The main legal point established in the judgment is that special allowances or benefits to meet expenses for the performance of duties are included in the definition of 'income' under the Income-tax Act.

S.R. Rajasekhara Murthy, J.

1. The question that arises for decision in this writ petition is whether dearness allowance, additional dearness allowance, city compensatory allowance and house rent allowance form part of the "salary" of the salaried employees represented by the petitioner-Union and whether the said allowances are taxable under the Income-tax Act under the head "Salaries".

2. This contention does not survive in view of the amendment to section 2(24) of the Income-tax Act, 1961 ("the Act"), by the Direct Tax Laws (Amendment) Act, 1989 (3 of 1989), inserting sub-clauses (iii)(a) and (iii)(b) after sub-clause (iii). The clauses inserted with effect from April 1, 1962, are reproduced below :

"(iii)(a) any special allowance or benefit, other than a perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit;

(iii)(b) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living."

The effect of the amendment is to specifically include any special allowance or benefit, etc., specifically granted to the salaried persons to meet the expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit. This amendment sets at rest the controversy whether the special allowances paid to the salaried persons enumerated above are includible in their "income" as defined under section 2(24) of the Act.

3. Now that these allowances are treated as income of the salaried persons the total income of the petitioners for the purpose of the charging section 4 of the Act will include all these allowances as well and other consequences of computation of the said income for the purpose of levy of income-tax on such allowances automatically follow under the Act.

4. It may not be out of place to mention in this context that the amendment to section 2(24) of the Income-tax Act brought about by the Central Act 3 of 1989 is only clarificatory in nature. "Salaries", which is one of the heads of income under which the total income of an assessee under the Act is subjected to tax, is always understood to include the special allowances paid to the salaried persons in addition to the basic salary. Any type of remuneration of an employee by an employer is taxable under the category "Salaries".

The term "income" is very wide in its import. All allowances received by salaried persons are taxable under the Act unless expressly exempted. These payments made in the form of allowances and special allowances accrued and are received by the salaried person by virtue of his office and employment.

5. For the reasons stated above, the writ petition does not survive and is, accordingly, dismissed as having become infructuous in view of the amendment to section 2(24) of the Income-tax Act, 1961.