S R MITTRA IN RE Vs. STATE

JUDGEMENT

(1.) This is a reference by the Commissioner of Income-tax under Section 66(2) of the Indian Income-tax Act asking for the opinion of this Court upon the question Whether in circumstances of the case of payment received by the assessee from the unrecognised Provident Fund maintained by his employer was rightly assessed as income chargeable under Section 7(1) of the Act

(2.) The facts found are that the assessee, who is drawing a pay of over Rs. 75 per mensem, is an employee in the Tata Iron and Steel Company Limited to Jamshedpur. Under the rules of the Provident Fund maintained by that Company the assessee began to subscribe to that fund be contributing 1/24th or a larger sum out of his salary received every year. The employer under the rules of the Fund also contributed a similar sum. These sums, namely the employers and the employees contributions together with 6 per cent, interest thereon were placed to the credit of the assessee who in the previous year in question withdrew a sum of Rs. 6,214 which consisted of the contributions made by the employer towards the Provident Fund Rs. 3,445 and the accumulated interest theron Rs. 1,319. The contention of the assessee was that this sum of Rs. 4,764 was not assessable to income-tax because it was received by him not as his salary but as a capital voluntary payment within the meaning of the decision of their Lordships of the Judicial Committee in Fletchers case (1937) 5 I. T. R. 428. The Income-tax Officer and the Assistant Commissioner of Income-tax rejected this contention and made as assessment by bringing into aid Explanation 2 to Section 7 of the Indian Income-tax Act. But the Commissioner of Income-tax did not accept this view because he found that the assessee had received that amount while he was still in service and, therefore, this amount was received not in connection with the termination of service but while the assessee is still in service and, therefore, technically the assessee was out of the pale of Explanation 2 to Section 7(1) of the Indian Income-tax Act. He, however, was of the opinion that the assessee was liable to income-tax otherwise under sue-clause (1) of Section 7 because the amount which is received was in the nature of a deferred salary if the rules of the Provident Fund of his employer are kept in view. This is the question which arises for consideration in this case.

(3.) It should be observed here that the statement of the case in the reference was silent as to whether the assessee was drawing a salary below Rs. 75 or over. As the assessee was not represented before us, we asked the learned Standing Counsel to obtain for us this information from the Commissioner. He has supplied us an extract from the register of salaries which shows that the assessee was drawing a salary of over Rs. 200 per mensem for the period in question.