Smt. Lataben R. Baraiya, Bharuch V. The Income tax Officer, Ward-3, Bharuch

ITA 3918/AHD/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0230 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-10-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 31-12-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Gift; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES D BENCH: AHMEDABAD (BEFORE S/SHRI N.S. SAINI, AM AND MAHAVIR SINGH, JM ) ITA NO.3918, 3920 AND 3921/AHD/2004 A Y: 2000-01,2000-01 AND 2000-01 DATE OF HEARING 20-10-2009 DRAFTED ON 20-10-2 009 1. LATABEN R. BARAIYA, C/0. BHUPENDRA C. MEHTA, ADVOCATE, 15, AGANTA NAGAR, OPP. 288 SIDHNATH NAGAR, BHARUCH- 392 001 PA NO. ADEPB 5155F 2. EFTEKHAR AHMED ANSARI, C/0. BHUPENDRA C. MEHTA, ADVOCATE, 15, AGANTA NAGAR, OPP. 288 SIDHNATH NAGAR, BHARUCH- 392 001 PA NO. ABWPA 1710R 3. JULFIKAR KHAN, C/0. BHUPENDRA C. MEHTA, ADVOCATE, 15, AGANTA NAGAR, OPP. 288 SIDHNATH NAGAR, BHARUCH- 392 001 PA NO. -- VS THE INCOME TAX OFFICER, WARD (3), BHARUCH APPELLANT RESPONDENT ASSESSEE BY NONE (ADJOURNMENT PETITION FILED) DEPARTMENT BY SHRI C. K. MISHRA, DR ORDER PER N.S. SAINI, AM: THERE ARE THE APPEALS FILED BY THE 3 DIFFERENT ASS ESSEES AGAINST THE SEPARATE ORDERS OF THE CIT(APPEALS)- IV, BARODA ALL DATED 11-10- 2004 TAKING THE FOLLOWING COMMON GROUNDS OF APPEAL: ITA NOS. 3918, 3920 AND 3921/AHD/2008 LATABEN R. BARIYA, UFTEKHAR AHMED ANSARI AND JULFEK AR KHAN 2 ITA NO.3918/AHD/2004: 2000-01 (LATABEN R. BARIYA) GROUNDS OF APPEAL GROUND NO. 1. THE ORDER OF THE RESPONDENT ASSESSING OFFICER (R ESPONDENT AO) IS INVALID AS IT IS BASED ON THE DIRECTIONS OF THE HON'BLE JOINT COMMISSIONER OF INCOME TAX, BHARUCH (JCIT). T HE JCIT DID NOT, THOUGH REQUESTED, SHOW OR INTIMATE TO THE APPLICANT- APPELLANT, THE PROPOSED PREJUDICIAL DIRECTIONS U/S 144A OF THE INCOME TAX ACT, 1961 (THE ACT). HENCE, NO SUFFICIEN T OPPORTUNITY WAS GIVEN TO THE APPELLANT AND AS A RES ULT THEREOF AND CONSEQUENTLY, THE APPELLANT COULD NOT MAKE PROP ER SUBMISSIONS. 2. THE RESPONDENT AO HAS GROSSLY ERRED ALSO IN HO LDING THAT THE PAYMENT OF RS 7 LAKHS IS A COMPENSATION FOR THE EMPLOYERS' OBLIGATION UNDER LAW. THE EMPLOYER HAD P AID SEPARATELY FOR HIS LEGAL OBLIGATION. THERE WAS NO M ORE AND OTHER THAN THOSE ANY LEGAL OBLIGATION FOR WHICH THE EMPLOYER WAS UNDER OBLIGATION WHATSOEVER TO PAY THE AMOUNT. THE AMOUNT OF RS 7 LAKHS RECEIVED BY THE APPELLANT IS N OT AS A COMPENSATION IN CONNECTION WITH THE LOSS OF EMPLOYM ENT DUE TO CLOSURE OF CONCERN OF THE EMPLOYER AND THEREFORE IS NOT TAXABLE U/S 17(3)(I) OF THE ACT. THE TERM COMPENSAT ION IS DEFINED AT MANY PLACES AS UNDER: COLLINS ENGLISH DICTIONARY (1979 EDITION) (PAGE 308) WILLIAM AND COLLINS SONS & COMPANY A: COMPENSATE 1. TO MAKE AMENDS TO SOME ONE ESP FOR LOSS OR INJURY. 2. SERVE AS COMPENSATION OR DAMAGES FOR LOS S OR INJURY. 3. TO EFFECT OR COUNTER BALANCE THE EFFECT O F LOSS ETC, SO AS TO NULLIFY THE EFFECT OF AN UNDESIRABLE. B: COMPENSATION 1. THE ACT OR PROCESS OF MAKING AMENDS FAR SOMETHING 2. SOMETHING GIVEN AS REPARATION FOR LOSS, I NJURY ETC ITA NOS. 3918, 3920 AND 3921/AHD/2008 LATABEN R. BARIYA, UFTEKHAR AHMED ANSARI AND JULFEK AR KHAN 3 INDEMNIFY 1. COMPENSATION FOR LOSS OR DAMAGE REIMBURS EMENT 2. PROTECTION OR INSURANCE AGAINST LOSS CONCISE LAW DICTIONARY (1927) BY P.G. OSBORNLL.B. ( PAGE 67) COMPENSATION SET OFF WHEN THE DEFENDANT BRINGS HIS CLAIM AGAINST THE PLAINTIFF IN ORDER TO HAVE THEM RECKONED IN REDUCTI ON OF THE PLAINTIFF'S DEMAND. LAW DICTIONARY BY P. H. COLLIN (PAGE 52) COMPENSATION FOR LOSS OF EARNING PAYMENT TO SOME ONE WHO HAS STOPPED EARNING MONEY O R WHO IS UNABLE TO EARN MONEY OXFORD DICTIONARY COMPENSATION SIGNIFIES THAT WHICH IS GIVEN TO COMPENSATE AN EQUI VALENT TO RENDER DAMAGE, ON THE OTHER HAND CONSTITUTE THE SUM OF MONEY CLAIMED, OR ADJUSTED TO HE PAID IN COMPENSATI ON FOR LOSS OR INJURY SUSTAINED. 3. THE RESPONDENT A O SHOULD HAVE HELD THAT A) WHATEVER LOSSES AS AN EMPLOYEE WERE SUFFERED BY THE APPELLANT DUE TO CLOSURE OF ESTABLISHMENT, WERE DUL Y AND SEPARATELY COMPENSATED BY THE EMPLOYER AS PROVIDED UNDER THE LAW. B) THIS AMOUNT OF RS 7 LAKHS WAS NOT IN ANY WAY A COMPENSATION AS DEFINED AND SHOWN ABOVE FOR ANY LOS S OR OBLIGATION UNDER LAW. THE WORD 'COMPENSATION ', IN THE CONTEXT IS THEREFORE MEANING LESS. UNLESS THERE IS ANY LOSS , INJURY OR HARM TO BE DAMNIFIED UNDER LAW, NO PAYMENT CAN BE CONSTRUED TO BE COMPENSATION. ITA NOS. 3918, 3920 AND 3921/AHD/2008 LATABEN R. BARIYA, UFTEKHAR AHMED ANSARI AND JULFEK AR KHAN 4 C) IN THE INSTANT CASE, THE PAYMENT OF 7 LAKHS WAS MADE SHEERLY OUT OF GOODNESS, GRACE AND FAVOUR OF AND GR ATUITOUSLY BY THE EMPLOYER I.E. EX-GRATIA, WITHOUT THERE BEING ANY LEGAL OBLIGATION. THE WORD EX-GRATIA IS DEFINED AS UND COLLINS ENGLISH DICTIONARY (1979 EDITION) (PAGE 511) EX-SRATIA GIVEN AS FAVOUR OR GRATUITOUSLY WHERE NO LEGAL OBLI GATION EXITS. AN EX-GRATIA PAYMENT IS OUT OF KINDNESS. 4. THE RESPONDENT AO SHOULD HAVE HELD THAT THE EX -GRATIA AMOUNT OF RS 7 LAKHS WAS EXEMPTED UNDER SECOND PROV ISO TO SECTION 10(3) OF THE ACT BECAUSE OF REASONS THAT: (I) IT IS CASUAL AND NAN RECURRING IN NATURE, (II) IT IS RECEIVED FOR THE FIRST AND LAST TIME. (III) IT IS RECEIVED BY CHANCE, ACCIDENT OR FORTUITOUS CIRCUMSTANCES (IN THE FORM OF CLOSURE OF THE UNIT) AND NOT OTHERWISE. (IV) IT IS UNFORESEEN OR UNANTICIPATED RECEIPT, (IV) IT IS BY WAY OF ADDITION TO THE REMUNERATION, (V) IT CAN AMOUNT TO TERMINAL PAYMENT MADE BY THE EMPLOYER AS PERSONAL GIFT. 5. THE RESPONDENT AO SHOULD HAVE FOLLOWED THE PRINCIPL ES OF LAW LAID DOWN BY THE APEX COURT IN THE CASE OF MAHESH A NANTRAI PATTANI VS. COMMISSIONER OF INCOME TAX (1961) 41ITR 481. THE JUDGMENT WAS CITED IN THE ARGUMENTS AND RELIED UPON BY THE APPELLANT. PHOTOCOPY OF THE JUDGMENT IS ENCLOSED. I N THAT JUDGMENT, IT WAS HELD THAT THE SUM OF RS 5 LAKHS WAS PAID TO THE ASSESSEE NOT IN TOKEN OF APPRECIATION FOR THE SERVICES RENDERED AS THE DEWAN OF THE BHAVNAGAR STATE HUT AS A PERSONAL GIFT FOR THE PERSONAL QUALITIES OF THE ASSESSEE AND AS A TOKEN OF PERSONAL ESTEEM. THE AMOUNT WAS, THEREFORE, NOT TAXABLE. IN THIS CASE ALSO, THE RE IS NOTHING IN WRITING DATED 25-07-99 THAT THE SAID AMOUNT OF 7 LA KHS WAS PAID FOR REASON OTHER THAN THE PERSONAL ESTEEM. IT IS EXPRES SLY MENTIONED ITA NOS. 3918, 3920 AND 3921/AHD/2008 LATABEN R. BARIYA, UFTEKHAR AHMED ANSARI AND JULFEK AR KHAN 5 THERE FURTHER TO QUALIFY THE PAYMENT AS AN EX-GRATI A (I.E. OUT OF GRACE ONLY). THE SAID PAYMENT BY WAY OF EX-GRATIA IS REPE ATEDLY NARRATED AS SUCH ONLY IN VARIOUS DOCUMENTS VIZ SALARY CERTIF ICATE, LETTER DATED 25-07-99. AS SUCH, THE RESPONDENT AO WAS NOT JUSTIF IED IN NOT HOLDING THE SAID AMOUNT AS EX-GRATIA AND AS SUCH NO T TAXABLE. 6. WITHOUT PREJUDICE TO THE ABOVE AND ASSUMING TH AT THE EX-GRATIA AMOUNT OF RS 7 LAKHS IS TAXABLE AS IT IS PROFITS IN LIEU OF SALARY, IT IS SUBMITTED THAT THE RESPONDENT AO WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED TO SPREAD OVER THE I NCOME OF RS 7 LAKHS OVER SPECIFIED YEARS TO OFFER THE TAX AT APPR OPRIATE RATE FOR CLAIMING THE RELIEF U/S 89(1) OF THE ACT. 7. THE EX-GRATIA PAYMENT SHOULD NOT HAVE BEEN TAXED AS IT WAS RECEIVED IN FY 1999-00 AND NOT TAXABLE PRIOR TO 1.4 .02. THE AMENDMENT TO SEC. 17(3) MAKING IT TAXABLE IS EFFECT IVE FROM 1.4.02 AND IS NOT RETROSPECTIVE. 8. THE APPELLANT CRAVES LEAVE TO RESERVE THE RIGHT OF ADDING, ALTERING AND / OR AMENDING THESE GROUNDS OF APPEAL IN SUCH MANNER AND IN SUCH TERMS AS MAY BE JUST AND NECESSARY FOR DETERMINING THE ISSUES IN THE INTEREST OF JUSTICE. 2. SINCE THE FACTS AND ISSUES INVOLVED IN ALL THE A BOVE THREE APPEALS ARE COMMON, THEY ARE BEING DISPOSED OF TOGE THER BY THIS CONSOLIDATED ORDER. 3. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE HAS FILED ADJOURNMENT APPLICATION AND REQUESTED FOR ADJOURNME NT OF THE HEARING OF THE ABOVE APPEALS ON THE GROUND THAT HE IS OUT OF STATION FOR PERSONAL WORK AND THEREFORE, HE WILL NOT BE ABL E TO APPEAR AND ARGUE THE APPEALS. THE BENCH WAS OF THE VIEW THAT T HE APPEALS CAN BE DECIDED IN THE ABSENCE OF THE LEARNED AUTHORIZED RE PRESENTATIVE OF THE ASSESSEE AND THEREFORE, THE LEARNED DEPARTMENTA L REPRESENTATIVE WAS HEARD AND THE APPEALS ARE BEING DISPOSED OFF ON THE BASIS OF THE MATERIALS AVAILABLE ON RECORD. 4. IN THESE APPEALS ONE OF THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT HE WAS NOT ALLOWED SUFFICIENT OPPORTUNITY IN R ESPECT OF THE ITA NOS. 3918, 3920 AND 3921/AHD/2008 LATABEN R. BARIYA, UFTEKHAR AHMED ANSARI AND JULFEK AR KHAN 6 DIRECTIONS GIVEN BY THE JCIT UNDER SECTION 144A OF THE ACT. FURTHER, IT IS ALSO OBSERVED THAT THE ASSESSEE HAS RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF DEEPAK VERMA VS DCIT (2008) 22 SOT 345 (DELHI) WHICH COULD NOT BE CONSIDERED BY THE LOWER AUTHORITIES. AT TIME OF THE HEARING LEARNED DEPARTMENTAL REPRESENTA TIVE ADMITTED THAT IT SHALL BE FAIR AND IN THE INTEREST OF THE JU STICE TO RESTORE THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OF FICER FOR ADJUDICATION AFTER TAKING INTO CONSIDERATION THE AF ORESAID DECISION OF THE TRIBUNAL AND AFTER ALLOWING SUFFICIENT OPPORTUN ITY OF HEARING TO THE ASSESSEE. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER WITH THE ABOVE MENTIONED DIRECTIO NS. THUS ALL THE THREE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATI STICAL PURPOSES. 5. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT AT THE CLOSE OF THE HEAR ING ON 20-10- 2009. SD/- SD/- (MAHAVIR SINGH) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:20-10-2009 LAKSHM IKANT/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. RE SPONDENT 3. CIT(A) CONCERNED 4. THE C IT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER //TRUE COPY// DR / AR, ITAT, AHMEDABAD