Ram Kanwar Rana, Hisar V. ITO, Hisar

ITA 1307/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7312 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 15-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V R SONBHADRA
• Keywords: Benefit of exemption
• Section: 10(10AA)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.1307/DEL/2016 ASSESSMENT YEAR : 2010-11 RAM KANWAR RANA, H.NO.233, SECTOR 15A, HISAR. PAN: AAVPR2697H VS. ITO, WARD-3, HISAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANKIT GUPTA, CA DEPARTMENT BY : SHRI V.R. SONBHADRA, SR. DR DATE OF HEARING : 15. 06.2016 DATE OF PRONOUNCEMENT : 16.06.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 23.12.2015 IN RELATION TO T HE ASSESSMENT YEAR 2010-11. ITA NO.1307/DEL/2016 2 2. THE ONLY ISSUE PRESSED BY THE LD. AR IN THIS APP EAL IS AGAINST THE DENIAL OF EXEMPTION IN RESPECT OF THE AMOUNT RECEIV ED BY THE ASSESSEE TOWARDS ARREARS OF GRATUITY AT RS.6,50,000/- AND AR REARS OF LEAVE ENCASHMENT AMOUNTING TO RS.1,88,720/-. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS AN EMPLOYEE OF CHAUDHARY CHARAN SINGH HARYANA AGRICULT URAL UNIVERSITY, HISAR (HEREINAFTER CALLED CCSU) AND RETIRED FROM SE RVICE IN APRIL, 2008. RETURN FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME OF RS.2,50,410 /- WAS FILED, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THE AO INITIAT ED RE-ASSESSMENT PROCEEDINGS ON THE PREMISE THAT THE ASSESSEE HAD WR ONGLY CLAIMED EXEMPTION U/S 10(10) IN RESPECT OF THE ARREARS OF G RATUITY AND ARREARS OF LEAVE ENCASHMENT. HE OBSERVED THAT GRATUITY AND LE AVE ENCASHMENT WERE EXEMPT UP TO THE LIMIT OF RS.3,50,000/- AND RS.3 LA C, RESPECTIVELY, IN THE CASE OF THE ASSESSEE, WHICH LIMIT STOOD EXHAUSTED I N THE EARLIER YEAR AT THE TIME OF THEIR RECEIPT. HE FURTHER NOTICED THAT EXEMPTION LIMIT WAS ENHANCED TO RS.10 LAC FOR THE PERSONS RETIRING FROM SERVICE ON OR AFTER ITA NO.1307/DEL/2016 3 24.5.2010. SINCE THE ASSESSEE RETIRED BEFORE THIS CUT-OFF DATE, THE AO OPINED THAT THE EXTENDED BENEFIT OF EXEMPTION WAS N OT AVAILABLE TO THE ASSESSEE. HE JETTISONED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10(10) OF THE ACT AND HELD THAT THE CORRECT SECTION S APPLICABLE WERE 10(10)(III) AND SECTION 10(10AA)(II). SINCE THE ASS ESSEE WAS AN EMPLOYEE OF CCSU, THE AO HELD THAT SUCH EMPLOYEES C OULD NOT BE TERMED AS GOVERNMENT EMPLOYEES AND, HENCE, THE BENE FIT U/S 10(10)(I) WAS NOT AVAILABLE TO THE ASSESSEE. RESULTANTLY, HE MADE ADDITION TOWARDS THE AMOUNT OF ARREARS OF GRATUITY RECEIVED AT RS.6, 50,000/- AND THE AMOUNT OF ARREARS OF LEAVE ENCASHMENT RECEIVED OF R S.1,88,720/-. THE LD. CIT(A) ECHOED THE VIEW TAKEN BY THE AO THAT THE ASSESSEE WAS NOT A `HOLDER OF CIVIL POST UNDER THE STATE GOVERNMENT A ND HENCE NOT ELIGIBLE FOR EXEMPTION U/S 10(10)(I). FURTHER, THE ASSESSEE WAS HELD TO BE NOT COVERED U/S 10(10)(II) AS HE DID NOT RECEIVE ANY GR ATUITY UNDER THE PAYMENT OF GRATUITY ACT, 1972. THAT IS HOW, HE HEL D THAT THE EMPLOYEES OF THE CCSU WERE COVERED U/S 10(10)(III) OF THE ACT , FOR WHICH THERE IS A LIMIT ON THE EXEMPT GRATUITY AMOUNT, WHICH STOOD EX HAUSTED BY THE ASSESSEE IN EARLIER YEAR. SINCE THE ASSESSEE WAS E MPLOYED BEFORE ITA NO.1307/DEL/2016 4 24.5.2010, THE NOTIFICATION ISSUED BY THE CBDT ENHA NCING THE LIMIT OF RS.10 LAC ON GRATUITY U/S 10(10)(III) WAS HELD TO B E NOT APPLICABLE. THE ASSESSEE IS AGGRIEVED AGAINST THE CONFIRMATION OF D ENIAL OF EXEMPTION MADE BY THE LD. CIT(A). 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE CONTROVERSY IN THIS APPEAL CAN BE VIEWED SEPARATELY IN RESPECT OF RECEIPT OF GRATUITY AMOUNT AND LEAVE ENCASHMENT. IN SO FAR AS THE ADDITION ON ACCOUNT OF GRATUITY RE CEIVED BY THE ASSESSEE AMOUNTING TO RS.6,50,000/- IS CONCERNED, IT IS FOUN D THAT THE CASE OF THE ASSESSEE IS THAT THIS AMOUNT FALLS U/S 10(10)(I) OF THE ACT. ON THE CONTRARY, THE REVENUE HAS TREATED IT AS A CASE FALL ING U/S 10(10)(III). IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS IN RIGHT PERSPECTIVE, IT WILL BE APPOSITE TO SET OUT THE RELEVANT PARTS OF SECTION 1 0, AS UNDER :- `( 10 ) ( I ) ANY DEATH- CUM -RETIREMENT GRATUITY RECEIVED UNDER THE REVISED PENSION RULES OF THE CENTRAL GOVERNMENT OR, AS THE CASE MAY BE, THE CENTRAL CIVIL SERVICES (PENSION) RULES, 1972, OR UN DER ANY SIMILAR SCHEME APPLICABLE TO THE MEMBERS OF THE CIVIL SERVI CES OF THE UNION OR HOLDERS OF POSTS CONNECTED WITH DEFENCE OR OF CIVIL POSTS UNDER THE UNION (SUCH MEMBERS OR HOLDERS BEING PERSONS NOT GO VERNED BY THE SAID RULES) OR TO THE MEMBERS OF THE ALL-INDIA SERV ICES OR TO THE MEMBERS OF THE CIVIL SERVICES OF A STATE OR HOLDERS OF CIVIL POSTS UNDER A STATE OR TO THE EMPLOYEES OF A LOCAL AUTHORITY OR ANY PA YMENT OF ITA NO.1307/DEL/2016 5 RETIRING GRATUITY RECEIVED UNDER THE PENSION CODE O R REGULATIONS APPLICABLE TO THE MEMBERS OF THE DEFENCE SERVICES ; ( II ).. ( III ) ANY OTHER GRATUITY RECEIVED BY AN EMPLOYEE ON HIS RETIREMENT OR ON HIS BECOMING INCAPACITATED PRIOR TO SUCH RETIREMENT OR ON TERMINATION OF HIS EMPLOYMENT, OR ANY GRATUITY RECEIVED BY HIS WIDOW, CHILDREN OR DEPENDANTS ON HIS DEATH, TO THE EXTENT IT DOES NOT, IN EITHER CASE, EXCEED ONE-HALF MONTH'S SALARY FOR EACH YEAR OF COMPLETED SERVICE, CALCULATED ON THE BASIS OF THE AVERAGE SALARY FOR THE TEN MONT HS IMMEDIATELY PRECEDING THE MONTH IN WHICH ANY SUCH EVENT OCCURS, SUBJECT TO SUCH LIMIT AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATIO N IN THE OFFICIAL GAZETTE, SPECIFY IN THIS BEHALF HAVING REGARD TO THE LIMIT APPLICABLE IN THIS BEHALF TO THE EMPLOYEES OF THAT GOVERNMENT : .. PROVIDED FURTHER THAT WHERE ANY SUCH GRATUITY OR GR ATUITIES WAS OR WERE RECEIVED IN ANY ONE OR MORE EARLIER PREVIOUS YEARS ALSO AND THE WHOLE OR ANY PART OF THE AMOUNT OF SUCH GRATUITY OR GRATU ITIES WAS NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE OF SUC H PREVIOUS YEAR OR YEARS, THE AMOUNT EXEMPT FROM INCOME-TAX UNDER THIS CLAUSE SHALL NOT EXCEED THE LIMIT SO SPECIFIED AS REDUCED BY THE AMO UNT OR, AS THE CASE MAY BE, THE AGGREGATE AMOUNT NOT INCLUDED IN THE TO TAL INCOME OF ANY SUCH PREVIOUS YEAR OR YEARS. 5. A CAREFUL PERUSAL OF THE ABOVE PROVISION INDICAT ES THAT IF A CASE FALLS UNDER CLAUSE (I) OF SECTION 10(10), THE ENTIR E AMOUNT OF DEATH-CUM- RETIREMENT GRATUITY BECOMES EXEMPT. AU CONTRAIRE, IF A CASE FALLS UNDER SUB-CLAUSE (III) OF SECTION 10(10), THEN, THE EXEMP TION IS LIMITED TO THE AMOUNT AS THE CENTRAL GOVERNMENT MAY NOTIFY IN OFFI CIAL GAZETTE. IT IS AN ACCEPTED POSITION THAT THE NOTIFICATION U/S 10(1 0)(III) ISSUED ON ITA NO.1307/DEL/2016 6 24.5.2010 RAISED THE CEILING OF EXEMPTION FROM RS.3 ,50,000/- TO RS.10 LAC. SINCE THE ORIGINAL AMOUNT WAS RECEIVED BY THE ASSESSEE DURING THE CURRENCY OF AN EARLIER YEAR ON HIS RETIREMENT, THE EXEMPTION LIMIT PREVALENT AT THAT TIME AT RS.3,50,000/- WAS USED BY THE ASSESSEE. IT IS NOBODYS CASE THAT THE EXTENDED LIMIT OF EXEMPTION CAN BE APPLIED TO THE ASSESSEE, BECAUSE OF HIS RETIREMENT WHICH TOOK PLAC E MUCH BEFORE THE CUT-OFF DATE. TO BE MORE SPECIFIC, THE QUESTION IS AS TO WHETHER THE EXTANT CASE FALLS UNDER CLAUSE (I) OR CLAUSE (III) OF SECT ION 10(10). IF A CASE DOES NOT FALL UNDER CLAUSE (I), IT WILL AUTOMATICALLY GO TO CLAUSE (III). ON A SPECIFIC QUERY FROM THE BENCH, THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE SHOULD BE CONSIDERED UNDER SUB-CLAUSE (I) OF SECTION 10(10) AS A HOLDER OF CIVIL POST UNDER A STATE. IN ORDER TO C ONSTRUE ANY PERSON AS A HOLDER OF CIVIL POST UNDER A STATE, TWO REQUIREMENT S MUST BE FULFILLED VIZ., FIRST THAT THE EMPLOYEE SHOULD BE HOLDING A C IVIL POST AND, SECOND, SUCH CIVIL POST MUST BE UNDER A STATE. 6. THE FIRST CONDITION IS THAT THE EMPLOYEE SH OULD BE HOLDING A CIVIL POST. THE ASSESSEE WAS APPOINTED AS A RESEARCH ASS ISTANT IN DECEMBER, ITA NO.1307/DEL/2016 7 1971, WHO EVENTUALLY ROSE TO THE POST OF HEAD OF DE PARTMENT, PLANT BREEDING DEPARTMENT AT THE TIME OF HIS RETIREMENT. PAGE 32 OF THE PAPER BOOK IS COPY OF THE ASSESSEES PENSION PAYMENT ORDE R, WHICH DEPICTS THE ASSESSEES DESIGNATION AS SR. SCIENTIST, DEPARTMENT OF PLANT BREEDING. ON THE PENSIONERS PORTION OF THIS DOCUMENT, THER E IS A REFERENCE TO RULE 10, 11 AND NOTE THEREUNDER OF CIVIL SERVICES R ULES (CSR) V.II. AS THE ASSESSEES PENSION HAS BEEN COMPUTED UNDER CIVI L SERVICES RULE, IT GOES TO SHOW THAT THE ASSESSEE WAS HOLDING A CIVIL POST AT THE TIME OF HIS RETIREMENT. NO OTHER CONTRARY MATERIAL HAS BEEN PLACED ON RECORD BY THE LD. DR TO SHOW THAT THE ASSESSEE WAS HOLDING A POST OTHER THAN CIVIL POST. 7. THE SECOND REQUIREMENT IS THAT SUCH CIVIL PO ST MUST BE UNDER A STATE. PAGE 20 OF THE PAPER BOOK IS A COPY OF HARY ANA AND PUNJAB AGRICULTURAL UNIVERSITY ACT, 1970, WHICH WAS PASSED BY THE PARLIAMENT AND RECEIVED THE ASSENT OF THE PRESIDENT ON 2 ND APRIL, 1970. UNDER THIS ACT OF PARLIAMENT, TWO INDEPENDENT AGRICULTURAL UNI VERSITIES IN PLACE OF THE HITHERTO PUNJAB AGRICULTURAL UNIVERSITY, WERE E STABLISHED. SECTION 5 ITA NO.1307/DEL/2016 8 OF THIS ACT SETS OUT THE NAME OF CCSU AS THE AGRICU LTURAL UNIVERSITY TO FUNCTION WITHIN THE TERRITORIES OF STATE OF HARYAN A. THIS PROVES THAT THE CCSU WAS ESTABLISHED BY AN ACT OF PARLIAMENT. PAGE 29 OF THE PAPER BOOK IS A DOCUMENT WHICH SHOWS THAT THE ASSESSEE IS A STATE UNIVERSITY COVERED UNDER UNIVERSITY GRANTS COMMISSION (UGC). IT IS UNDISPUTED THAT THE ENTIRE FUNDING OF THE CCSU IS DONE BY THE STATE GOVERNMENT. PAGE 25 IS A COPY OF NOTIFICATION ISSUED BY THE HAR YANA GOVERNMENT INCREASING THE MAXIMUM LIMIT OF DEATH-CUM-RETIREMEN T GRATUITY AT RS.10 LAC, UNDER WHICH THE ASSESSEE HAS RECEIVED THE ARR EARS OF RETIREMENT GRATUITY UNDER THIS SCHEME ONLY. THE ABOVE FACTS A MPLY DEMONSTRATE THAT CCSU IS COVERED UNDER THE EXPRESSION STATE. THIS IS FURTHER CORROBORATED FROM ARTICLE 12 OF THE CONSTITUTION O F INDIA WHICH STATES THAT: IN THIS PART, UNLESS THE CONTEXT OTHERWISE R EQUIRES, THE STATE INCLUDES THE GOVERNMENT AND PARLIAMENT OF INDIA AND THE GOVERNMENT AND THE LEGISLATURE OF EACH OF THE STATES EITHER LO CAL OR OTHER AUTHORITIES WITHIN THE TERRITORY OF INDIA OR UNDER THE CONTROL OF THE GOVERNMENT OF INDIA. THE EXPRESSION OTHER AUTHORITIES HAS BEEN INTERPRETED IN UMESH V. SINGH A 1967 PAT. 3(9) F.B. AS INCLUDING: A BOA RD, A UNIVERSITY, THE ITA NO.1307/DEL/2016 9 CHIEF JUSTICE OF A HIGH COURT, HAVING THE POWER TO ISSUE RULES, BYLAWS OR REGULATIONS HAVING THE FORCE OF LAW. THE ABOVE DIS CUSSION MANIFESTS THAT CCSU IS COVERED WITHIN THE MEANING OF STATE. 8. AS THE ASSESSEE IS FOUND TO BE AN EMPLOYEE HOLDING A CIVIL POST UNDER A STATE, IN MY CONSIDERED OPINION, THE PROVIS IONS OF SECTION 10(10)(I) ARE FULLY ATTRACTED IN THIS CASE ENTITLIN G HIM TO EXEMPTION FOR THE AMOUNT UNDER CONSIDERATION. ONCE A CASE FALLS U NDER CLAUSE (I) OF SECTION 10(10), THE SAME CANNOT BE BROUGHT WITHIN T HE PURVIEW OF CLAUSE (III) OF SECTION 10(10). I, THEREFORE, HOLD THAT T HE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(10)(I) IN RESPECT OF GRATUITY AMOU NT RECEIVED IN TOTAL UPTO RS.10 LAC, WHICH COVERS A SUM OF RS.6,50,000/- RECEIVED DURING THE YEAR. OVERTURNING THE IMPUGNED ORDER ON THIS SCORE , I ALLOW EXEMPTION U/S 10(10)(I) TO THE ARREARS OF GRATUITY RECEIVED B Y THE ASSESSEE AT RS.6,50,000/- DURING THE INSTANT YEAR. 9. AS REGARDS THE SECOND AMOUNT OF RS.1,88,720/- RE CEIVED BY THE ASSESSEE DURING THE YEAR TOWARDS THE ARREARS OF LEA VE ENCASHMENT, IT IS NOTICED THAT THE ASSESSEE CLAIMED EXEMPTION U/S 10( 10AA)(I) WHICH WAS ITA NO.1307/DEL/2016 10 REFUSED BY THE AO BY HOLDING THE CASE TO BE COVERED UNDER SUB-CLAUSE (II) OF SECTION 10(10AA). THE LD. CIT(A) AFFIRMED THE VIEW TAKEN BY THE AO ON THIS POINT, THEREBY DENYING THE BENEFIT OF EX EMPTION IN RESPECT OF THE ARREARS OF LEAVE ENCASHMENT RECEIVED DURING THE YEAR. 10. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. AR SUBMITTED THAT THERE IS NOT MUCH DIFFERENCE IN THE LANGUAGE OF SECTION 10(10)(I) AND 10(10AA)(I) AND THE VIEW TAKEN IN RESPECT OF ARREARS OF GRATUITY U/S 10 (10) SHOULD BE FOLLOWED FOR ARREARS OF LEAVE ENCASHMENT U/S 10(10AA). THE LD. DR SUPPORTED THIS PROPOSITION. AS BOTH THE SIDES ARE CONSENSUS AD IDEM ON THE POSITION THAT THE VIEW TAKEN IN THE CONTEXT OF SEC TION 10(10) AS APPLICABLE TO LEAVE GRATUITY BE FOLLOWED HERE IN TH E CONTEXT OF SECTION 10(10AA) IN THE CONTEXT OF LEAVE ENCASHMENT, I AM D ESISTING FROM INDEPENDENTLY EXAMINING THE LATER PROVISION. IN V IEW OF THE FACT THAT I HAVE HELD THE ASSESSEE TO BE ENTITLED TO EXEMPTION U/S 10(10)(I) IN RESPECT OF ARREARS OF GRATUITY, FOLLOWING THE SAME, I EXTEND THE BENEFIT OF ITA NO.1307/DEL/2016 11 EXEMPTION U/S 10(10AA)(I) IN RESPECT OF ARREARS OF LEAVE ENCASHMENT. THIS GROUND IS ALLOWED. 11. THE LD. DR DID NOT SERIOUSLY PRESS THE GROUND C HALLENGING THE INITIATION OF RE-ASSESSMENT. THE SAME IS, THEREFOR E, DISMISSED. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.06.201 6. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 16 TH JUNE, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.