Family allowance treated as salary under income tax law, making it taxable where linked to employment.

Family allowance paid by the Government of Tamil Nadu to an employee of the Tamil Nadu Medical Service was treated as part of salary under the inclusive definition in section 17(1) of the Income-tax Act, 1961 because it was granted in connection with employment. An earlier decision on the same issue had already classified the allowance as taxable under the head "Salary", and the Tribunal's contrary view that it was exempt was rejected. The allowance was therefore held taxable as salary, with the issue decided in favour of the Revenue and against the assessee.

---

---

Issues: Whether the family allowance paid by the Government of Tamil Nadu to the assessee formed part of salary within the inclusive definition of salary under section 17(1) of the Income-tax Act, 1961.

Analysis: The allowance was granted to the assessee in connection with employment in the Tamil Nadu Medical Service and had already been held, in an earlier decision on an identical question, to constitute salary taxable under the head "Salary". The Tribunal's view that the amount was exempt was not accepted.

Conclusion: The family allowance falls within salary under section 17(1) of the Income-tax Act, 1961 and is taxable under the head "Salary"; the question is answered in favour of the Revenue and against the assessee.

---