1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ------------------------------------------------- INCOME TAX APPEAL No. 96 of 2006 C I T AJMER V/S SHIV CHARAN MATHUR BHILWARA Mr. KK BISSA, for the appellant. Mr. SANJEEV JOHARI, for the respondent. Date of Order : 28.8.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER
REPORTABLE This appeal is filed by the revenue, seeking to challenge, the order of the Tribunal, dated 22.7.2004, whereby the order of the CIT (Appeals), dated 26.8.1996, was affirmed. The learned CIT had set aside the order of the assessing officer, passed consequent upon a notice under Sec. 148, making addition of Rs. 1,28,642.50/-.
The facts, lie in the very narrow compass, in as much as, the assessee, at the relevant time, was sitting MLA, and former Chief Minister of the State, who had submitted his return of income, received by him as salary, and disclosing other incomes also, however notice under Sec. 148 was issued for the reason, that the assessee received a sum of Rs. 1,28,643/- from the State Government, as reimbursement of medical expenses in the relevant previous year, which amount was contended to be, liable to be taxed, under Section 17, which had not been offered, for assessment in the return.
The learned Commissioner, while allowing the appeal, examined the matter, and in para 9, noticed the contention of the assessee, that the amount received by the MPs and MLAs is not taxable under the head “income form salary”, but under the head “income form other sources”, has been accepted. In this regard, in para 10, it was held, that the undisputed point is, that the medical expenses, reimbursed by the Govt. of Rajasthan and Government of India, do not attract provisions of Section 17, as remuneration received by the assessee, as MLA, is not taxable under the head “Income from Salary”. Thus, this aspect was found to be not requiring to be discussed in detail. Even though, notice under Sec. 148 was issued only on this premise. Yet, an argument was raised before the learned commissioner about the taxability of medical reimbursement, under Sec. 2 (24) (iii) (a) and 2 (24) (iii) (b) of the Act, but after examining this contention also, it was found, that the two clauses cover the special allowances, like city compensatory allowance, lunch allowance, and additional salary paid at hard stations, or for hard duties, by the employer. Thus, these clauses are also not attracted. Then yet another argument, raised on the anvil of Sec. 28 (4)(b) was also negatived, and by placing reliance on judgments of the Delhi High Court, and few judgments of the Tribunal, it was found, that taxing of reimbursement of medical expanses, would be contrary to the law. Thus, the addition of tax was set aside, and some more additions, which were proposed to be made, during course of appeal, were also declined.
This order has been affirmed in appeal by the tribunal.
The appeal was admitted vide order dated 4.10.2006, by framing following substantial question of law :-
i)Whether remuneration/allowances paid to assessee as a member of Legislative Assembly is taxable under the head “Income from salary”.
ii) If so whether in the facts and circumstances of the case, the reimbursement of medical treatment taken by the assessee, who was a member of the Legislative Assembly for open heart surgery conducted abroad is taxable as perquisite under Section 17 (2) (iv) of the Income Tax Act, 1961?
It would, suffice to say, that in view of what has been noticed in para 9 of the judgment of learned CIT, it cannot be said, that these two questions, at all arise; When it was clearly conceded by the department before the CIT, that Sec. 17 is not attracted, and that, the remuneration received by the MLA is not taxable under the head “income form salary”, but then is, taxable under the head “income from other sources”. Obviously, this question cannot be said to have arisen. This is one of the aspects of the matter. The other aspect of the matter is, that even if it were to be considered, that the concession on the point of law, could not be binding, we have examined the provisions of Sec. 15 and 17 afresh, and find, that the remuneration received by the MLA, can possibly not be taxed under the head “income from salary”. For ready reference, we may quote the provisions of Sec. 15, which reads as under :-
15. The following income shall be chargeable to income tax under the head “salaries”-
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not:
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him:
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any earlier previous years.
Explanation 1…………. Explanation 2………….
Thus, from reading of this section it is clear, that fundamental requirement, for attracting this section is that, there should be relationship of employer and employee, whether in existence, or in the past. Obviously, and inherently, in the very nature of things, for bringing about such relation ship, the assessee, being the person concerned, should have been employed by the employer, and as a necessary corollary, the employer should have right to discharge or terminate the employee. This basic ingredient is missing in the case of MLAs and MPs, as they are not employed by anybody, rather, they are elected by the public, forming their election constituencies, and it is consequent upon such election, that they acquire constitutional position, and discharge constitutional functions and obligations. May be, that they receive remunerations after swearing in, but then, it cannot be said to be salary, within the meaning of Sec. 15, and therefore, the department had rightly taken the stand, that the remuneration, received by the MLA or MP, cannot be taxed, under the head “income form salary”, but can be taxed under the head, “income from other sources”.
That being the position, when the provisions of Sec. 15 are not attracted to the remuneration received by the assessee, obviously, Sec. 17 cannot be attracted, as Sec. 17 only extends the definition of ‘salary’, by providing certain item mentioned therein, to be included in salary.
The net result, of the aforesaid discussion is, that, in our view, the two questions, as framed do not arise, and at the same time, the impugned order does not suffer from any error of law, requiring interference, by this court, in appeal.
The appeal thus has no force, and is hereby dismissed.
( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /ns./