INCOME TAX OFFICER Vs. P KUMARACHANDRAN
INCOME TAX APPELLATE TRIBUNAL
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T. Venkatappa, Judicial Member -
(1.) THERE is a delay of two days in preferring this appeal. An affidavit has been filed giving the reasons for the delay. We accept the reasons given and condone the delay of two days in preferring this appeal.
(2.) The assessee was an employee of Voltas Ltd. He left the services of Voltas Ltd. and joined some other concern. He received Rs. 26,761 from Voltas Ltd., being the refund of contribution from the superannuation fund. This amount was claimed by the assessee as a capital receipt and not taxable. The ITO did not accept the claim of the assessee. He held that the refund of contribution is taxable in accordance with rule 6 of Part B of Fourth Schedule to the Income-tax Act, 1961 ('the Act'), and also not exempt under Section 10(75) of the Act. The assessee appealed to the AAC. The AAC held that Section 17(5)(ii) of the Act clearly states that the amount received by the assessee from an approved superannuation fund cannot be treated as 'profit in lieu of salary' and, therefore, the amount received by the assessee is not taxable. Thus, he directed the ITO to exclude the same. Against the same, the revenue has preferred this appeal.
The learned departmental representative strongly urged that under rule 6 of Part B of Fourth Schedule, the employer has an obligation to deduct tax on contribution paid to an employee who does not come under Section 10(75). It is not the assessee's case that he comes under Section 10(75). In fact, the employer has deducted tax. This clearly shows that the amount received by the assessee is taxable. It was rightly taxed by the ITO. Once the assessee does not fall under Section 10(75), the amount received is liable to be taxed. It is not a capital receipt. Alternatively, he submitted that if it is not taxable under the head 'salary', it is taxable as income from other sources. He referred to certain passages at page 983 of Sampath Iyengar's commentary on Income-tax and at page 314 of Kanga's commentary on Income-tax. The learned counsel for the assessee strongly urged that the onus is on the revenue to prove that the amount received by the assessee is chargeable to tax. But, no provision has been pointed out under which it could be taxed. Since, the assessee is an employee, he can be charged to tax under the head 'salary'. The assessee does not fall under Section 17(3)(ii) as the amount received from the superannuation fund is excluded therefrom. The amount received cannot be assessed as income from other sources as the assessee's source of income is only salary and only on account of his employment the amount has been received from his employer.
(3.) WE have considered the rival submissions. The assessee was an employee of Voltas Ltd. The employer Voltas Ltd. contributed certain amount every year, being employer's contribution towards superannuation fund. The assessee resigned from the said company. Thus, on his leaving the said company, he received Rs. 26,761 from his employer being the refund of contribution from the superannuation fund. The question for consideration is whether the said amount is taxable. It will be necessary to refer to the relevant provisions of the Act. Section 2(24) of the Act defines income which includes the value of any perquisite or profit in lieu of salary taxable under Clauses (2) and (i) of Section 17. Section 17(3) is the relevant provision for our consideration which reads as under: "profits in lieu of salary' includes--
(i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto ;
(ii) any payment (other than any payment referred to in Clause (10), Clause (10A), Clause (10B), Clause (11), Clause (12) or Clause (13A) of Section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund (not being an approved superannuation fund) to the extent to which it does not consist of contributions by the assessee or interest on such contributions.
Section 192(5) of the Act reads as under:
Where any contribution made by an employer, including interest on such contributions, if any, in an approved superannuation fund is paid to the employee, tax on the amount so paid shall be deducted by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule.
Rule 6 of Part B of Fourth Schedule reads as under:
6. Deduction of tax on contributions paid to an employee.--Where any contributions made by an employer, including interest on contributions, if any, are paid to an employee during his lifetime, in circumstances other than those referred to in Clause (73) of Section 10, tax on the amounts so paid shall be deducted at the average rate of tax , at which the employee was liable to tax during the preceding three years during the period, if less than three years, when he was a member of the fund, and shall be paid by the trustees to the credit of the Central Government within the prescribed time and in such manner as the Board may direct.
Section 10(13) reads as under:
10. Income not included in total income.--In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--
(i) any payment from an approved superannuation fund made--(i) on the death of a beneficiary ; or
(ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement ; or
(iii) by way of refund of contributions on the death of a beneficiary ; or
(iv) by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon ;
Section 2(24) is an inclusive definition of income and under Sub-clause (iii) thereto, profit in lieu of salary taxable under Clauses (2) and (3) of Section 17 is also income.;
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