Decided on June 30,1982



K.S. Viswanathan, Accountant Member - (1.) THE appeal and the cross-objection arises from the order of the AAC in his Appeal No. THn. 7/79-80 dated 5-3-1980, disposing of an appeal filed by the assessee, for the assessment year 1979-80. THE assessee is an individual. He was employed in National Machinery Manufacturers Ltd. He left that company on 1-1-1979. He received from the superannuation fund Rs. 25,823. THE ITO brought this amount to tax. On appeal, the AAC deleted the addition. He, however, held that the amount received should be taxed under the Fourth Schedule, Part B, at the rates specified in Rule 6 therein, of the Income-tax Act, 1961 ('the Act').
(2.) Against this finding, both the assessee and the department are on appeal before us. In order to understand the issues involved in this appeal, we would give a few facts. The assessee joined the company sometimes in 1969. As per the service agreement, the assessee would be entitled to participate in the company's provident fund and gratuity schemes. The standard employment terms applicable to all senior staff would be applicable in the assessee's case also and his services could be terminated by three months' notice.
(3.) THE company had constituted a superannuation scheme with effect from 1-1-1973. Under this scheme, the employer-company would contribute in respect of each member, an annual contribution equal to two months' salary of the member. THEse contributions will be held by the trustees of the superannuation scheme. THEre is no requirement that the employee should make any contribution. As a matter of fact, no employee has been called upon to make any contribution. THE contribution made by the company would be available to the members of the staff under certain contingencies and circumstances. Normally, they are available on the retirement of the employee. But it could be available under such circumstances when the employee withdraws from the scheme on an earlier date. THE benefits would be claimed under an annuity purchased by the trustees with the Life Insurance Corporation of India. However, the employees have other options. THEy can elect a pension for a specific period plus certain guaranteed payment. Section III of the scheme gives seven alternatives to the employees.;

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