COMMISSIONER OF INCOME TAX, ASSAM AND. NAGALAND ETC. versus SHRI G. HYATT

Citation: [1971] 3 S.C.R. 438 · Decided: 21-01-1971 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

43·8 
COMMISSIONER OF INCOME TAX, ASSAM AND. 
NAGALAND ETC. 
v. 
SHRI G. HYATT 
January 21, 1971 
[J. C. SHAH, C.J., K. S. HEGDE AND A. N. GROVER, JI] 
Inaome-tax Act 1961, ss. 17 and 56-Contribution to unrecognised 
provident fund-Interest thereon-Whether caxab/e under s. 56. 
On the question whether an amount representing the interest on the 
amount of the assessee's own contributions to an unrecognised provident 
fund was assessable µnder the -residuary s. 56 of the Income-tax Act, 1~61., 
HELD : The arlii;mnt was liable to be assessed. 
The receipt of aninterest of any investment is a gain made by the 
investor and there'fore the same is 
1income''. 
B 
c 
In view of s. 17(1)(iv), all receipts•·bf profits in.lieu of salary have 
to be considered as salary. 
In defining the expression 'profits in lieu of 
salary','ithe legislature exclucieclfrom the scope of that expression 
any 
D 
payments received by the assessee' from a provident fund, his own con-
tributions to the fund or any interest on such contributions. 
TherE1iore 
this receipt cannot be considered as salary, though undoubtedly that is an 
income. 
As the income in question is not salary and the same cannot 
be said to be either interest on the securities; income from house property, 
profits and gains of business of profession or capital gains, it ·IJlas to be 
considered as 'income from other sources' and brought to tax un\ler s. 56. 
Section 56( I) provides that income of every kind which is not to be ex-
cluded from the total income under the Act shall be chargeable to income-
tax' under any of the heads specified in s. 14 item "A" to "E". [439 C-GJ 
CIVIL APPELLATE JuR1smcT10N : Civil Appeal No. 1174 of 
1967. 
. 
Appeal from the judgment and order dated August 22, 1966 
of the Assam & Nagaland High Court in Income-tax Reference 
No. 3 of 1966. 
Jagadish Swarup, Solicitor-General, 
G. C. Sharma, R. N. 
Sachthe,v and B. D. Sharma, for the appellant, 
T. A. Ramachandran, for the respondent. 
The Judgment of the Court was delivered by 
Hegde, J. 
The Commissioner of Income-tax, Assam and Naga-
land has brought these appeal by certificate. 
The 
assessment 
with which we are concerned in this appeal is for the assess-
ment year 1'963-64, the relevant accounting year Tu the financial 
year 1962-63. 
The assessee was the manager of a Tea Estate 
under the managing agency of Ml s. Gilla,nders 
Arbuthnot & 
Co. Ltd. 
The said Co. had a Provident Fund scheme for its 
employees. 
But that provident fund was not a recognised one. 
The assessee retired during the previous year relevant to assess-
ment year 1963-64 and received out of this provident fund an 
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G 
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C.l.T. v. G. HYATT (Hegde, J.) 
439 
A amount of Rs. 27 ,948/- which represented the interest on the 
amount of his own contribution to the fund, 
The Income-tax 
Officer assessed this amount as the assessee's income from other 
sources. That order was confirmed ~ appeal by the Appellate 
Assistant Commissioner. 
But on further appeal to the tribunal 
by the assessee, the tribunal came to the conclusion that the re-
B ceipt in question being profits 'in lieu of salary', the same was 
his salary as defined in s. 17 of the Income-tax Act, 1961 (to 
be hereinafter referred to as the Act) ; the SaJ!le having not been 
assessed as his salary, the assessment order relating to that item 
of receipt WJIS not legal. 
At the instance of the· Commissioner, 
the tribunal referred the following question of law to the High 
C Court of Assam and Nagaland for its opinion : 
"Whether on the facts and circumstllillces 
of the 
case and having regard to the provisions of section 
17(3)(ii) of the Income-tax Act, 1961 the amount 
Rs. 27,948/- representing the interest on the amount 
of the assessee's own contpbutions to an unrecognised 
B 
provident fund was assessable under 
the 
residuary 
section 56 of the said Act?" 
The High Court answered that question in the negative and 
in favour of the assessee. While'it came• to the conclusion that 
the receipt in question cannot be considered as salary as defined 
in s. 17, in its view the same was exempt from payment of tax 
E in view of s. 17 ( 3 )(ii). The Commiss10ner is challenging the 
above conclusion. 
The receipt of Rs. 27,948/- is undoubtedly an income 
as 
defined by s. 2(24). The receipt of an interest on any invest-
ment is a gain made. by the investor and therefore the same is 
11 
"income". The next question is whether the said income is ex-
empt from tax

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