COMMISSIONER OF INCOME TAX Vs. MACKINTOSH I G

JUDGEMENT

(1.) THE assessees in these two references are employees of the National & Grindlays Bank, Madras. T. C. No. 277/67 relates to the assessment year 1962 -63 and T.C. No. 280/67 relates to the assessment year 1961 -62. In the first case the assessee returned a sum of Rs. 69, 517 under the head "salary" which included a sum of Rs. 4, 636, being the value of rent -free quarters. The assessee's employer had paid a sum of Rs. 15, 119 by way of tax on the salary. The assessee had valued the rent -free accommodation at 12 1/2 per cent. on the basic pay after excluding the income -tax paid by the employer and the fuel and lighting charges borne by the employer. In the other case (T.C. No. 280/67) also the assessee, in calculating the value of the rent -free accommodation, has excluded the income -tax paid by the employer and the fuel and lighting charges borne by the employer. In both these cases the Income -tax Officer considered that the tax borne by the employer of the assessees was a "perquisite", that it represented a fixed regular payment and that, therefore, it should have been included in the sum in arriving at the value of the rent -free accommodation. Both the assessees filed appeals to the Appellate Assistant Commissioner. It was contended before him that the tax borne by the employer was neither fixed nor regular in nature and that it was in the nature of an ad hoc benefit given to the employees and, therefore, should have been excluded in computing the value of the perquisites in the form of rent free accommodation. Objection was also taken against the inclusion of the cost of fuel and electricity in the amount of salary for the same purpose. The Appellate Assistant Commissioner thought that all these items formed part of the profits derived from the employment and was, therefore, salary. In that view he confirmed the orders of the Income -tax Officer. In the appeal before the Tribunal, the assessees disputed only the inclusion of the income -tax paid by the employer in the salary. The Tribunal held that it would not be proper to include the tax borne by the employer as part of the assessees' salary for the purpose of calculating the value of rent -free accommodation, that the tax borne by the employer was a perquisite and a perquisite could not come under the term "salary" as defined in Explanation 2, rule 3, of the Income -tax Rules, 1962 Identical question has been referred in these two cases and it reads as follows

(2.) IT may be mentioned that for the assessment year 1961 -62, the relevant rule is rule 24A of the Indian Income -tax Rules, 1922, and not rule 3 of the Income -tax Rules, 1962. Both in the order of the Tribunal and in the reference, T.C. No. 280/67, rule 3 of the Income -tax Rules, 1962, has been referred to instead of ruler 24A. But that does not make any difference because so far as the present question is concerned, both rule 24A of the Indian Income -tax Rules, 1922, and rule 3 of the Income -tax Rules, 1962, are identically worded. Since the interpretation and ascertainment of the exact scope of rule 3 is involved, it becomes necessary to extract the relevant portion which reads as follows

(3.) IT was the contention of the learned counsel for the revenue that the definition of "salary" in rule 3 is an inclusive definition and that, therefore, the ordinary and natural meaning of the word "salary" is not restricted but enlarged. Per contra the learned counsel for the assessees contended that the word "includes" in the definition of "salary" in the rule should be understood as "means and includes" and that the definition is exhaustive and that, therefore, there is no scope for taking in anything which will not come under the expression "pay and allowances" Normally, the word "include" is employed by Parliament and legislatures in defining words for the purpose of enlarging the meaning of the ordinary words or clearing any doubt that might arise in understanding the same. Therefore, the courts generally interpret it as enlarging the meaning of the word and do not restrict the meaning to the particular words that follow in the inclusive part of the definition unless the context otherwise merits. Thus, in Dilworth v. Commissioner for Land & Income -tax Lord Watson observedThe word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of the 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. But the word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.