Section 16 — the law in short
What the courts have decided on section 16, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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CIT v Gopal Krishna Suri
High CourtHelps departmentHigh Courts differ
I spend my own money to earn the incentive part of my pay. Can I deduct that expenditure before the amount is taxed as salary?
No. Once a receipt falls under the head Salaries, the only deductions available are those s.16 allows; there is no provision permitting expenses incurred to earn salary to be taken out at the threshold, and 'income' in s.15 does not mean net of such expenses. An LIC development officer's incentive bonus is in the nature of commission, falls within the inclusive definition of salary in s.17(1)(iv), and is taxable in full.
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Nandinho Rebello v DCIT
ITATCuts both waysNo later treatment found
My client left two jobs in the same year and each employer recovered notice pay out of his salary. The Assessing Officer has added back the gross salary from Form 26AS. Is the recovery deductible?
The Tribunal held that only the salary actually received is taxable. Where the employer recovers notice pay under the employment agreement and pays the employee the net amount, the case is one of recovery of salary and s.16 does not come into it at all; the Tribunal expressly declined to test the claim against the list of deductions in s.16.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
