Sh. Gian Chand Barwal, Mandi V. ITO, Ward, Mandi

ITA 37/CHANDI/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5245 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-09-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 29-01-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Earning of tax free income; Competent authority
• Section: 13

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 37/CHD/2023 Ǔनधा[रण वष[ / Assessment Year : 2017-18 Shri Gian Chand Barwal, Prop. Barwal Motors, Dhelu, Joginder Nagar, Mandi (H.P.) Vs. बनाम The ITO, Ward, Mandi èथायी लेखा सं./PAN No. ACXPC6276D अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent ( Virtual Hearing ) Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Ashwani Kumar, CA राजèव कȧ ओर से/ Revenue by : Sh. Amanpreet Kaur, Sr.DR स ु नवाई कȧ तारȣख/Date of Hearing : 18.09.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 21.11.2023 आदेश/Order Per A.D. Jain, Vice President: This is Assessee’s appeal against the order of the ld. CIT(A), contending that the order passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 01.12.2022 is against law and facts; and that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in treating the disability pension received by 37-Chd-2023– Shri Gian Chand Barwal, Mandi 2 the Assessee during the year under consideration as taxable, by holding that the Assessee was not invalidated out of service due to bodily disability but had retired on superannuation. 2. The Assessee is a retired Armed Force officer of the Indian Army. He received pension income of Rs. 10,16,207/-. The Assessee claimed this entire pension amount as exempt income. The Assessing Officer asked the Assessee as to why the pension income should not be treated as salary income and added to his total income. 3. The Assessee replied vide letter dated 20.11.2019 by submitting that he had received disability pension during the year under consideration, which was exempt as per instruction F. No. 200/51/00-ITA-1 dated 02-07-2001, issued by the CBDT; that as per the said instruction, the entire pension, i.e., the disability element and the service element, of an officer of the Indian Armed Forces, is exempt; that in this case, the CBDT has not clarified that such exemption is available only to Armed Forces personnel who have been invalidated out of service on account of bodily disability attributable to or aggravated by such service and not to personnel who have been retired on superannuation, or otherwise; that so, as per said instruction, the pension received by Assessee was exempt from Income Tax; and that he was not invalidated out of service on 37-Chd-2023– Shri Gian Chand Barwal, Mandi 3 account of bodily disability or aggravated by such service, but retired on superannuation. 4. The Assessee filed a further reply dated 25.11.2019, in which, he stated that the letter issued by the Military Secretary Branch, MS Retirement Army Headquarters, DHQ PO New Delhi, dated 22-01- 2003 is a combined intimation letter for all officers mentioned in Appendix of this letter, for retirement on superannuation; that in this letter, medical category of the officers is not shown; that he had been retired on superannuation with 30% bodily disability for life; that in this connection, letter No. 13102/RC-623K/SIGS/MP-6(C /227/DP/2004/AG/PS 4(D), dated 10 Dec 2004, of the Additional Directorate, General Personnel Services, Adjutant General Branch, Army Headquarters, DHQ PO, New Delhi, was being filed. Reference was also made to the copy of Disability Pension PPO which had already been filed before the Assessing Officer. A copy of the CORR PPO No. MDIS30872019 dated 10/04/2019 was also enclosed. It was further submitted that as per para 9 (d) of the Brochure of Terminal Benefits for Retiring Officers and NOK (Revised Edition December, 2012), issued by the Integrated HQ MOD (Army), Adjutant General Branch, a copy of which brochure was also being attached, the entire disability pension, i.e., the disability element and the service element 37-Chd-2023– Shri Gian Chand Barwal, Mandi 4 of a disabled officer is exempt from Income Tax. The Assessee had also enclosed along with the reply, copies of Instruction No 136, F. No. 34/3/68-IT(AI), Govt. Of India, CBDT, New Delhi dated 14 th January 1970, and Instruction No 2/2001, F.No. 200/51/99-ITA.I, Govt. Of India, Ministry of Finance, Deptt. of Revenue, CBDT, New Delhi, dated 2 nd July, 2001. Further, the Assessee had also filed a copy of the decision dated 18.08.2018, in the case of ‘K.S. Chaudhary Vs CBDT’. The Assessee further enclosed a copy of Indian Soldiers (representation image) dated 25 June 2019 and it was pointed out that therein, it has been stated that "As per Military Pension Rules, any person who is in low medical category at the time of release from service is treated as ‘Invalidated’ for the purpose of disability pension". The Assessee submitted that hence, even those persons who are released in low medical category on completion of terms or superannuation are deemed to be invalidated for the purpose of disability pension as per rules. The Assessee further contended that the disease contracted by him because of continued exposure to hostile work environment subject to extreme weather condition and occupational hazards while serving in the high altitude area of the Leh Sector, resulted in the onset of the disability. It was stated that a copy of Medical Board Proceeding (AFMSF-15A) had already been 37-Chd-2023– Shri Gian Chand Barwal, Mandi 5 submitted to the Assessing Officer. The Assessee requested that in view of these facts, his case be considered sympathetically. 5. The Assessing Officer, however, rejected the Assessee’s claim as not acceptable on the basis that the CBDT Instruction on the subject itself was, according to the Assessing Officer, self-contained that such exemption is available only to Armed Forces personnel who have been invalidated out of service on account of bodily disability attributable to or aggravated from such service, and not to personnel who have been retired on superannuation or otherwise. The Assessing Officer held that the Assessee had been retired on superannuation and not invalidated out of service on account of bodily disability and that hence, he is not entitled to such exemption. The Assessing Officer further held that in this regard, the CBDT has also given its clarification vide Circular No. 13/2019, dated 24/06/2019. It was in this manner that the claim of exemption of pension income of Rs.10,16,207/- was disallowed and added to the total income of the assessee. 6. By virtue of the impugned order, the ld. CIT(A) dismissed the appeal field by the Assessee and confirmed the assessment order. 7. Aggrieved, the Assessee is in further appeal before us. 37-Chd-2023– Shri Gian Chand Barwal, Mandi 6 8. The ld. Counsel for the Assessee has contended that the ld. CIT(A) has erred in upholding the action of the Assessing Officer in treating the disability pension received by the Assessee during the year under consideration as taxable by holding that the Assessee was not invalidated out of the service due to body disability, but had retired on superannuation. 9. The ld. DR, on the other hand, has placed strong reliance on the impugned order. 10. We have heard the parties and have perused the material on record. As per the record, the Assessee is a retired Armed Force officer of the Indian Army. He received disability pension amounting to Rs. 10,16,207/- during the year under consideration. The Assessee claimed this income as exempt. The Assessing Officer disallowed the claim of exemption, which disallowance has been upheld by the ld. CIT(A). The Assessee retired on superannuation with 30% body disability for life. It was, therefore, that exemption of disability was claimed by the Assessee. The Assessing Officer, while making the disallowance, relied on CBDT Circular No. 13 of 2019, wherein, it was mentioned that such exemption is available only to Armed Forces personnel who have been invalidated out of service on account of disability attributable to or aggravated by such service and not to the 37-Chd-2023– Shri Gian Chand Barwal, Mandi 7 personnel who have been retired on superannuation or otherwise. The Assessee has although, submitted various letters issued by the Military Secretary Branch, copy of Brochure, etc., wherein it was clearly mentioned that the entire disability pension, i.e., the disability element and the service element of a disabled officer is exempted from income tax. The Assessee also filed a copy of Indian Soldiers (representation image) dated 25 June 2019, in which, it is stated that "As per Military Pension Rules, any person who is in low medical category at the time of release from service is treated as ‘Invalidated’ for the purpose of disability pension", as per Rules. The Assessee has also submitted that the disease contracted by him was because of continued exposure to hostile work environment, subject to extreme weather condition and occupational hazards while serving in the high altitude area of the Leh Sector, resulting in the onset of the disability. The Assessee has also submitted the copy of Medical Board Proceeding (AFMSF-15A). 11. It has been submitted that the CBDT Circular No. 13/2019, which formed the basis of the disallowance, was challenged by disabled soldiers in the Hon'ble Supreme Court; that vide order dated 30.08.2019, in the case of ‘Pradeep Mathur v. Union of India’, the Hon'ble Supreme Court has directed the parties to maintain status 37-Chd-2023– Shri Gian Chand Barwal, Mandi 8 quo. Reliance has further been placed on the judgement of the jurisdictional Hon'ble High Court of Punjab & Haryana, in the case of ‘Col. Jaswinder Pal Singh v. Principal Commissioner of Income Tax’, [2023] 152 taxmann.com 103 (P&H), wherein, it was held that merely because a person has attained discharge on a compassionate ground, although his disability has been acquired on account of stress and strain of military service, this will not be a ground to reject the claim of disability pension, as he has been invalidated in terms of Appendix II of Rule 173. On this basis, the ld. Counsel for the Assessee has contended that the appeal be allowed, the order under appeal be set aside and the Pension exemption, as claimed by the Assessee be allowed. 12. The ld. DR, on the other hand, has placed strong reliance on the impugned order. 13. We find that as per the Folio F. No. 200/51/99-ITA, issued by the Govt. Of India, Ministry of Finance, Department of Revenue, CBDT, New Delhi, dated 2 nd July 2002, all the Chief Commissioners of Income tax and the Directors General of Income Tax have been asked to bring it to the notice of the officers working under their charge, that the matter with regard to exemption from Income Tax to Disability pension, i.e., the “disability element” and the “service element” of a 37-Chd-2023– Shri Gian Chand Barwal, Mandi 9 disabled officer of the Indian Armed Forces has been re-examined by the Board and it has been decided to reiterate that the entire disability pension, i.e., the “disability element” and the “service element” of a disabled officer of the Indian Armed Forces is exempt from Income Tax. A copy of he said Instruction has been placed at APB 11. Then, CBDT Circular No. 13/2019, which formed the sole basis of the disallowance of the exemption claimed by the Assessee, was challenged by disabled soldiers before the Hon'ble Supreme Court, in the case of the ‘Pardeep Mathur & Ors. vs. Union of India and Ors.’, in Writ Petition (Civil) No. 953/2019. The Hon'ble Supreme Court, vide order (APB 15), dated 30.08.2019, ordered maintain of status quo in the matter, pending further consideration. In pursuance of the said order, the Principal Controller of Defence Accounts (Pensions) issued Circular (APB 12-14) (No. 211) dated 3.3.2020, advising the PCDA (P), Allahabad to issue a circular to the Pension Disbursing Agencies not to make recovery of Income Tax on disability pension as per the CBDT Circular No. 13 of 2019, already disseminated till a final decision by the Supreme Court in the matter. 14. It is pertinent to mention that as per Order (APB 18) dated 10.12.2004, of the Principal Controller of Defence Accounts (Pension), Allahabad, the Competent Authority, after examining the Assessee’s 37-Chd-2023– Shri Gian Chand Barwal, Mandi 10 case in the light of the relevant rules and administrative medical provisions, had decided, that the ID ‘Primary Hypertension’ from which, the Assessee was found suffering at the time of Release Medical Board should be regarded as aggravated by military service with the degree of disablement at 30%, for life. Therefore, the Competent Authority has itself agreed that the disease of the Assessee ought to be regarded as aggravated by military service. 15. Further, the Armed Forces Tribunal, Chandigarh Bench, in OA No. 3011 of 2018, in the Assessee’s case itself, vide order (APB 19- 21) dated 3.10.2018, it was held that the case of the Assessee was covered by the decision of the Hon'ble Supreme Court in Civil Appeal No.418 of 2012 in “Union of India & Ors. Vs. Ram Avtar’, decided on 10.12.2014, and that in accordance therewith, the Assessee was entitled for the benefit of rounding off by computing the disability element of his disability pension to the extent of 50%, as against 30% w.e.f. 1.1.2004. 16. Further, the jurisdictional Punjab & Haryana High Court, in “Col. Jaswinder Pal Singh vs. Principal CIT’ (supra), vide order dated 26.4.2023, has held, keeping in consideration the fact that CBDT Circular No. 13/2019 (supra), had been stayed by the Hon'ble Supreme Court, as above, that where a disabled officer of the Indian 37-Chd-2023– Shri Gian Chand Barwal, Mandi 11 Army received disability pension, such pension was exempted from Income Tax. 17. The above facts, as brought on record on behalf of the Assessee, have not been disputed by the Department. Therefore, finding merit in the grievance sought to be raised by the Assessee, the same is accepted. Accordingly, the order in appeal, confirming the disallowance of the claim of exemption of disability pension from the Income Tax, is reversed. The claim of exemption of disability pension is allowed, holding that the Assessee is an Armed Forces Personnel, who had been invalidated out of service on account of bodily disability aggravated by such service and he had not been retired on superannuation or otherwise. Ordered accordingly. 18. In the result, the appeal is allowed. Order pronounced on 21.11.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President “आर.के.” आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आय ु Èत/ CIT