Earned income relief is computed on earned income included in total income, with ambiguity resolved for the taxpayer.

Earned income relief under Section 15-A was construed to apply to the earned income included in total income, not merely to the reduced net figure after setting off losses under other heads. The court rejected the Department's narrower reading as artificial and inequitable, and applied the principle that an ambiguous taxing provision must be construed strictly in favour of the taxpayer. Relief was therefore available on the professional receipts brought into the computation, subject to the statutory ceiling, rather than only on the lower net income figure.

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Issues: Whether earned income relief under Section 15-A of the Income-tax Act was allowable on the assessee's professional receipts of Rs. 31,006 or only on the net total income of Rs. 16,149.

Analysis: Section 15-A and the corresponding Finance Act provision granted relief in respect of the earned income included in total income, subject to the statutory ceiling. The expression was construed as referring to that part of earned income which entered the computation of total income under the Act, and not to the smaller net figure after setting off losses under other heads. The Court held that the Department's interpretation would produce an artificial and inequitable result, and that in case of ambiguity a taxing provision must be construed strictly in favour of the taxpayer.

Conclusion: The assessee was entitled to earned income relief on Rs. 31,006, subject to the statutory maximum of Rs. 4,000, and not merely on Rs. 16,149.

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