SHRIRAM BAGAVATHYAPPAN,HARYANA V. DCIT/ACIT-INT-TAX, GURGAON

ITA 4815/DEL/2025

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The case involves Shriram Bagavathyappan, a salaried employee who, during his employment with M/s Flipkart Internet Pvt. Ltd., received joining and retention bonuses which were later recovered by the employer upon his resignation. The primary legal issue was whether these recovered amounts should be considered as taxable income in the hands of the assessee for the Assessment Year 2018-19. The assessee argued that since the amounts were recovered and not actually received as income, they should not be taxed. The Income Tax Department had added these amounts to the assessee's income, leading to the appeal. The Tribunal's decision reversed the Department's stance, aligning with the assessee's argument that the amounts, once recovered, do not constitute taxable income.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 842123 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 05-08-2025
• Other Referred Cases: Vrajeshwari B. Parikh vs. ITO, ITA No.1512/Ahd/2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SINGH SHARMA
• Assessee Lawyers: GURJEET SINGH
• Keywords: Salary income; TDS
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.4815/Del/2025 Assessment Year : 2018-19 Shriram Bagavathyappan, H-184, DLF Park Place, DLF Phase-5, Gurgaon. PAN: BBKPB0290F Vs. DCIT, International Taxation, Gurgaon. (Appellant) (Respondent) Assessee by : Shri Gurjeet Singh, CA Revenue by : Shri Vikram Singh Sharma, Sr. DR Date of Hearing : 18.02.2026 Date of Pronouncement : 24 .02.2026 ORDER PER MADHUMITA ROY, JM: The instant appeal filed by the assessee is directed against the assessment order dated 08.07.2025 passed by the Ld. Commissioner of Income Tax (Appeals), Delhi-43, [hereinafter referred to as the Ld. CIT(A)] u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the assessment order dated 28.06.2021 passed by the DCIT, International Taxation, Printed from counselvise.com ITA No.4815/Del/2025 2 Circle, Gurgaon (hereinafter referred to as ‘the ld. AO’) under Section 143(3) r.w.s. 144C(3) of the Act for Assessment Year 2018-19. 2. The assessee is a salaried person and shifted to foreign country during the financial year. The return of income was filed on 28.08.2018 declaring the income from salary of Rs.13,38,625/-, income from short-term capital gain of Rs.1,43,231/- and income from other sources of Rs.1,39,520/- and further claiming deduction under Chapter VI of Rs.1,59,466/-. The taxable income was declared by the assessee to the tune of Rs.14,61,910/-, the tax liability of Rs.2,36,477/- was satisfied from TDS deduction of Rs.7,71,458/- and refund was claimed of Rs.5,34,980/-. 3. The fact of the case is that the assessee was in employment with M/s Flipkart Internet Pvt. Ltd. As per the employment agreement dated 24th December, 2015 when the assessee joined the company on 01.02.2016, joining bonus of Rs.15,00,000/- was paid to the assessee during the F.Y. 2015-16 with a rider that upon termination of employment within a period of two years from the date of joining the said joining bonus shall be recovered from the assessee. Relevant to mention that the said joining bonus of Rs.15 lakhs received by the assessee during the F.Y. 2015-16 was offered to tax in AY 2016-17. Similarly, in terms of the said agreement dated 24th December, 2015, upon completion of one year of service with the employer company, retention bonus to the tune of Printed from counselvise.com ITA No.4815/Del/2025 3 Rs.10 lakhs was paid to the assessee during the F.Y. 2016-17 on condition that upon termination of employment within a period of 12 months from the date of payment retention bonus shall be recovered from the assessee. The same was offered to tax for AY 2017-18 too. The assessee joined the company, namely Flip Kart Internet Pvt. Ltd., on 01.02.2016 and offered his resignation on 29.05.2017 and ultimately left on 11.08.2017 meaning thereby the assessee was in employment with the employer for only two months during the F.Y. 2015-16, the month of February and March, 2016, the full year of F.Y. 2016-17, i.e., from April, 2016 to March, 2017 and further for four months and ten days for F.Y. 2017-18 commencing from April, 2017 to July, 2017 (four months and ten days of the month of August, 2017). 4. As the terms of employment towards payment of joining bonus was for a continuous service for a period of two years from the date of joining, i.e., on and from 01.02.2016 since not fulfilled, the employer company recovered the said joining bonus of Rs.7,50,000/- from the assessee out of the salary earned during F.Y. 2017-18 which is evident from page 65 of the paper book reflecting the details of full and final settlement made by the company, namely Flip Kart Internet Pvt. Ltd., Bangalore which is reproduced as below:- Printed from counselvise.com ITA No.4815/Del/2025 4 5. Similarly, the retention bonus paid by the assessee to the tune of Rs.10 lakhs on the condition of continuance of service for a period of one year from the date of payment of such retention bonus since not fulfilled by the assessee since he left the company on 29.05.2017, the employer recovered the said retention bonus of Rs.10 lakhs from the assessee out of the salary earned during the F.Y. 2017-18 which is also reflecting from the details of full and final settlement as reproduced hereinabove. Having regard to the above particular financial aspect of the matter, during filing of the income-tax return for AY 2017-18 relevant of A.Y. 2018-19, the assessee made set off/adjustment of Rs.17,50,000/-, i.e., the Printed from counselvise.com ITA No.4815/Del/2025 5 amount recovered by the employer on account of joining bonus to the tune of Rs.7,50,000/- and on account of retention bonus of Rs.10 lakhs from the salary income of Rs.30,95,225/- and offered the balance amount actually earned by the assessee of Rs.13,44,225/- to tax under the head ‘Salary.’ Though sufficient explanation was rendered by the assessee to substantiate the cause of deduction of Rs.17,50,000/- by the employer company including the set off/adjustment out of salary income for the financial year and net salary income of Rs.13,44,225/- was offered to tax, the same was not considered in its proper perspective by the Ld. AO and the impugned addition of Rs.17,50,000/- as deducted by the employer was added to the returned income in the hands of the assessee. The assessment was, therefore, finalized by and under the order dated 28.06.2021 passed by the Ld. AO under Section 143(3) r.w.s. 144C(3) of the Act upon raising a demand of Rs.5,94,240/-. It is the case of the assessee that though the payment made to the assessee on account of joining bonus to the tune of Rs.15 lakhs and retention bonus to the tune of Rs.10 lakhs the same were subsequently recovered by the company to the tune of Rs.7,50,000/- and Rs.10 lakhs respectively and thus said amount cannot be considered as income earned by the assessee. More so, TDS was also deducted on the entire amount by the company. Thus, it was further concluded by the assessee that once taxed the said amount cannot be considered for further taxation in the hands of the assessee; the deduction as claimed to the tune of Rs.17,50,000/- made by the assessee ought to have been considered by the Revenue in its proper perspective and disallowance Printed from counselvise.com ITA No.4815/Del/2025 6 of the same under the present facts and circumstances is not sustainable in the eyes of law. In this regard, he has relied upon the order passed by the Ahmedabad Bench of the Tribunal in the case of Vrajeshwari B. Parikh vs. ITO, ITA No.1512/Ahd/2014, order dated 15th September, 2015 for AY 2008-09 wherein excess payment made by the employer was adjusted subsequently and once the said payment was refunded by the assessee to the employer the disallowance made by the authority on the said payment was found to be bad in law. He further submitted that taxability of an income only when and only to the extent the unqualified right to receive the salary from an employer has come into existence. When the assessee has demanded deduction of Rs.17,50,000/- as the same was recovered by the employer from the assessee’s salary the same cannot be considered as an income for the year under consideration and thus the disallowance of deduction is liable to be rejected as contended by the Ld. AR. 6. On the other hand, the Ld. DR vehemently argued in support of the order passed by the authorities below. He has further made an attempt to distinguish the judgement passed by the ITAT Ahmedabad Bench (supra) on the premise that deduction in question therein was the amount which was paid to the assessee by the employer in excess and the same was subsequently recovered. In the case in hand before us as this is neither an excess payment, rather, it is the assessee who left the job without following the terms and conditions laid down in the Printed from counselvise.com ITA No.4815/Del/2025 7 service agreement dated 24.12.2015, the deduction has rightly been disallowed by the authorities below as argued by the Ld. DR. 7. Heard the parties, perused the records. Considering the entire aspect of the matter, the fact at this point of time found to be considered as to whether the assessee is liable to pay tax on the amount of Rs.7.5 lakhs as joining bonus and Rs.10 lakhs as retention bonus, which was admittedly subsequently recovered by the employer, namely, M/s Flipkart Internet Pvt. Ltd. on resignation tendered by the assessee; this Rs.7,50,000/- as joining bonus and retention bonus of Rs.10 lakhs, therefore, found to be not actually the income of the assessee at the end of the day. The said amount of Rs.17,50,000/- though claimed for deduction, the same was denied merely on the ground that this was earlier paid to the assessee and only on resignation tendered by the assessee this has been recovered by the company meaning thereby the disallowance is not on the basis of income whether earned by the assessee or not, rather, only on the reason of recovery of amount on account of non-continuance of service by the assessee as per the agreement of service which, in our considered opinion, is not acceptable. 8. The jurisdiction conferred upon the Ld. AO by the Act to assess the actual income earned by the assessee under the Act and not to relate the conduct of the assessee vis-a-vis service rendered by him with his employer in order to determine actual income of the assessee. the Department should restrict to assess the income of the assessee which has admittedly been earned. Thus, the Printed from counselvise.com ITA No.4815/Del/2025 8 disallowance of deduction merely on the utopian income alleged to have been earned by the assessee is nothing, but, high handed action on the part of the Ld. AO which was further not considered in its proper perspective by the First Appellate Authority. Such a decision of disallowance of deduction of Rs.17,50,000/- which was ultimately not earned by the assessee is, thus, found to be arbitrary, colourable exercise of power, whimsical, erroneous, contrary to the taxing provisions and therefore, liable to be quashed. We, thus, direct to allow the claim of deduction made by the assessee. 9. In the result, the assessee’s appeal is allowed. Order pronounced in the open court on 24.02.2026. Sd/- Sd/- (SANJAY AWASTHI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24th February, 2026. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "