Why the Dearness Allowance is Taxable as this is provided in relation to help the employee out of Inflation and cost of living.
this is not the actual income of the "ee than why should he pay the Tax.
9 Replies
Vivek Angrish
(Manager Finance & Accounts)
(232 Points)
Replied 04 March 2010
Plz. refer the below case in order to resolve your query :
"The ruling was handed down by a division bench comprising Justice D P Wadhwa and Justice M B Shah while allowing appeals filed by the Revenue Department, General Insurance Corporation and others and dismissing those filed by the Karmoohari Union, Agra and the All India Defence Accounts Association, Poona and others. "
The Supreme Court said that in view of the amendment with effect from April 1, 1962 of section 2 of the Act, it would be difficult to say that the amount received as the CCA or the HRA would not be covered by the inclusive definition of the word "Income.''
In view of the amendment in the definition of the word ''income,'' the court pointed out, any special allowance or benefit, specifically granted to an assessee to meet expenses wholly, necessarily and exclusively for the purpose of the duties of an office, would be included in the word ''income''.
''It has also been pointed out that under sub-clause (iii)(b) of clause (24) of section 2 of the Act, any allowance granted to an employee-assessee either to meet his personal expenses at his place of work or his place of residence or to compensate him for the increased cost of living is also to be included in income. Therefore, it is conceded that the payment of the HRA or the CCA would be covered by the word 'income'. Hence, the basis of the decision rendered by the Calcutta high court would not survive,'' the court held.
''Section 2(24) of the Act gives a wide inclusive definition to the word 'income', similarly, for levying tax on salary income, an exhaustive definition is given under section 17, which includes perquisites and profits in lieu of salary. The only exclusion provided under sub-section 3 is any payment referable to clause (10), clause (10 a), clause 10 (b), clause (11), clause (12), clause (13), or clause (13 a) of section 10,'' the court added.
''The word 'profits' is used only to convey an ''advantage' or 'gain' by receipt of any payment by the employee,'' the court clarified.
Applying the general meaning of the word 'profits' and considering the dictionary meaning given to it under section 17(i)(iv) and 3(ii), the court was of the view that 'advantage' in terms of payment of money received by an employee from his employer in relation or in addition to any salary or wages would be covered by the inclusive definition of the word 'salary.'
May be this information will be of useful to you
CA. Rajesh P. Ahir
(In Service @ PSU)
(687 Points)
Replied 04 March 2010
Dear Vivek sir,
i fully agree with you and the wording of the Act. But my question is regarding the Logic for Taxing the Da.
Max Payne
(employed)
(2569 Points)
Replied 04 March 2010
Dear Rajesh,
Vivek sir has even provided a case law to tax DA.... :)
If DA was not taxable, then everybody will say they don't want basic pay, or commissions, or profit sharing, or perks...
they'll all settle for ultra-high DA!
(Guest)
Hey friends,
Concept of DA is brought by government.
Pay commission is fixed for 20 years once. So they started giving DA to take care of inflation.
But as for as income tax they fix slab and basic exemption limit considering inflation only.So as far as income tax is concern DA is taxable. There is no difference between basic and DA.
kumarsatish022
(Professional)
(165 Points)
Replied 04 March 2010
then,friends what is the difference between DA and DA(enter)
(Guest)
| Originally posted by : kumarsatish022 | ||
 |
then,friends what is the difference between DA and DA(enter) |
 |
Sorry friend,
Who do you mean by DA(enter). I have never seen anything like that!
(Guest)
Dear Rajesh,
One thing you should keep in mind that, in Income tax most of the thingsdoesn't have logic it is basically rules by the Income tax department. Tax is leived everywhere, where there is income. You are talking about that DA isgiven to employee for inflation then why it is taxable so plz think about that salary is given to employee then why it is taxable?............................. Think..
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