- (1.) Leave granted in special leave petitions. Civil Appeal No. 1843 of 1989 and C. A. No. 1853-1856 of 2000 @ SLP (C) No. 15477-80 of 1988 :
(2.) 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 and 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. 1853-1856 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.
(3.) 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 Act, 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 reimbursement of 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 fee's 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(1)(iv) read with S. 17(2) and hence are taxable under the head 'salaries' under S. 14, read with S. 17.;