Sant Lal Mehta, Hisar V. ITO WARD - 4, Hisar

ITA 1537/DEL/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5423 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 01-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S. RISHAB OSTWAL
• Keywords: Set aside
• Section: 10(10AA)

Judgement Text

1 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. _1537/DEL/2020 [Assessment Year: 2010-11 Sant Lal Mehta, H. No. 461-P, PLA, Hisar, Haryana-125001 PAN- ATJPM9268J Vs Income-tax Officer, Ward-4, Hisar. APPELLANT RESPONDENT Appellant by S/Sh. Rishab Ostwal & Deepak Ostwal Adv. Respondent by Sh. Om Prakash, Sr. DR Date of hearing 05.07.2022 Date of pronouncement 20.07.2022 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), Hisar, dated 11.01.2016, pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal: “1. The order of the Learned CIT(A) is bad in law and against the facts placed on record. 2. On the facts & circumstances of the case, order passed by the AO by 2 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO making the addition of Gratuity of Rs. 6,50,000/- & Rs. 81,610/- on account of leave encashment and sustained by the Honorable CIT(A) is bad in law & against the facts of the case.” 2. Facts giving rise to the present appeal are that the assessee filed its return of income declaring income of Rs. 8,63,800/- on 31.07.2010. The case of the assessee was reopened on the basis that the assessee had received gratuity and other retirement benefits. As per the Assessing officer the assessee received gratuity amounting to Rs. 10,00,000/-. However, the exemption limit was to the extent of Rs. 3,50,000/-, hence Rs. 6,50,000/- was required to be taxed. Apart from that earlier year of leave encashment amounting to Rs. 81,610/- was found not in order and same was added to the income of the assessee. Thus, the assessing officer assessed income at Rs. 15,95,410/-. Aggrieved against this the assessee preferred appeal before the learned CIT9Appeals0 who, after considering the submissions dismissed the appeal. Now the assessee is in appeal before this Tribunal. 3. The only effective ground in this appeal is against sustaining the addition of Rs. 6,50,000/- made on account of Gratuity and Rs.81,610/- made on account of leave encashment. 4. At the outset learned counsel for the assessee submitted that similarly situated employees/assessees have filed appeals before the Tribunal and the coordinate Bench of the Tribunal in ITA no. 905/Del/2017 and ITA no. 906/Del/2017 has deleted the addition. 3 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO 5. Learned DR opposed the submissions and supported the orders of authorities below. 6. I have heard the learned authorized representative of the assessee. I find that in ITA no. 905/Del/2017 in the case of Dev Raj Sood Vs. ITO, the coordinate Bench decided identical issues in favour of the assessee by observing as under: 9. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that an identical issue relating to the gratuity, having similar facts has already been adjudicated by the ITAT Delhi Benches, ‘SMC- IT, New Delhi in ITA No. 3713/Del/2016 for the assessment year 2011 - 12 in the case of Dharam Jeet Dahiya Vs ITO, Ward-1, Hisar, wherein the relevant findings have been given in paras 7 & 8 of the order dated 26.10.2016 which read as under: “7. It is noticed that an identical issue relating to the gratuity, having similar facts has already been adjudicated by the IT AT Delhi Benches ‘SMC-1 ’, New Delhi in ITA No. 1307/Del/2016 for the assessment year 2010-11 in the case of Ram Kanwar Rana Vs ITO, Ward-3, Hisar, wherein the relevant findings have been given in paras 4 to 10 of the order dated 16.06.2016 which read as under: “4. I have heard the rival submissions and perused the 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 received by the assessee amounting to Rs. 6,50,000/- is concerned, it is found 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 falling 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 10, 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, 4 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all- India services 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 payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services; (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 months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification 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 gratuities 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 gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years. ’ 5. A careful perusal of the above provision indicates that if a case falls under clause (i) of section 10(10), the entire amount of death-cum-retirement gratuity becomes exempt. Au contraire, if a case falls under sub-clause (iii) of section 10(10), then, the exemption is limited to the amount as the Central Government may notify in official gazette. It is an 5 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO accepted position that the Notification u/s 10(10)(iii) issued on 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 nobody’s case that the extended limit of exemption can be applied to the assessee, because of his retirement which took place 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 section 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 Id. 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 construe any person as a holder of civil post under a State, two requirements must be fulfilled viz., first that the employee should be holding a civil post and, second, such civil post must be under a State. 6. The first condition is that the employee should be holding a civil post. The assessee was appointed as a Research Assistant in December, 1971, who eventually rose to the post of Head of Department, Plant Breeding Department at the time of his retirement. Page 32 of the paper book is copy of the assessee’s Pension Payment Order, which depicts the assessee’s designation as Sr. Scientist, Department of Plant Breeding. On the Pensioner’s Portion ’ of this document, there is a reference to Rule 10, 11 and note thereunder of Civil Services Rules (CSR) V.II. As the assessee’s pension has been computed under Civil 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 Id. DR to show that the assessee was holding a post other than civil post. 7. The second requirement is that such civil post must be under a State. Page 20 of the paper book is a copy of Haryana and Punjab Agricultural University Act, 1970, which was passed by the Parliament and received the assent of the President on 2nd April, 1970. Under this Act of Parliament, 6 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO two independent agricultural universities in place of the hitherto Punjab Agricultural University, were established. Section 5 of this Act sets out the name of CCSU as the agricultural university to function within the territories of State of Haryana. 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 Haryana Government increasing the maximum limit of death- cum-retirement gratuity at Rs.10 lac, under which the assessee has received the arrears of retirement gratuity under this scheme only. The above facts amply demonstrate that CCSU is covered under the expression ‘State. ’ This is further corroborated from Article 12 of the Constitution of India which states that: ‘In this part, unless the context otherwise requires, ‘the State ’ includes the Government and Parliament of India and the Government and the legislature of each of the States either local 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 Board, a University, the Chief Justice of a High Court, having the power to issue rules, bylaws or regulations having the force of law. ’ The above discussion 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 provisions of section 10(10) (i) are fully attracted in this case entitling him to exemption for the amount under consideration. Once a case falls under clause (i) of section 10(10), the same cannot be brought within the purview of clause (Hi) of section 10(10). I, therefore, hold that the assessee is entitled to exemption u/s 10(10) (i) in respect of gratuity amount 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 by the assessee at Rs.6,50,000/- during the instant year. 7 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO 9. As regards the second amount of Rs.1,88,720/- received by the assessee during the year towards the arrears of leave encashment, it is noticed that the assessee claimed exemption u/s 10(10AA)(i) which was refused by the AO by holding the case to be covered under sub-clause (ii) of section 10(10AA). The Id. CIT(A) affirmed the view taken by the AO on this point, thereby denying the benefit of exemption 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 Id. 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 Id. DR supported this proposition. As both the sides are consensus ad idem on the position that the view taken in the context of section 10(10) as applicable to leave gratuity be followed here in the context of section 10(10AA) in the context of leave encashment, I am desisting from independently examining the later provision. In view 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 exemption u/s 10(10AA)(i) in respect of arrears of leave encashment. This ground is allowed. ” 8. Since the facts of the assessee’s case are identical to the facts involved in the aforesaid referred to case of Sh. Ram Kanwar Rana. So, respectfully following the order dated 16.06.2016 in the case of Ram Kanwar Rana Vs ITO (supra), the impugned order is set aside and the AO is directed to allow the claim of the assessee on account of gratuity & leave encashment. Accordingly the additions made by the AO and sustained by the Id. CIT(A) are deleted. ” 10. Since the facts of the assessee’s case are identical to the facts involved in the aforesaid referred to case of Sh. Dharam Jeet Dahiya. So, respectfully following the order dated 26.10.2016 (supra), the impugned order is set aside and the AO is directed to allow the claim of the assessee on account of gratuity & leave encashment. Accordingly the additions made by the AO and sustained by the Id. CIT(A) are deleted.” 8 ITA no. 1537/Del/2020 Sant Lal Mehta Vs. ITO 7. The Revenue has not pointed out any change into the facts and circumstances of the case. Therefore, taking the consistent view and respectfully following the decision of the coordinate Bench of the Tribunal in case of Dev Raj Sood (supra), I direct the Assessing Officer to delete the additions in question. 8. In the result, assessee’s appeal is allowed. Order pronounced in open court on 20 th July, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI