Commissioner of Income Tax vs Jai Prakash Vaish

Heard Sri A.N. Mahajan for the department and Sri. P.K. Mishra holding brief of Sri Bharatji Agarwal for the assessee.

This is an Income Tax reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). In which following questions have been referred to us for our opinion :

"1. Whether on the facts and in the circumstances of the case, the amount of Rs. 25,257 received by the deceased assessee on his retirement in view of accumulated Earned Leave amounting to 471 days could be taxed as his income for the accounting period relevant to the assessment year 1975-76 ?

If the answer to the question No. 1 is in the affirmative, whether the said income was taxable under the head ''Income from salary'' and/or the provisions of section 89(1) of the Income Tax Act, 1961 would be attracted in the present case ?"

Assessee is the deceased Jai Prakash Vaish whose legal heir is Sunil Kumar an individual of Muzaffarnagar. The relevant assessment year was 1975-76 and the assessee received Rs. 25,257,38 by way of encashment leave salary after his retirement. The question was whether that amount could be taxed as income in the relevant assessment year and whether the said income would come under the head of income from his salary. The facts of this case are covered by the decision of a Division Bench of this court dated 12-8-1988 in the case of In Re: All India Defence Accounts Association, in which it was held that the said amount would be taxable u/s 17(3)(ii) of the Act. We, therefore, following the aforementioned decision answer both the questions referred to us in the affirmative, i.e., in favour of the department and against the assessee. The reference is answered accordingly.