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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether commission received by an employee fell within the exemption notification where the employer's profits had been assessed and charged to tax, even though the employer later obtained exemption under section 25(4) and no tax was actually levied or paid on that amount.
Analysis: The notification required only that the commission be paid out of the profits of the business and that those profits be assessed and charged to income-tax. The distinction between assessment, charge, levy, and payment was material: assessment determines the income, charge creates liability under the charging provision, levy is the process for realisation, and payment is the final stage. Once the employer's profits, including the commission amount, had been assessed and brought within the charge of tax, the condition in the notification was satisfied. The subsequent exemption under section 25(4) did not alter the fact that the income had been assessed and charged, because exemption presupposes an existing tax liability and does not undo the prior charging of the income.
Conclusion: The commission was entitled to exemption under the notification, and the answer to the referred question was in the affirmative, in favour of the assessee.
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