Judgment

HEGDE, J.: The Commissioner of Income-tax, Assam and Nagaland has brought this appeal by certificate. The assessment with which we are concerned in this appeal is for the assessment year 1963-64, the relevant accounting year is the financial year 1962-63. The assessee was the manager of a Tea Estate under the managing agency of M/s. Gillanders Arbuthnot & Co. Ltd. The said company had a Provident Fund scheme for its employees. But that provident fund was not a recognised one. The assesses retired during the previous year relevant to assessment year 1963-64 and received out of this provident fund an amount of Rs. 27,948/- which represented the interest on the amount of his own contribution to the fund. The Income-tax Officer assessed this amount as the assessee s income from other sources. That order was confirmed in appeal by the Appellate Assistant Commissioner. But on further appeal to the tribunal by the assessee, the tribunal came to the conclusion that the receipt in question being profits in lieu of salary , the same was his salary as defined in Section 17 of the Income-tax Act, 1961 (to be hereinafter referred to as the Act): the same having not been assessed as his salary, the assessment order relating to that item of receipt was not legal At the instance of the Commissioner, the tribunal referred the following question of law to the High Court of Assam and Nagaland for its opinion:

"Whether on the facts and circumstances of the case and having regard to the provisions of section 17 (3) (ii) of the Income-tax Act, 1961 the amount of Rs. 27,948/- representing the interest on the amount of the assessee s own contributions to an un-recognised provident fund was assessable under the residuary section 56 of the said Act?"

2. The High Court answered that question in the negative and in favour of the assessee. While it came to the conclusion that the receipt in question cannot be considered as salary as defined in S. 17, in its view the same was exempt from payment of tax in view of S. 17 (3) (ii). The Commissioner is challenging the above conclusion.

3. The receipt of Rs. 27, 948/- undoubtedly an income as defined by S. 2 (24). The receipt of an interest on any investment is a gain made by the investor and therefore the same is "income". The next question is whether the said income is exempt from tax or if it is not exempt, under what head the same has to be brought to tax?

4. Section 14 of the Act gives the heads of income. They are: (A) Salaries; (B) Interest on securities; (C) Income from house property; (D) Profits and gains of business or profession: (E) Capital gains and (F) Income from other sources.

5. The salaries are brought to tax under S. 15 and "the income from other sources" is brought to tax under S.56. In this appeal we are not concerned with the other heads of income. The salary is defined in S. 17 as including any "profits in lieu of or in addition to any salary or wages" (S. 17 (1) (iv).) Sub-s. (3) of S. 17 says:

"profits in lieu of salary" includes.

x x x

(ii) any paymentdue to or received by an assessee from an employer or a former employer or from a provident or other fund (not being an approved superannuation fund) to the extent to which it does not consist of contribution by the assessee or interest on such contributions."

(emphasis supplied)

6. The contributions to recognised provident funds are dealt with by other provisions of the Act. Herein we are concerned with the contribution to an un-recognised provident fund. The learned Judges of the High Court opined that the receipt by the assessee with which we are concerned is exempt from the payment of tax in view of S. 17 (3) (ii). In our opinion they were clearly in error in arriving at that conclusion Deductions from salaries are dealt with by S. 16. In view of S. 17 (1) (iv), all receipts of profits in lieu of salary have to be considered as salary. But then the question is what is meant by "profits in lieu of salary" In defining the expression "