieu of salary or in addition to  salary  for which any payment is received by the assessee

     It is submitted that salary includes any payment out of profit in lieu of salary.  Instead of salary any amount is  paid  in terms of profits, then the same is included  in salary  as  it is profits in lieu of salary.  The  basis for  payment of such amount is profits.  So the expression any  amount  received by the employee is relatable to  the profits  of  employer  and  that payment out  of  profit  is considered  to  be  the   salary  by  inclusive  definition. Reference  is  made  to  Earl Jowitts  The  Dictionary  of English  Law  which  mentions   profit  asan  arrangement whereby  an employer agrees that his employees shall receive

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a   share,  fixed  before  hand,  in  the  profits  of   the undertaking.   Hence, it is submitted that payment received by  the employee should be relatable to profits and whatever amount  is  paid to an employee - is paid in lieu of  salary out of profits.  Instead of paying salary, if percentage out of the profits is paid by the employer, it would be included in  the  word  salary  and it would be  considered  to  be profits  in lieu of salary.  It may be in addition to  the salary  or only profits in lieu of salary.  It is  contended that  this  would  be  the natural  meaning  of  the  phrase profits in lieu of salary and in the present case as there is  no  question  of payment of C.C.A.  or  H.R.A.   out  of profits   earned   by   the    Government   or   statutory corporations, receipt of such amount would not be covered by the phrase profit in lieu of salary’.

     For  this  purpose,  it  is submitted  that  the  word profits is not defined, but Section 28 of the Act provides that  the  income mentioned therein shall be  chargeable  to income  tax under the head of profits and gains of business or  profession  and  hence,  the word profits  is  to  be understood under the Act in its natural and proper sense and as  understood since years in commercial terms.  Reliance is placed  on  the following passage referred to by  the  Privy Council  in Pondicherry Railway Co.  Ltd.  Vs.  Commissioner of  Income-tax,  Madras  (Reported  in  A.I.R.   1931  Privy Council  165)  dealing  with the word  profits  under  the Income Tax Act.  The Privy Council relied upon the principle laid  down  by  Lord Chancellor Halsburry  in  Gresham  Life Assurance  Society  V.   Styles  by stating that  it  is  of general  application  unaffected by the specialities of  the English tax system, existing as under:  -

     The  thing  to be taxed, said his Lordship,  is  the amount  of profits or gains.  The word profits I think  is to  be understood in the natural and proper sensein a sense which  no commercial man would misunderstand.  But when once an  individual  or  a  company  has  in  that  proper  sense ascertained,  what  are the profits of his business  or  his trade,  the destination of those profits or the charge which has  been  made  on those profits by previous  agreement  or otherwise  is perfectly immaterial.  The tax is payable upon the  profits realized and the meaning to my mind is rendered plain  by  the  words payable out  of  profits.  (emphasis supplied)

     Further,  the meaning of the word profit as given in Blacks  Law  Dictionary  is  as under:   -  Profit.   Most commonly,  the gross proceeds of a business transaction less the  costs of the transaction;  i.e.  net proceeds.   Excess of revenues over expenses for a transaction;  sometimes used synonymously  with net income for the period.  Gain realized from business or investment over and above expenditures.

     Profit  means  accession  of good,  valuable  results, useful  consequences,  avail, gain, as an office of  profit, excess of returns over expenditures or excess of income over expenditure. U.S.  v.  Mintzes, D.C.Md., 304 F.Supp.  1305, 1312.

     The  benefit, advantage, or pecuniary gain accruing to the  owner  or occupant of land from its actual use;  as  in the  familiar phrase rents, issues and profits, or in  the expression mesne profits.

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     Profit-sharing   plan.    A   plan   established   and maintained  by an employer to provide for the  participation in  the  profits  of the company by the employees  or  their beneficiaries.   In  order to qualify for tax benefits,  the plan  must  provide  a definite  predetermined  formula  for allocating  the  contributions  made to the plan  among  the participants  and  for  distributing the  funds  accumulated under the plan after a fixed number of years, the attainment of  a stated age, or upon the prior occurrence of some event such  as layoff, illness, disability, retirement, death,  or severance  of  employment.  Such plans are regulated by  the federal  Employee  Retirement Income Security  Act  (ERISA). See also Employee Stock Ownership Plan (ESOP).

     Qualified  profit sharing plan.  An employer-sponsored plan  that meets the requirements of I.R.C.  401.  If  these requirements are met, none of the employers contribution to the  plan will be taxed to the employee until distributed to him  or her (402).  The employer will be allowed a deduction in the year the contributions are made.  (404)

     It   is   submitted  that   similar  should   be   the interpretation  of  Section 17(1)(iv) read with  sub-section 3(ii)  of the Act.  This clause is for taxing salary payable out  of  the profits realized by the employer and  the  said meaning  is rendered plain by the words profits in lieu  of salary.   Foundation  of any such payment is the  profits. It  is,  therefore,  submitted  that  the  result  would  be salary  includes  profits  in   lieu  of  salary,  which includes  any  payment,  but   such  payment  should  have connection with or referable to profits of the employer.

     The learned counsel for the assessee further submitted that  the Legislature in sub-sections (1), (2) and (3) of s. 17  has used the word includes to give wider meaning  than natural  meaning  which is given to the said word or  phrase and,  therefore, the definition given by the Legislature  is to be accepted as it is without any further enlargement.  It is  contended  that the word include is generally used  in interpretation  clauses  in order to enlarge the meaning  of words  or phrases occurring in the body of the statute;  and when it is so used, these words or phrases must be construed as  comprehending,  not  only such things  as  they  signify according  to  their  natural import but also  those  things which  the  interpretation clause declares that  they  shall include.   The  learned  counsel referred  to  The  Regional Director,  Employees  state Insurance Corporation  vs.   M/s High  Land  Coffee  Works  of P.F.X.  Saldanha  &  Sons  and another, [AIR 1992 SC 129] wherein this Court considered the inclusive  definition  of the word seasonal factory  given under  Section 2(12) of the Employees State Insurance  Act, 1948  and  held  that  what is included in  the  meaning  of seasonal  factory is a factory which is engaged for  the purpose  mentioned  therein.  That is to say, it is first  a factory  and  then it would be considered to be  a  seasonal factory.   Relying  on the aforesaid  observations,  learned counsel  for  the employees submitted that by the  inclusive definition of the phrase profits in lieu of salary what is included  is any payment which must be out of the  profits i.e.   sharing  of  the profits by the employer.   For  this purpose,  he  further  referred  to   the  words  any  fee, commission,   perquisites  or  profits   used   in   clause (17)(1)(iv) and pointed out that in the inclusive definition the  Legislature  wanted  to   include  fee,  commission  or perquisites  which  normally cannot be included in the  word

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salary  by  specifically mentioning the same.  It is  also submitted  that  similarly  what  is included  in  the  word salary  is  only profits in lieu of salary.   Therefore, any payment received by the employee from the employer would have  limited  meaning  and is referable  to  only  payments received out of profits.

     As  against  this,  learned counsel  for  the  Revenue submitted  that  salary includes profits in lieu  of  salary which  in turn includes any payment received by an  assessee from  an  employer.  The word profits is to be  given  its plain  meaning  to mean any benefit, advantage or  pecuniary gain  accruing  to  the  assessee.   Therefore  any  payment received by an assessee from an employer would be profits in lieu of salary or in addition to salary.  For the purpose of income  tax,  even  if  the  payment  is  made  towards  the additional expenses incurred by the employee for the purpose of  service,  yet it is taxable income, unless there  is  an exemption as provided under different clauses of Section 10.

     In  our  view, even though there is much substance  in the  contentions  raised  by  the learned  counsel  for  the assessee  yet  it  is  to  be  stated  that  the  Act  is  a self-contained Code and the taxability of the receipt of any amount  or  allowance  is to be determined on the  basis  of meaning  given to the words or phrases in the Act.   Section 2(24) of the Act gives wide inclusive definition to the word income.   Similarly,  for  levying tax on  salary  income, exhaustive  definition  is  given under  Section  17,  which includes  perquisites  and profits in lieu of salary.   Only exclusion  provided  under  sub-section  3  is  any  payment referable  to  clause  (10) [clause (10A],  [clause  10(B)], clause  (11), clause (12), clause (13) or [clause (13A)]  of section  10.   In  view  of   this  specific  inclusion  and exclusion  in the meaning of the word income and salary, it  is  rightly  submitted  that  payment  received  by  the assessee has no connection with the profits of the employer. The word profits is used only to convey any advantage or gain by receipt of any payment by the employee.

     Websters  Comprehensive  Dictionary gives meaning  of the  word profit inter alia to mean advantage or  benefit. It states:

     ProfitSynonyms:     advantage,     avail,   benefit, emolument,  expediency,  gain, good, improvement,  proceeds, receipts,   return,   returns,   service,  utility,   value Advantage  is that which gives one a vantage ground,  either for  coping with competitors or with difficulties, needs, or demands;  as, to have the advantage of a good education;  it is frequently used to what one has beyond another or secures at  the  expense of another;  as, to have the  advantage  in argument, or to take advantage in a bargain.

     Applying  the  aforesaid general meaning of  the  word profits and considering the dictionary meaning given to it under  Section  (17)(1)(iv) and 3 (ii), it can be said  that advantage  in  terms of payment of money received  by  the employee from the employer in relation or in addition to any salary or wages would be covered by the inclusive definition of  the  word  salary.  Because of the  inclusive  meaning given  to  the  phrase  profits in lieu  of  salary  would include any payment due to or received by an assessee from an  employer,  even  though it has no  connection  with  the

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profits  of the employer.  It is true that Legislature might have  avoided  giving  of  inclusive  meaning  to  the  word salary  by  stating  that  any  payment  received  by  the employee  from an employer would be considered to be  salary except  the payments which are excluded by Section 17(3)(ii) i.e.   clauses (10), (10A), (10B), (11), (12), (13) or (13A) of Section 10.  However, it is for the Legislature to decide the same.  This would not mean that by giving exhaustive and inclusive meaning, the word profits can be given a meaning only when it pertains to sharing of profits by the employer. For  the  assessee,  the receipt of such amount would  be  a profit, gain or advantage in addition to salary, even though it is not named as salary.  Therefore, the word profits in context is required to be understood as gain or advantage to the  assessee.   Hence,  it is not possible  to  accept  the contention  of the learned counsel for the employees that as the CCA amount is paid to meet the additional expenditure as contemplated  by  the statutory Service Rules, it cannot  be said  to  be profit, gain or additional salary.   Under  the Act,  such  receipt of the amount as conceded is covered  by the definition of the word income and as provided it would be  in  addition  to salary.  Hence, it would  be  part  and parcel  of  income by way of salary, which would be  taxable one.   Learned  counsel for the appellant further  submitted that  assuming for the purpose of profits in lieu of salary, employer  is  not  required  to give any share  out  of  the profits,  yet even in the hands of the employees, receipt of the  amount  must be profits.  It is his  contention  that whatever  CCA,  Government or Statutory Corporations pay  to the employees, cannot be termed as profits by any standard because  the  amount is calculated in such a manner that  it reimburses  less  than  extra  cost incurred by  them  at  a station where they are posted.  It is further submitted that by  including  these  payments as taxable,  it  would  cause hardship  to the honest employees whose source of income  is limited  and  are  required to meet extra  expenses  at  the station  where  they  are transferred and posted  for  which service  rules provide for reimbursement of extra cost.   He referred  to the decision rendered by the Bombay High  Court in  C.I.T.   v.  D.R.  Pathak (1975) 99 ITR 14, wherein  the Court  considered  whether CCA was taxable as perquisite  as contended by the revenue.  The Court negatived it by holding that  payment  of taxable allowance under the order of  the Government  is neither an emolument nor fee nor profit,  but it  is a reimbursement of personal expenses required by  the Government  servant to be incurred on account of expenses of living at a particular place.

     May be that this is true to the extent that Government or statutory corporations do pay something less than what is required  to be reimbursed and the receipt of CCA can not be termed  as  profit  in   common  parlance.   However,  for income,  salary  and its taxability under the  Act,  the dictionary  meaning given by the Legislature is to be  taken into  consideration  as for that purpose, it is  a  complete code.   Income tax is attracted at the point when the income is  earned.   Taxation of income is not dependent  upon  its destination   or  the  manner  of  its  utilisation.    [Re: Tuticorin  Alkali  Chemicals & Fertilizers Ltd.  Madras  vs. Commissioner  of  Income  Tax,  Madras (1997)  6  SCC  117]. Therefore,  there  is  no  question   of  referring  to  the Fundamental Rules framed by the Central Government or by the statutory  authorities for payment of CCA, HRA or other such allowance  for  reimbursing the expenditure incurred by  the employees.   Further,  equity  or hardship would  hardly  be

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relevant  ground  for interpretation of tax law.  It is  for the  Government  or the statutory bodies to do the  needful. However,  equitable it may be that CCA cannot be held to  be profit in the hands of the assessee or it is not share out of  profit, yet it cannot be helped in view of inclusive and exclusive meaning given under the Act.

     In  the result, we hold that DA, CCA and HRA would  be taxable  income.   Since, counsel for the employees did  not make  any  submission with regard to other allowances  like, night  allowance, tuition fee, leave encashment linked  with leave  travel concession, running allowance etc.  we do  not pass any order with regard to those allowances.

     Accordingly, Civil Appeal Nos.1784-86 of 1988, 6054/94 and  6058/94  filed  by the Revenue  and  General  Insurance Corporation  and  others respectively are allowed and  Civil Appeal  No.   1843/89  and C.A.  No._____of  2000    SLP(C) No.15477-80  of 1988 filed by Karamchari Union, Agra and All India  Defence  Accounts  Association,   Poona  and   others respectively  are dismissed.  There shall be no order as  to costs.