Section 2(24)
Income*, definition of
Constitutional
validity
Treating
cash assistance as income is valid - Clause (vb) introduced in section 2(24) to include cash
assistance in the definition of ‘income’ with retrospective effect from 1-4-1967,
is valid and is within the legislative competence of Parliament under entry 82
of List I of Schedule VII to the Constitution of India - Aero Leather (P.)
Ltd. v. Union of
Including
lottery winnings, etc., under income is valid - The Parliament was competent to enact
sub-clause (ix) in clause (24) of section 2, under entry 82 of
the Union List (List I) of the Seventh Schedule to the Constitution - Amara
Kondaiah v. ITO [1977] 106
ITR 73 (AP).
Scope of
Definition
Definition
is inclusive and all-embracing -
The definition of ‘income’ in section 2(24) is an inclusive definition.
It adds several artificial categories to the concept of income but on that
account the expression ‘income’ does not lose its natural connotation. Anything
which can properly be described as income is taxable under the Act unless of
course it is exempted under one or the other provisions of the Act - Emil
Webber v. CIT [1993] 200 ITR 483 (SC)/Kedar Narain Singh v. CIT
[1938] 6 ITR 157 (All.).
Items not
falling under specified categories can still be income - Even if a receipt does not fall within the
ambit of any of the sub-clauses in section 2(24), it may still be income
if it partakes of the nature of the income. The idea behind providing inclusive
definition in section 2(24) is not to limit its meaning but to widen its
net. The word ‘income’ is of widest amplitude, and it must be given its natural
and grammatical meaning - CIT v. G.R. Karthikeyan [1993] 68 Taxman 145/201 ITR 866 (SC).
Allowances
CCA, DA and
HRA are ‘income’
u City
Compensatory allowance (CCA), house rent allowance (HRA) and dearness allowance
(DA) are income - All
u City
compensatory allowance and dearness allowance would fall under sub-clause (iiib)
of section 2(24). Accordingly, these two allowances would form part of
the income as defined in section 2(24) - Haryana Government College
Teachers’ Association v. Union of
Refreshment
allowance is ‘income’ -
Sub-clauses (iiia) and (iiib) of section 2(24) extend the
scope of the term ‘income’ so as to include the special allowances and benefits
mentioned in these sub-clauses. In the light of these provisions the allowance
given to the assessee for meeting the refreshment expenses during office hours
is taxable as income - CIT v. M.R. Kini [1991] 190 ITR 282 (Ker.).
Benefit/perquisites
Unauthorised
advantages are excluded - A
mere advantage derived from the company without its authority or knowledge will
not amount to a benefit or perquisite obtained. - CIT v. A.R.
Adaikappa Chettiar [1973] 91 ITR 90
(Mad.).
Capacity in
which benefit/perquisite is received is not relevant
u Section
2(24)(iv) merely provides that if any relative of a director
derives the benefit or perquisite from a company, it will be deemed to be his
income. It does not state that the income should be derived by a relative in
any particular capacity. - Lala Lakshmipat Singhania v. CIT
[1976] 104 ITR 466 (All.).
u In
the case of a person having substantial interest as statutorily defined, the
capacity in which he was given the benefit or perquisite would be immaterial.
Thus, share allotted to director pursuant to an agreement with promoters,
constitutes a ‘benefit’ assessable to tax in director’s hands - D.M.
Neterwalla v. CIT [1980] 122
ITR 880 (Bom.).
Benefit
should be other than money -
The ‘benefit or perquisite’ cannot be money itself. The benefit or perquisite
contemplated by this section should be other than money - CIT v. G.
Venkataraman [1978] 111 ITR 444
(Mad.).
Benefit/perquisite
is not confined to ‘salaries’ and ‘business’ - Merely because the inclusive definition of ‘income’ to be found in
section 2(24) provides only for the two heads of income, viz.,
‘Salaries’ dealt with in section 17 and ‘Profits and gains of business or
profession’ dealt with in section 28, it would not follow that the benefits or
perquisites which are not covered by these two heads of income would not be
assessable if they can be fairly regarded as income of the assessee.
Perquisites not falling under ‘business’ or ‘salary’ can be taxed under the
head ‘Income from other sources’ - Emil Webber v. CIT [1978] 114 ITR 515 (Bom.).
Personal/family
needs should be considered for quantification - The value of any benefit or perquisite
derived by a director from a company has to be quantified at the estimated
figure of what the director would have spent otherwise, having regard to his
personal or family needs - CIT v. P.R. Ramakrishnan [1980] 124 ITR 545 (Mad.).
Benefit may
even be capital in nature -
Even if the benefit received by the director of the company is capital in
nature, it can also be brought under the term ‘value’ of any benefit as
contemplated under section 2(24)(iv). In order to tax the benefit
received by a director from the company, it is not necessary that the director
should be an employee-director- CIT v. S. Varadarajan [1996] 89
Taxman 457 (Mad.).
Capital
gains
Gains
assessable under section 46(2) are also included - Section 2(24) defines income as
including capital gains chargeable under section 45. This does not mean that
the capital gain chargeable under section 46(2) is not assessable as income.
The definition of income in section 2(24) is inclusive and not
exhaustive - Addl. CIT v. Uma Devi Budhia [1986] 157 ITR 478 (Pat.)/CIT
v. M.A. Alagappan [1977] 108 ITR
1000 (Mad.).
Winnings
from lotteries, etc.
*Other games does not mean games of gambling sort
only - Sub-clause (ix) of section 2(24) refers to lotteries,
crossword puzzles, races including horse races, card games, other games of any
sort and gambling or betting of any form or nature whatsoever. All crossword
puzzles are not of a gambling nature. Some are; some are not. Even in card
games there are some games which are games of skill without an element of
gamble. The words ‘other games of any sort’ are of wide amplitude. Their
meaning is not confined to games of a gambling nature alone. It, thus, appears
that sub-clause (ix) is not confined to mere gambling or betting
activities - CIT v. G.R. Karthikeyan [1993] 68 Taxman 145/201 ITR 866 (SC).
Purchase of
lottery ticket is essential -
A lottery is a chance for a prize against a price and, therefore, the element
of purchase of a lottery ticket must be present and, secondly, the purchaser of
a lottery ticket must have a right to participate in the draw. Undoubtedly, it
is a sale of goods and lastly it is an income liable to tax - Commercial
Corpn. of India Ltd. v. ITO [1993]
201 ITR 348 (Bom.).
Bonus
received by lottery agent is his income - Where the assessee-lottery agent was entitled to receive a bonus
equivalent to 10 per cent of the prize amount won on a ticket sold by it, and
for this purpose the agent retained the counterfoil of the ticket, it could not
be said that the agent was not participating in the lottery. The bonus amount
received by the assessee was winnings from lottery under section 2(24)(ix)
of the Act - CIT v. G. Krishnan [1997] 141 CTR (
Distribution
of prizes under District Level Gift Linked Savings Mobilisation Scheme - Distribution of prizes under the District
Level Gift Linked Savings Mobilisation Scheme does not constitute ‘lottery’ - CIT
v. Dy. Director of Small Savings [2004] 266 ITR 27/136 Taxman 261 (Mad.).