Commission paid under employment terms is salary income, with only statutory salary deductions available

Commission paid under the terms of employment and forming part of an employee's remuneration is assessable as salary, not as income from other sources. Where the employer-employee relationship is established by the engagement terms, duties, payment structure and tax deduction at source, section 17(1)(iv) includes such commission within salary under the Income-tax Act. Once so classified, only the deductions specifically permitted from salary under section 16 can be claimed, and no separate flat 30 per cent expenditure allowance is available.

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Issues: Whether commission received by an employee was taxable as salary or as income from other sources, and whether a flat deduction of 30 per cent of such commission was allowable as business expenditure.

Analysis: The terms of engagement, the nature of the duties, the payment structure, and the employer's treatment of the amount as salary with tax deducted at source showed an employer-employee relationship. Under section 15 of the Income-tax Act, 1961, salary is the chargeable head for such remuneration, and section 17(1)(iv) specifically includes commission within salary. Once the receipt was part of salary, deductions could be claimed only within the limits prescribed by section 16(i), and no separate expenditure allowance of 30 per cent could be granted on the footing that the amount was income from other sources.

Conclusion: The commission was assessable as salary and not as income from other sources, and the 30 per cent deduction was not permissible.

Final Conclusion: The reference was answered against the assessee and in favour of the Revenue, with the commission treated as salary income and no separate deduction beyond the statutory salary deductions allowed.

Ratio Decidendi: Commission paid under the terms of employment and forming part of the employee's remuneration is salary within the meaning of the income-tax law, and once so classified, only the deductions specifically allowed from salary can be claimed.

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