Commissioner of Income Tax vs R.K. Mukherjee

On an application u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in upholding the order of the Commissioner of Income Tax (Appeals) by accepting the claim of exemption of Rs. 60,437 which the assessee received after the winding up of the superannuation scheme, when some of the conditions for exemption mentioned in Section 10(13) was not fulfilled ?"

In this case the assessee claimed that the amount of Rs. 60,437 received from an approved superannuation fund is not taxable under the Act of 1961. The Income Tax Officer has taken the view that when the conditions laid down in Section 10(13) of the Act are not fulfilled, the income of Rs. 60,437 is not exempted.

In the appeals the Commissioner of Income Tax (Appeals) and the Tribunal both have allowed the claim of the assessee that the amount in question cannot be a perquisite within the meaning of Section 17(3)(ii) of the Act. Therefore, it cannot be taxed.

Heard learned counsel for the parties. Learned counsel for the assessee submits that when the payment was made from the approved superannuation fund the payment so made cannot be treated as perquisite within the meaning of Section 17 of the Income Tax Act, 1961. The relevant provision that is Sub-clause (ii) of Clause (3) of Section 17 reads as under :

"(ii) any payment other than any payment referred to in Clause (10), Clause (10A), Clause (10B), Clause (11), Clause (12), Clause (13) or Clause (13A) of Section 10, due to or received by an assessee from an employer or a former employer or from a provident or other fund (not being an approved superannuation fund), to the extent to which it does not consist of contributions by the assessee or [interest on such contributions] or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy."

Learned counsel for the assessee submits that the words "not being an approved superannuation fund" are omitted with effect from April 1, 1996, and the relevant assessment year in this case is 1987-88. Therefore, when the words "not being an approved superannuation fund" were there in the relevant assessment year 1987-88, there is no question of treating any payment from superannuation fund as perquisite within the meaning of Section 17, Clause (3) of the Act.

Learned counsel for the Revenue has not controverted the facts that the relevant assessment year is 1987-88, payment has been made out of an approved superannuation fund and the words "not being an approved superannuation fund" have been omitted with effect from April 1, 1996.

The payment has been made from the approved superannuation fund and the words "not being an approved superannuation fund" were there in Sub-clause (ii) during the assessment year 1987-88, there is no question to treat any payment out of an approved superannuation fund as perquisite. When the amount is not a perquisite and cannot be treated as salary there is no need to consider the question whether that amount in lieu of salary is exempted or not u/s 10(13) of the Act. Therefore, whether the conditions of Section 10(13) are fulfilled for exemption of the amount from taxation, no more require, when the amount is not a salary. It is also made clear that the Income Tax Officer has not treated it as an income under the Act, except treating it as salary. He has disallowed the claim of the assessee only on the ground that the amount in question is not exempted u/s 10(13) of the Act. Whether it is an income at all or not as that dispute is not before us, we need not go into that question.

Learned counsel for the Revenue also submits that the payment has been made after the winding up of the scheme, firstly, the Income Tax Officer has not disallowed the claim of the assessee on this ground, secondly, whether the scheme is in existence or not is irrelevant. Under the provisions of Section 17(3), once the payment has been made out of the approved superannuation fund that amount cannot be treated as in lieu of salary.

In the result, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue.

The reference accordingly is disposed of.