Compensatory allowance not taxable under 'Salaries'. Additional Commissioner's jurisdiction upheld. House rent deduction issue deemed irrelevant.

The court held that compensatory allowance received by the assessee should not be included in total income under 'Salaries' as it is not additional salary or perquisite. The Additional Commissioner had jurisdiction to revise the assessment order, but since compensatory allowance was not taxable, the issue was irrelevant. The question of entitlement to deduction of house rent from compensatory allowance was unnecessary due to the non-taxable nature of the allowance. The case was referred back to the Income-tax Appellate Tribunal for consequential orders, with no costs awarded.

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Issues Involved:
1. Inclusion of compensatory allowance in total income under the head 'Salaries'.
2. Jurisdiction of the Additional Commissioner to revise the assessment order.
3. Entitlement to deduction of house rent from compensatory allowance u/s 10(14) or u/s 16(v).

Summary:

Issue 1: Inclusion of Compensatory Allowance in Total Income under 'Salaries'
The court examined whether the compensatory allowance received by the assessee under article 222(2) of the Constitution of India should be included in his total income under the head 'Salaries' for income-tax assessment. The court held that compensatory allowance is not additional salary or a perquisite as defined u/s 17(1) and 17(2) of the Income-tax Act, 1961. The court emphasized that compensatory allowance is meant to counterbalance the loss or inconvenience suffered due to the transfer and cannot be equated with salary or perquisite. Therefore, the compensatory allowance should not be included in the total income under 'Salaries'.

Issue 2: Jurisdiction of the Additional Commissioner to Revise the Assessment Order
The court addressed whether the Additional Commissioner had rightly held that the order passed by the Income-tax Officer u/s 142(1) without including the compensatory allowance was erroneous and prejudicial to the interests of the revenue. The court affirmed that the Additional Commissioner had the jurisdiction to revise the assessment if it was prejudicial to the interests of revenue. However, since the compensatory allowance was not taxable, the second question did not arise for consideration.

Issue 3: Entitlement to Deduction of House Rent from Compensatory Allowance
The court considered whether the assessee was entitled to deduct the house rent paid at Jabalpur from the compensatory allowance either u/s 10(14) or u/s 16(v) of the Income-tax Act. Given the court's decision that the compensatory allowance is not taxable, it was unnecessary to address the alternative contentions regarding deductions u/s 10(14) or u/s 16(v).

Conclusion:
The court concluded that the compensatory allowance received by the assessee should not be included in his total income under the head 'Salaries'. The Additional Commissioner had the jurisdiction to revise the assessment order, but since the compensatory allowance was not taxable, the second question was moot. The third question regarding deductions was also unnecessary to address. The reference was returned to the Income-tax Appellate Tribunal for a consequential order in accordance with this judgment, with no order as to costs.

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