Decided on April 23,1982



R.L.Segel, - (1.) THE appeal by the revenue, and the cross-objection by the assessee, Shri D.N. Dhingra of Agra, an individual, arising out of the order of the AAC, Agra, dated 4-12-1981, are consolidated, heard together, and are being disposed of by a common order for the sake of convenience.
(2.) The year of assessment involved is 1977-78 for which the previous year ended on 31-3-1977. The assessee was at one time working as an agent with Norwich Union Life Insurance Society. After life insurance was nationalised in the country, the Life Insurance Corporation (LIC) came into existence under the Life Insurance Corporation Act, 1956. The assessee vide agreement dated 10-1-1957 was continued as an agent of LIC on the terms and conditions mentioned in the said Act. A copy of the said agreement has been produced before me. Admittedly, the assessee in the year under consideration retired as an agent of the LIC. On his retirement the assessee was paid by way of gratuity an amount of Rs. 20,609. This payment was over and above the income earned by the assessee as an agent of the LIC in the year under consideration of Rs. 16,349. The gratuity amount of Rs. 20,609 has been taxed by the ITO under the head 'Income from other sources'. In respect of the gratuity paid to the assessee by the LIC, the claim of the assessee that it was exempt under Section 10(10)(iii) of the Income-tax Act, 1961 ('the Act') has been negatived by the ITO on the ground that the relationship between the LIC and the assessee was not that of an employer and an employee but that of a principal and an agent.
(3.) AGGRIEVED by the aforesaid assessment, the assessee brought the matter by way of appeal before the AAC who has agreed with the ITO that the aforesaid gratuity amount received by the assessee was not exempt under Section 10(10)(iii). He, however, held that the above gratuity amount was exempt under Section 10(3) of the Act because, according to him, the gratuity received was a casual and non-recurring receipt. The revenue is aggrieved against the finding just mentioned hereinbefore. The assessee has filed the cross-objection to urge that there was a relationship of employer and employee between the LIC and him and so the aforesaid gratuity amount was exempt under Section 10(10)(iii).;

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