COMMISSIONER OF INCOME TAX Vs. P RAMAJAYAM

JUDGEMENT

(1.) THE following question of law has been referred to this Court by the Tribunal, Madras at the instance of the Revenue under s. 256(1)of the IT Act, 1961 :

(2.) THE assessee was engaged by M/s Bata Indra Ltd. under an agreement dt. 21st Dec., 1978, as manager of a retail shoe store of the company along with the repair and pedicure organization Coimbatore. The agreement designates the assessee as an employee and under the terms of the agreement, he was entitled to a fixed salary of Rs. 101 per week and a commission on the retail sales effected through the shoe staff at the rate of 1.60 per cent on shoes, accessories, toys, umbrella and banians. During the accounting year relevant for the asst. yr. 1981 -82, the assessee received from his employer, the following amounts :

(3.) AGGRIEVED by the order of the AAC, the Revenue preferred an appeal before the Tribunal, Madras. The Tribunal examined the terms of the agreement entered into between the assessee and the company, viz., M/s Bata India Ltd. and after examining the relevant clauses of the .agreement, it came to the conclusion that the agreement entered into between the assessee and the company was not a mere contract of employment but was a contract for service. The Tribunal, therefore, held that the amount received by the assessee as salary would be taxable under the head "salary" but the amount received towards commission and profits on repair and pedicure section contemplated in the agreement was not liable to be charged under the head "salary", but charged either under the head "Income from business" or under the head "Income from other sources". In this view of the matter, the Tribunal held that the assessee would be entitled to deduct all expenditure incurred for earning the amount in arriving at the income of the assessee. The Tribunal thus upheld the order of the AAC allowing the deduction to the assessee.