Per Shri H.S. Ahluwalia, Judicial Member - These four appeals involve a very ticklish issue. In the original proceedings the assessee claimed deductions at Rs. 36,000 plus commission Rs. 58,625 on account of salary and commission paid to Shri H.S. Sethi, general manager of the assessee- firm. After some scrutiny the IAC allowed these claims. Subsequently, the IAC started fresh proceedings under section 154 of the Income-tax Act, 1961 (‘the Act’) in which it was contended that the salary and commission paid to Shri H.S. Sethi exceeded the limit of Rs. 60,000 provided for in section 40A(5)(a)(i) and (c) of the Act. This was a mistake and, therefore, he proceeded on to rectify the same by limiting the total to as prescribed by law. The assessee went in appeals to the Commissioner (Appeals) who was of the opinion that payment of commission to Shri H.S. Sethi had been made depending on the increase of sales and, therefore, the salary and commission to him related to different items for two different services performed by Shri H.S. Sethi. The payment was not in the nature of salary but was with reference to the guarantee of sales and, therefore, it could not be included along with salary so as to limit the allowance of Rs. 60,000. He, therefore, deleted the consequential disallowances on this ground. The revenue has come up in second appeal before us.

2. We have heard the representatives of the parties at length in these appeals and to our mind there is force therein. No doubt, the IAC making the assessment in the first instance had asked for detailed particulars regarding the payment of salary and commission by the assessee and, thereafter, allowed the claims which prima facie would show that he had applied his mind to this aspect of the matter also but there is no discussion in his order about the applicability of section 40A(5). It could be that he was considering these payments from the angle of reasonableness and then deciding upon their applicability. The original order in relation to the year 1977-78 made in this behalf was on 17-9-1979. The present proceedings were initiated on 19-8-1983. Therefore, at that time the assessing authority had jurisdiction to proceed both under sections 147 and 154 of the Act. In fact, the ultimate orders were also passed within limitation, i.e., on 16-9-1983. The mere fact that the commission was claimed separately from salary would, however, not taken it out of the ambit of word ‘salary’ as defined in section 40A(5). Explanation 2 to this sub-section reads as under :

"Explanation 2 : In this sub-section,-

(a)‘salary’ has the meaning assigned to it in clause (1) read with clause (3) of section 17 subject to the following modifications, namely :-

(1)in the said clause (1), the word ‘perquisites’ occurring in sub-clause(iv) and the whole of sub-clause (vii) shall be omitted ;

(2)in the said clause (3), the references to ‘assessee’ shall be construed as references to ‘employee or former employee’ and the references to ‘his employer or former employer’ and ‘an employer or a former employer’ shall be construed as references to ‘the assessee’;"

Section 17 of the Act defines the word ‘salary’ as under :

"For the purposes of sections 15 and 16 and of this section,-

(1)’salary’ includes-

(i) to (iii) ******

(iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages ;’’

Whether Shri H.S. Sethi was being paid a commission in addition to salary or in lieu thereof has absolutely no relevance for the purpose of definition of ‘salary’ contained in this clause. In other words the assessing authority in the first instance did not at all read these express provisions of law. Had he read it there would have been no scope for coming to a different conclusion. The authorities relied upon by the assessee for the proposition that decision on a debatable point of law is not a mistake, namely, T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC), Ram Prashad v. CIT [1972] 86 ITR