Gurmit Singh, Patiala V. ITO, Patiala

ITA 756/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64097 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 25-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 147; 10; 2; 143(3); 10(10AA)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 756/CHD/2012 ASSESSMENT YEAR: 2008-09 SHRI GURMIT SINGH, V ITO, WARD 6, # 412/1, NATTAN STREET, PATIALA. SHERAN WALA GATE, PATIALA. PAN: ADHPS-3345J & ITA NO. 757/CHD/2012 ASSESSMENT YEAR: 2008-09 PARAMJIT KAUR SARAO, V ITO, WARD 6, # 1265/1, SUKHDASSPURA, PATIALA. B-TANK, PATIALA. PAN: AIOPS-0837K & ITA NO. 758/CHD/2012 ASSESSMENT YEAR: 2008-09 SHRI HARBANS SINGH, V ITO, WARD 6, # 683, STREET NO.5, PATIALA. TRIPURI TOWN, PATIALA. PAN: AENPS-5158N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.R.SHARMA RESPONDENT : SHRI J.S.NAGAR DATE OF HEARING : 22.11.2012 DATE OF PRONOUNCEMENT : 27.12.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEALS FILED BY DIFFERENT ASSESSEES AR E DIRECTED AGAINST THE ORDER DATED 25.05.2012 PASSED BY THE 2 LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (I N SHORT 'THE ACT'). 2. IN THESE APPEALS, THE ASSESSEES HAVE RAISED SIMI LAR GROUNDS OF APPEAL, EXCEPT VARIATION IN AMOUNT OF AD DITIONS. THEREFORE, GROUNDS OF APPEAL, AS RAISED BY THE ASSE SSEE IN ITA NO. 756/CHD/2012, ARE REPRODUCED HEREUNDER AS A N ILLUSTRATIVE CASE : 1. THE WORD SALARY HAS NOWHERE IN THE INCOME TAX ACT HAS BEEN DEFINED AS BASIC (+) DA. SECTION 17 OF THE ACT DEFINES, SALARY INCLUDES WAGES. WAGES HAS BEEN DEFINED IN THE MINIMUM WAGES ACT-194 8 AND PAYMENT OF GRATUITY ACT, 1972 AND BY DIFFERENT IT DEPTT. CI RCULARS (CIR. NO/46 DATED 14.09.1970 AND CIR NO./90 DATED 18.05.1973). 2. A) CLAUSE 2(H) OF PART A OF FOURTH SCHEDULE OF THE ACT ,THE WORDS ARE, 'SALARY INCLUDES DEARNESS ALLOWANCE, IF THE TERMS O F THE EMPLOYMENT SO PROVIDES.' B) SECTION 2(S) OF THE GRATUITY ACT DEFINES 'ALL EM OLUMENTS WHICH ARE EARNED BY AN EMPLOYEE WHILE ON DUTY OR ON LEAVE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF HIS EMPLOYMENT, XXXX'. 3) THERE IS A STRESS ON THE TERMS AND CONDITIONS O F THE EMPLOYMENT. HER TERMS OF EMPLOYMENT ARE GIVEN IN AND GO VERNED BY BIPARTITE SETTLEMENTS:- CLAUSE 6 OF THE BIPARTITE SETTLEMENT DEFINE PAY AS 'PAY FOR THE PURPOSE OF D.A, HRA AND SUPERANNUATION BENEFITS SHALL MEAN BASIC PAY, STAGNATION INCREMENTS SPECIAL PAY, GRADUATION PAY, PROFESSIONAL QUALIFICATION PAY, OFFICIATING PAY AND FIXED PERSON AL PAY, IF ANY. RELIEF PRAYED 1) THE ORDERS OF HON'BLE CIT(A), PATIALA, REGARDING SALARY TERMINOLOGY ARE BAD IN LAW AND BEYOND ALL CANNONS OF LAW AND JUSTIC E, MAY KINDLY BE SET ASIDE. THE MEANING OF THE TERM SALARY HAS WRONGLY AND ARBI TRARILY HAS BEEN HELD AS BASIC (+) DA AND NOT OTHER PAYS, WHICH HAS BEEN & A RE STILL BEING CONSIDERED WHILE ALLOWING SUPERANNUATION BENEFITS TO THE RETIR EES. 2) THAT ADDITIONS OF RS.35000/- ON ACCOUNT OF GRATUITY & RS.29060/- ON ACCOUNT OF LEAVE ENCASHMENT MAY KINDLY BE EXEMPT ED IT IS, THEREFORE, HUMBLY PRAYED THAT THE ORDERS OF THE CIT(A) PATIALA DISALLOWING ABOVE PRAYS MAY KINDLY BE SET ASIDE WIT H COST. 3 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' REFERRED TO TRIPARTITE AGREEMENT TO SUPPORT HIS CON TENTIONS. LD. 'AR', FURTHER, REFERRED TO SECTION 10(10) AND S ECTION 10(AA) OF THE ACT AND RULE 2(H), AS CONTAINED IN SC HEDULE IV, PART-A. FOR THE SAKE OF READY REFERENCE, THE SAID RULE IS REPRODUCED HEREUNDER : (H) SALARY INCLUDES DEARNESS ALLOWANCE, IF THE TERMS OF EMPLOYMENT SO PROVIDE, BUT EXCLUDE ALL OTHER ALLOWANCES AND PERQUISITES. 4. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER PASSED BY THE LOWER AUTHORITIES. 5. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT REC ORDS. THE ISSUE INVOLVED IN THESE APPEALS, PERTAIN TO COMPUTA TION OF GRATUITY AND LEAVE ENCASHMENT. THE AO HAS INCLUDED BASIC PAY + DEARNESS ALLOWANCE AND APPLIED THE FORMULA, A S APPLICABLE TO THE GRATUITY AND LEAVE ENCASHMENT, FO R THE PURPOSE OF WORKING OUT THE ELIGIBLE AMOUNT OF GRATU ITY AND LEAVE ENCASHMENT. THE RELEVANT FINDINGS OF THE AO, ARE REPRODUCED IN PARA 5 & 6 OF THE ORDER DATED 27.10.2 011, FOR THE ASSESSMENT YEAR 2008-09, PASSED U/S 143(3) RED WITH SECTION 147 OF THE ACT. THE RELEVANT PART OF THE I MPUGNED ORDER IS REPRODUCED HEREUNDER : 5. GRATUITY : THE ASSESSEE RECEIVED GRATUITY OF RS .350000/- WHICH HAS BEEN CLAIMED AS EXEMPT U/S 10(10) OF THE INCOME-TAX ACT,1961. THE EXEMPT AMOUNT OF GRATUITY IN THE CAS E OF ASSESSMENT WAS WORKED OUT AT RS.255015/- BY TAKING HALF MONTHS AVERAGE SALARY ON THE BASIS OF LAST TEN MONTHS SAL ARY DRAWN MULTIPLIED BY NO. OF YEARS OF SERVICE RENDERED AND THE ASSESSEE 4 WAS ASKED VIDE NOTE SHEET ENTRY DATED 14.10.2011 TO EXPLAIN AS TO WHY GRATUITY OF RS.94985/- MAY NOT BE ADDED TO HIS INCOME. THE ASSESSEE VIDE HIS REPLY DATED 20.10.2010 HAS FURNIS HED A COPY OF BANKS LETTER DATED 19.10.2011 STATING THAT GRATUIT Y HAS BEEN PAID TO THE ASSESSEE UNDER THE GRATUITY ACT, 1972. SINCE THE GRATUITY HAS BEEN PAID TO THE ASSESSEE UNDER THE GRATUITY AC T AS CONFIRMED BY THE BANK IN ITS LETTER, THE GRATUITY A LLOWABLE U/S 10(10) IS WORKED OUT UNDER GRATUITY ACT, 1972 BY AC CEPTING THE VERSION OF THE ASSESSEE. ON THE DATE OF HEARING ITS ELF I.E. 20.10.2011, IT WAS POINTED OUT TO THE ASSESSEE THAT GRATUITY ALLOWABLE AS PER GRATUITY ACT, 1972 WORKS OUT TORS. 315000/- BY TAKING THE LAST MONTHS SALARY DRAWN RS.19500/- I N THIS CASE I.E. RS.14890 BASIC + RS.4610 D.A. MULTIPLIED BY CO MPLETED YERS OF SERVICE (28 YEARS IN THIS CASE) DIVIDED BY 15/26 I.E. 19500X28X15/26 RESULTING IN AN ADDITION OFRS.35000/ - (350000 315000) TO WHICH NO REPLY COULD BE FURNISHED BY HIM . THEREFORE, AN ADDITION OFRS.35000/- AS WORKED OUT ABOVE IS MAD E TO THE RETURNED INCOME OF THE ASSESSEE. AS THE ASSESSEE HA S CONCEALED THE PARTICULARS OF HIS INCOME OFRS.35000/-, PENALTY PROCEEDINGS ARE INITIATED U/S 271(1)(C). 6. LEAVE ENCASHMENT : THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.175772/- AS LEAVE ENCASHMENT WHICH WAS CLAIME D AS EXEMPT U/S 10(10AA) OF INCOME-TAX ACT,1961. THE EXEMPT LEA VE ENCASHMENT IN THIS CASE WAS WORKED OUT AT RS.146712 /- BY TAKING ONE MONTHS AVERAGE SALARY ON THE BASIS OF LAST TEN MONTHS SALARY DRAWN MULTIPLIED BY NO. OF DAYS OF LEAVE AT HIS CREDIT DIVIDED BY 30. SALARY FOR THIS PURPOSE INCLUDES BAS IC PAY AND DEARNESS ALLOWANCE AND EXCLUDES ALL OTHER ALLOWANCE S. IN THE PRESENT CASE, AVERAGE BASIC PAY & DEARNESS ALLOWANC E FOR ONE MONTH COMES TO RS.18990/-(14746 BASIC PLUS 4444 DA) AND THE ASSESSEE HAD AT HIS CREDIT LEAVE OF 233 DAYS. THUS, THE EXEMPT LEAVE ENCASHMENT WORKS OUT TORS.146712/- I.E. 18890 /30X233. VIDE NOTE SHEET ENTRY DATED 14.10.2011, THE ASSESSE E WAS CONFRONTED WITH THE CALCULATIONS OF ALLOWABLE EXEMP T LEAVE ENCASHMENT U/S 10(10AA) AND IT WAS POINTED OUT TO H IM THAT AN ADDITION OFRS.29060/- (I.E.175772-146712) IS TO BE MADE ON ACCOUNT OF EXCESS LEAVE ENCASHMENT CLAIMED EXEMPT A ND THE CASE WAS ADJOURNED TO 20.10.2011. ON 20.10.2011, NO REPL Y WAS 5 FURNISHED BY THE ASSESSEE. THEREFORE, AN ADDITION O FRS.29060/- IS MADE TO THE ASSESSEE'S INCOME BEING EXCESS LEAVE EN CASHMENT CLAIMED EXEMPT BY HIM. AS THE ASSESSEE HAS CONCEALE D THE PARTICULARS OF INCOME, PENALTY PROCEEDINGS U/S 271( 1)(C) ARE INITIATED SEPARATELY. 6. THE FINDINGS OF THE AO WERE UPHELD BY THE CIT(AP PEALS) AND THE SAME ARE REPRODUCED HEREUNDER, FOR THE PURP OSE OF PROPER APPRECIATION OF THE SAME : 5.1 THE FACTS OF THE CASE IS THAT THE ASSESSEE REC EIVED GRATUITY OF RS.3,50,000/- WHICH WAS CLAIMED AS EXEMPT U/S.10 (10). AS CONTENDED BY THE APPELLANT BEFORE THE AO, THE GRATU ITY WAS PAID AS PER GRATUITY ACT AND THEREFORE THE AO RECOMPUTED THE EXEMPT AMOUNT BY TAKING HALF MONTHS AVERAGE SALARY ON THE BASIS OF LAST TEN MONTHS SALARY DRAWN (BASIC PLUS D.A) MULTIPLIED BY NUMBER OF YEARS OF YEARS OF SERVICE RENDERED. WHEN CONFRON TED AS TO WHY THE EXCESS GRATUITY CLAIMED BE NOT DISALLOWED, THE APPELLANT DID NOT OFFER ANY COMMENT. THE EXCESS CLAIM OF RS.35,00 0/- WAS THEREFORE DISALLOWED. BEFORE ME THE APPELLANT CONTE NDED THAT BANK SALARY MEAN BASIC PAY, SPECIAL PAY, FIXED PERS ONAL PAY, PROFESSIONAL PAY AND DA. 5.3 I HAVE GONE THROUGH THE SUBMISSIONS MADE AND I AM OF THE OPINION THAT THE AO HAS RIGHTLY COMPUTED THE AMOUNT OF GRATUITY EXEMPTED UNDER THE ACT BY FOLLOWING DEFINITION OF S ALARY AS PER FOURTH SCHEDULE, PART A RULE 2(H) WHICH DEFINES SAL ARY FOR THE PURPOSE OF THIS ACT. 5.4 IN VIEW OF THIS PART OF THE GROUND NO. 2 IS DIS MISSED. 6. THE THIRD PART OF THE 2 ND GROUND OF APPEAL CONTESTS THE DISALLOWANCE OF RS.29,060/- OUT OF LEAVE ENCASHMENT UNDER THE PROVISIONS OF SECTION 10(10AA) OF THE IT ACT. 6.1 THE BRIEF FACTS OF THE CASE IS THAT THE APPELLA NT RECEIVED AN AMOUNT OF RS.1,75,722/- AS LEAVE ENCASHMENT AND CLA IMED THIS AS EXEMPT U/S 10(10AA). THE AO HELD THAT SALARY FOR TH IS PURPOSE MEANS BASIC PAY AND DA AND EXCLUDES ALL OTHER ALLOW ANCES. THE AO RECOMPUTED THE LEAVE ENCASHMENT EXEMPT ON THE BA SIS OF DEFINITION OF SALARY AS ABOVE AND DISALLOWED THE EX CESS CLAIM OF 6 RS.29,060/- WHEN CONFRONTED BEFORE MAKING THE IMPUG NED ADDITION, THE APPELLANT DID NOT OFFER ANY COMMENT B EFORE THE AO. 6.2 BEFORE ME THE APPELLANT CONTENDED THAT BANK SAL ARY INCLUDES BASIC PAY, SPECIAL PAY, FIXED PERSONAL PAY , PROFESSIONAL PAY AND DA AS PER BANKS SCHEME. I HAVE GONE THROUG H THE SUBMISSIONS AND I AM OF THE OPINION THAT THE AO HAS RIGHTLY COMPUTED THE EXTENT OF EXEMPTION AVAILABLE U/S 10(1 0AA) BY ADOPTING DEFINITION OF SALARY AS PER CLAUSE (H) OF RULE 2 OF PARA A OF FOURTH SCHEDULE WHICH DEFINES SALARY FOR THE P URPOSE OF THIS ACT. 6.3 IN VIEW OF THIS, THIS PART OF GROUND NO. 2 IS D ISMISSED. 7. FOR THE PURPOSE OF PROPER APPRECIATION OF THE RE LEVANT STATUTORY PROVISIONS OF SECTION 10(10) AND 10(AA), IT IS RELEVANT TO REPRODUCE THE EXPLANATION TO SECTION 10 (10) OF THE ACT : EXPLANATION [IN THIS CLAUSE AND IN CLAUSE 10(AA), SALARY SHALL HAVE A MEANING ASSIGNED TO IT IN CLAUSE (H) OF RULE 2 OF PART-A OF THE FOURTH SCHEDULE;] 8. IN VIEW OF THE EXPLANATION, THE COMPUTATION OF B ENEFIT OF GRATUITY AND LEAVE ENCASHMENT, AS CONTEMPLATED U /S 10(10) AND 10(AA) ARE TO BE GOVERNED BY THE DEFINIT ION OF SALARY CONTAINED IN THE ABOVE EXPLANATION AND NOT BY ANY AGREEMENT, AS CONTENDED BY THE LD. 'AR', VIZ 8 TH BIPARTITE SETTLEMENT ON WAGE REVISION AND OTHER SIMILAR CONDI TIONS BETWEEN INDIAN BANKS ASSOCIATION AND THEIR WORKMAN . THE DEFINITION OF SALARY AS REPRODUCED ABOVE IS SQUAR ELY AND SPECIFICALLY APPLICABLE TO SECTION 10(10) AND 10(AA ) OF THE ACT AND, HENCE, ANY OTHER DEFINITION OF SALARY CA NNOT BE IMPORTED AND APPLIED TO SUCH SECTIONS. 7 8(I) THIS VIEW IS, FURTHER, SUPPORTED BY THE DIRECT DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF K.G OPAL KRISHAN V CENTRAL BOARD OF DIRECT TAXES & OTHERS (1 994) 206 ITR 183 (MAD). THE HON'BLE MADRAS HIGH COURT HAS SPECIFICALLY DEALT WITH THE DEFINITION OF SALARY IN THE CONTEXT OF SECTION 10(10) AND 10(10AA) OF THE ACT. THE HEA D-NOTES OF THE DECISION ARE REPRODUCED HEREUNDER : EXEMPTION CONSTITUTIONAL VALIDITY OF PROVISION GRATUITY E XEMPTION GRANTED BY SECTIONS 10(10) AND 10(10 AA ) DIFFERENCE BETWEEN EMPLOYEES OF GOVERNMENT AND STATUTORY CORPORATIONS AND EMPLOY EES IN PRIVATE SECTOR PROVISIONS DO NOT OFFEND ARTICLE 14 PROVISIONS ARE VALID MEANING OF ' SALARY ' FOR PURPOSES OF SECTIONS 10(10) AND 10(10AA) NO GENERAL DEFINITION OF SALARY IN THE INCOME-TAX ACT APPLICABLE FOR ALL PRO VISIONS DEFINITION OF SALARY IN SECTIONS 10(10) AND 10(10AA) IS VALID INCOME - TAX ACT , 1961, SS. 10(10), LO(LOAA) CONSTITUTION OF INDIA, ARTS . 14, 226. 8(II) THE HON'BLE MADRAS HIGH COURT FURTHER HELD AS UNDER : THERE IS NO GENERAL DEFINITION OF THE WORD SALARY APPLICABLE FOR ALL THE PROVISIONS OF THE INCOME-TAX ACT. THE EXPLA NATION TO SECTION 10(10) STATES THAT, IN THIS CLAUSE AND IN CLAUSE ( 10AA) SALARY SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (H) OF RU LE 2 OF PART A OF THE FOURTH SCHEDULE TO THE INCOME-TAX ACT. CLAUSE(H) O F RULE 2 OF PART A OF THE FOURTH SCHEDULE READS THAT SALARY INCLUDES DEARNESS ALLOWANCE, IF THE TERMS OF EMPLOYMENT SO PROVIDE, B UT EXCLUDES ALL OTHER ALLOWANCES AND PERQUISITES. THERE IS NO AMBIG UITY WHATEVER IN THE DEFINITION CONTAINED IN THE ABOVE CLAUSE, AND I T IS THE SAID DEFINITION WHICH SHOULD BE APPLIED WHILE CONSTRUING SECTION 10(10) AND SECTION 10(10AA). 8(III) IN THE ULTIMATE ANALYSIS, HON'BLE HIGH COURT CONCLUDED THE MATTER AS UNDER : HENCE, THE CONTENTION OF THE PETITIONER THAT THE E XPRESSION SALARY FOUND IN SECTION 10(10) AND SECTION 10(10A A) OF THE INCOME-TAX ACT SHOULD BE GIVEN A WIDER MEANING THAN FOUND IN CLAUSE (H) OF RULE 2 OF PART A OF THE FOURTH SCH EDULE IS WHOLLY UNTENABLE. THUS, THE PETITIONER IS NOT ENTIT LED TO THE GRANT OF ANY PART OF THE PRAYER MADE BY HIM IN THE WRIT PETITION . 8(IV) HON'BLE MADRAS HIGH COURT HAS CATEGORICALLY A ND CLEARLY HELD THAT EXPRESSION SALARY APPEARING IN SECTION 10(10) AND 10(10AA) CANNOT BE GIVEN A WIDER MEANING THAN 8 THAT FOUND IN CLAUSE (H) OF RULE 2 OF PART A OF THE FOURTH SCHEDULE. 9. AS THE ISSUES IN QUESTION ARE COVERED BY THE ABO VE DECISION OF THE HON'BLE MADRAS HIGH COURT AND ALSO BY THE PLAIN LANGUAGE OF THE STATUTORY PROVISIONS AND THE RELEVANT RULE, THE CONTENTION OF THE APPELLANTS IS NOT LEGAL LY AND FACTUALLY TENABLE. RESPECTFULLY FOLLOWING THE RATI O OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT, AS REPRO DUCED ABOVE, THE GROUNDS OF APPEAL OF THE APPELLANT ARE D ISMISSED AND FINDINGS OF THE CIT(APPEALS) ARE UPHELD. 10. AS THE ISSUES INVOLVED IN ITA NO. 757/CHD/2012, A.Y. 2008-09, IN THE CASE OF PARAMJIT KAUR SARAO AND ITA NO. 758/CHD/2012 A.Y. 2008-09, IN THE CASE OF SHRI HARB ANS SINGH, ARE IDENTICAL TO THE ISSUES ADJUDICATED BY U S IN ITA NO. 756/CHD/2012 A.Y. 2008-09, IN THE CASE OF SHRI GURMIT SINGH, THESE APPEALS ARE ALSO DISMISSED, FOLLOWING THE FINDINGS RECORDED IN ITA NO. 756/CHD/2012 IN THE CA SE OF SHRI GURMIT SINGH. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DEC.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH DEC.2012 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH