Dear Galsober,
Every payment where made to a person by any other person for renedition of service and the relation of Employee and Employer exists in accordance to the term of employment can be said to be salary.
Section 17
Salaries - Perquisite/Profits in lieu of salary
Includes
n The word ‘includes’ is generally used as a word of extension, but the meaning of a word or phrase is extended when it is said to include things that would not properly fall within its ordinary connotation. Thus, where ‘includes’ has an extending force, it adds towards the phrase a meaning which does not naturally belong to it. Scope of inclusive definition cannot be restricted to those words only which occur in such definition, but inclusive definition will extend to so many other things, which are not talked of in the section - All India Defence Accounts Association v. Union of India [1989] 175 ITR 494 (All.).
Fees in addition to any salary - sub-Clause (iv) of clause (1)
n The word ‘salary’ is derived from the word ‘salarium’. In a nutshell it means compensation for ‘rendition of some sort of service’. According to Corpus Juris Secundum, the word ‘salary’ is “usually applied to the reward paid to a public officer for the performance of his official duties.....” It is paid at stated intervals. Under the Income-tax Act, it is not merely defined to mean the compensation for services rendered but, by providing an inclusive definition, the scope of the provision has been widened. Even the pension, which is paid after the relationship of employer and employee ceases to exist, has been included in the definition of ‘salary’. Similarly, gratuity which is paid on retirement, is included within the term ‘salary’. Thus, the legislation does not confine ‘salary’ within the narrow limit of compensation for services rendered during the subsistence of a relationship of employer and employee but even includes the benefits which may become available at the end of that relationship. In sub-clause (iv) of section 17(1), it has been provided that even fees, commissions perquisites or profits which are paid to a person ‘in lieu of or in addition to any salary or wages’ shall be included in income taxable under section 15 of the Act. What is fee ? According to Corpus Juris Secundum (Volume 36 page 628) ‘fee’ is : “in a generic sense, the word implies compensation or salary, but if used in its narrow distinctive sense it signifies the compensation for particular acts or services rendered in the line of official duties”. It has been defined as a “charge fixed by law for the service of a public officer, or for the use of privilege under the control of the Government; a charge for services; a charge of emoluments.....” This meaning conforms to the provisions of section 17 and it is in consonance with the broad concept of salary as compensation for services rendered - CIT v. Dr. Mrs. Usha Verma [2002] 120 Taxman 738/254 ITR 404 (Punj. & Har.).
Salary - clause (1)
n The word ‘salary’ under section 17(1) is very wide. The word ‘salary’ under section 17(1)(v) is an inclusive definition - CIT v. Gopal Krishna Suri [2000] 113 Taxman 707 (Bom.).
n The expression ‘salary’ for the purposes of computing income for charging purposes will mean only as defined under section 17 - CIT v. Ram Rattan Lal Verma [2005] 145 Taxman 256 (All.).
Any payment made on account of renedition of Professional and other services on contractual basis and where there is no relation of employee and employer then such payment can be termed as Profession fee.
TDS on Salary is made u/s 192 and for professional services under 194C or 194J depending upon the nature of contract.
