Income from other sources u/s.56 of the I.T.Act, 1961

Reference is invited to the Board's circular No.40/2/0/67-IT(AI), dated 22nd May, 1967 in which it was elucidated that the salary of Rs.500 p.m. received by an M.P. was not chargeable under the head 'salaries' but as income from other sources u/s.56 of the I.T.Act, 1961. The scope for allowance of expenses in the context of this assessment head, for the salary in question was further elucidated in the Board's Circular No.40/20/67-IT(AI), dated the 22nd August, 1969.

2. The ITAT(Delhi Bench-A) have since held in their order dated 23-12-69 in I.T.A.No. 2567 of 1969-70 that such salary income is assessable u/s.28 as income from vocation. On the basis of legal advice obtained, this decision of the Tribunal has not been accepted and a reference to High Court has been authorised. Assessment of Income u/s.28 differs materially from assessment u/s.56 e.g. scope for allowance of expenses u/s.28 is comparatively wider, and on the other hand perquisites are also liable to be assessed under this section vide sub-section (iv) thereof, there being no corresponding provision u/s.56.

3. As the Tribunal's above noted decision is being challenged by the Department in reference, it may not be followed except in the particular case and the instructions in the Board's above noted two circulars may continue to be generally followed. The assessing officers in your charge may please be informed accordingly.