Even after discussion at length of heads there are some issues which holds worth for discussion, some of them are being discussed here.
Income from other sources :- Is Section 56 is place of specific chargeability or in certain circumstances income specified under 56 can be charged under other heads of income. Gifts are made taxable under section 56 but in Mrs. MeenaRajgopal Vs ACIT [(MUM.Tri) 156 Taxmann 40] Gift to employee was claimed to be taxable under the head salary, It was held that merely that gift is by employer to employee it cannot be concluded that it is salary. Similary Clause (id) of subsection (2) says that “income by way of interest on securities is taxable under this head, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”; This is very clear here that each and every interest has not been made specifically taxable under this clause. If interest is paid for use of funds of business under normal commercial practice – either as deposit or advance or debtor or refund claim or a bank account, it has to be taxed under business head. Since funds are owned by business and object for which they have been made available is in the course of normal business activity they have to be taxed under business head. If business has excess funds and due to this reason they have been invested out of the business then they can be taxed under as Income under the head Income from other sources. Interest is consideration of money lend, advanced, deposited etc., and this remuneration has to be taxed considering both the factors i.e. from where money has come and where it has been lent, advanced, deposited etc. Logically, If this money is part of capital structure then interest on capital is taxable as business income either the recipient of that consideration is individual or another business. Like interest of partner’s capital contribution has been specifically made taxable under business income. On the same analogy we have seen that when employee receives/pays interest in the course of employment on P.F., Loans this income takes flavor from the principal itself and is dealt appropriately under head income from salary. Secion 56 (2) (id) specifically excludes interest related business and Salary provisions under chapter IV specifically deals with interest earned under employment terms. In normal parlance we can conclude that the Section 56 (1) makes INCOME FROM OTHER SOURCES a residual head and Sub Section (2) makes it section of particular chargeability. Still the matter is open for discussion as it was held in above mentioned case.
Adhoc Deduction under section 57:- we have various ad hoc deductions available with us these these circular are of utmost importance for us.
Circular No 648 dated 30th March 1993 says that if total commission LIC agent is less than 60,000/- p.a. then – (a). If separate figures of first year and renewal commission are available then 50% of the first year commission and 15% of the renewal commission and (b) if No separate figures available then 33.33% of gross commission will be eligible for deduction. However in both the cases ceiling is 20000. Bonus commission is out of view of this circular.
Similarly circular no. 677 dated 28th January 1994 says that the benefit of adhoc deduction for expenses @ 50% of the gross receipt of commission is allowable to the agents of specified mutual funds under section 10 (23D) where no detail account expenditure is maintained and gross commission is less than 60000/- for the year.
Circular No. 594 dated 27th Feb 1991 says that benefit of adhoc deduction @ 50% of the gross receipts of commission is allowable to authorized agents of NSC (VIII Issue), Social Security Certificate, Post Office Time Deposit A/c, Post Office Recurring Deposit A/c , National Saving Scheme 1992, Post Office Monthly Income Account Scheme, Kisan Vikas Patra, Public Provident fund and deposit scheme of retiring government employees.
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