Income Tax Appellate Tribunal - Delhi
Rajinder Tiku vs Income-Tax Officer on 24 March, 1996
Equivalent citations: [1996]59ITD410(DELHI)
ORDER
Saluja, JM
1. The assessee and the Department have preferred these appeals mainly with reference to the exemption under section 10(17B) of the Income-tax Act in relation to generation reward (incentive) granted to DESU employees. Since the appeals were heard together the same are being disposed of by this consolidated order for the sake of convenience.
2. The brief facts in these cases are that the assessees are employees of the Delhi Electricity Supply Undertaking (DESU), which pays to its employees generation reward (incentive). It was claimed by the assessees that the said generation reward was exempt under the provisions of section 10(17B) of the Income-tax Act. The assessee had claimed that the Central Government had approved Meritorious Productivity Scheme framed by the Ministry of Energy, Government of India, for the assessment years 1989-90 to 1991-92 vide Board's order dated 15-5-1989. The assessees, therefore, urged that the incentive scheme of DESU for awarding generation incentive should also be covered in the same spirit for the assessment year 1988-89. The Assessing Officer did not agree with the contentions of the assessees and disallowed the claimed exemption by observing that the CBDT had not notified these exemptions, and that in view of the Board's instructions No. 1788 dated 22-11-1986, no deduction was admissible except the standard deduction.
3. On appeal, while the ld. DCIT(A) Range-I, New Delhi observed in the case of Shri Rajinder Tiku and the Generation Reward (incentive) Scheme framed by DESU had not been specifically approved by the Central Government, as no notification by the Board had been issued for the assessment year 1988-89. The ld. DCIT(A) Range-II, New Delhi in the case of Shri S.R. Sethi observed that DESU was covered within the definition of "State" and Delhi being a Union Territory run by the Central Government, DESU could be considered to be a part of the Central Government and approval of the scheme of payment by DESU to its employees was automatically taken to be approval by the Central Government and the assessee was entitled to exemption under section 10(17B) of the Income-tax Act as there was implicit approval of the Central Government. On these facts, the assessee and the Department are aggrieved.
4. The learned counsel for the assessee, Shri Rajinder Tiku, invited our attention to the provisions of "Generation Incentive Scheme" dated 16-3-1984 framed by the Delhi Electric Supply Undertaking (Pages 26 to 32 of the paper book). He invited our attention in particular to paragraph 4.1.3.(a), wherein it is specified that incentive payment will be 3.0% of basic pay and special pay, para 4.2.1 wherein it is specified that quarterly incentive will be paid based on the OPUF achieved for the quarter, para 5.2 wherein Performance Payment Table has been specified, para 6 wherein the payment of incentive is linked with the oil consumption in the power station, para 7.1 which highlights the purpose of the scheme so as to foster a team spirit and creation of environment essential to produce desirable results and the introduction of plantwise/sectionwise Group Incentive Scheme, para 7.2 which classifies the employees into various groups for purposes of the incentive scheme, para 8.2 which specifies certain ceilings with reference to payment of incentive per month, para 9.1 which specifies for deduction in incentives depending on performance of the power station and para 10.3 which specifies that earning under the incentive scheme will not be counted for purposes of leave pay, provident fund, bonus and other benefits.
5. The learned counsel Shri M.N. Tiku further took us through the written submissions filed before the Assessing Officer with reference to the reopening of the assessment under section 143(2) and in particular the justification of the claim seeking exemption under section 10(17B) of the Income-tax Act, 1961. It is mentioned in the written submission that there can possibly be two objections that the said reward in the form of incentive granted by DESU should have been granted by the Central Government or any State Government for such purpose as may have been approved by the Central Government and secondly that the said reward was not in public interest. The assessee had urged that DESU was substantially a part of the Central Government as its operation and day-to-day working and its funds were regulated by the Central Government. It was further mentioned that the current and future programmes of DESU were not only regulated but were also managed/governed by the Central Government through the Central Electricity Authority of India, a unit of the Ministry of Energy. It was further urged that DESU was not a part of Delhi Administration and it was a part of Municipal Corporation of Delhi which is a statutory body created by Parliament of India under the Delhi Municipal Corporation Act, 1957. It was also urged that even if DESU is held to be a part of the Delhi Administration, still it is a part of the Central Government as the Union Territory of Delhi is Centrally administered. In the alternative, it was submitted that DESU has several trappings of the Central Government inasmuch as it is created by an Act of Parliament, its technical operation and planning is controlled and regulated by the Central Government, there through its unit, that is, Central Electricity Authority of India, the Ministry of Energy has a substantial hold on DESU and its working, the main funds for operation of DESU are paid out of the consolidated fund of India, DESU is subject to statutory Public Accounts Committee of Parliament. Its accounts are being audited as prescribed by law. It was further urged that the reward in the form of incentive as a public purpose for social cause and that the provisions of section 10(17B) should be construed liberally. The assessee further referred to the provisions of Article 12 of the Constitution of India and the decision of the Hon'ble Supreme Court in the case of Ajay Hasia v. Khalid Mujib Sehravardi AIR 1981 SC 487, wherein it was held that even a regional engineering collage registered under the Societies Registration Act is equal to "State" for purposes of Article 12 of the Constitution. It was, therefore, urged that the actual test should be as to whether DESU is an instrument or as an agency of the Government and not as to how it has been created. The assessee further referred to the decision of the Hon'ble Supreme Court in the case of Rajasthan State Electricity Board v. Mohan Lal AIR 1967 SC 1857, wherein it was observed that "State" as defined in Article 12 will include bodies created for the purpose of promoting educational and economic interests of the people. It was also mentioned in the light of the said decisions that sovereign power vested in an authority under the law and enforcement of such power brings the authority within the parameters of "State". It was, therefore, urged that all the said powers were enjoyed by DESU and it can be clubbed with Government and be deemed to be part of the Central Government. With reference to public interest referred to in section 10(17B) the assessee submitted that the dominating purpose of the incentive scheme was to maximise generation of electrical energy and reduce the cost in terms of per unit of energy generated and, therefore, it was urged that the scheme was in public interest which was writ large in the scheme itself. In this connection, the assessee also relied on the decision of the Hon'ble Madras High Court in the case of CIT v. J.G. Gopinath [1980] 4 Taxman 80. The learned counsel submitted that the aforesaid arguments made in the written submissions filed before the Assessing Officer may be taken as argued before us. The learned counsel also sent a note dated 18-4-1996, that is, on the next date after the date of hearing, wherein the intention underlying the approval of the Central Government as contemplated by section 10(17B) with reference to a scheme framed by the State Government has been explained. It has been mentioned that the prior approval of the Central Government is prescribed in section 10(17B) in relation to scheme framed by the State Governments so that there is no drain on the Central revenues. It is further urged that section 10(17B) has not prescribed any proforma or time framed for grant of the approval and that such approval has only to be inferred from the contents of the scheme. It is ultimately urged that the incentive scheme is already floated by the Centre and its approval is thus implicit.
6. The learned counsel Shri Rajan Bhatia, who appeared for Shri S.R. Sethi submitted that the arguments advanced by Shri M.N. Tiku may be taken as advanced in the case of Shri S.R. Sethi also. In addition to the said arguments, the learned counsel submitted that section 10(17B) has four limbs and that "public interest" cannot be disputed in the present case. He further mentioned that in accordance with Dictionary meaning the word "reward/incentive" means "recompense for work". He, therefore, urged that the case of the assessee is covered by the provisions of section 10(17B). He also submitted that even if the incentive granted by DESU to the assessee is taken as part of his salary, the said part of the salary was still exempt under the provisions of section 10(17B). In this connection he submitted that the incentive was linked with salary only for purposes of quantification. In this connection the ld. counsel relied on the ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830/76 Taxman 611. He further submitted that approval as mentioned in section 10(17B) is a restrictive provision and that it should be construed liberally to advance the object underlying the said provision. In this connection, he relied on the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480. He further submitted that in the present case approval of the Central Government has to be construed as the scheme has been framed by an instrumentality of the State. In this connection, the ld. counsel relied on the decision of the Tribunal Delhi Bench-B in the case of Iraqi Airways v. IAC [1987] 23 ITD 115. He further submitted that in the present case section 10(17B) did not specify any specific mode of approval and, therefore, in the case of the incentive scheme in question, in case of any doubt, the benefit should be allowed to the assessee. For this proposition, the ld. counsel relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192.
7. The ld. D.R. Shri Jyoti S. Chowdhary relied heavily on the orders of the Assessing Officers as also on the order of the ld. DCIT(A) Range-I, New Delhi in the case of Shri Rajinder Tiku. He further submitted that DESU was only a local authority and was only a part of the Municipal Corporation of Delhi and that by no stretch of imagination it could be treated as a part of the Government of Union Territory of Delhi or the Central Government. He further invited our attention to page 34 of the paper book filed in the case of Shri Rajinder Tiku whereby the CBDT vide its letter dated 11-1-1991 had asked the Hony. General Secretary of DESU, General Engineers and Supervisors' Association to inform the Department as to whether the incentive scheme floated by DESU is covered by the M.P. Reward Scheme framed by the Ministry of Energy (Deptt. of Power). He submitted that even a copy of the order dated 15-5-1989 issued by the CBDT under section 10(17A) of the I.T. Act in relation to the said scheme framed by Ministry of Energy was forwarded. He submitted that there was no reply from the said association. The ld. D.R. further relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of M. Krishna Murthy v. CIT [1985] 152 ITR 163/23 Taxman 126, wherein it was held that incentive bonus was taxable.
8. We have carefully considered the rival submissions and have also perused the orders of the tax authorities in both the cases as also the relevant record to which our attention was invited during the course of the hearing. We have also seen the case-law relied upon by both the learned counsels and the ld. D.R. It is observed that the thrust of the arguments advanced by the ld. counsels is that DESU is a part of the Cental Government and detailed arguments have been advanced in that behalf. We may mention that DESU is a wing of the Delhi Municipal Corporation which has been created under the Delhi Municipal Corporation Act, 1957. At best, DESU can be considered to be a local authority within the meaning of section 3(31) of the General Clauses Act, 1897. Insofar as arguments advanced by the ld. counsels that DESU should be construed as "State" within the meaning of Article 12 of the Constitution are concerned, it may be mentioned that the said definition of "State" has been given in Article 12 with reference to enforcement of Fundamental Rights granted to citizens and others by the Constitution. The underlying purpose of giving a wide definition in Article 12 has been that the Fundamental Rights are enforceable against the State and, therefore, all instrumentalities of State should also be covered so as to protect the citizens and others against invasion of their Fundamental Rights. Therefore, the said definition cannot be invoked in the case of DESU when construing the provisions of section 10(17B) of the I.T. Act. It may also be mentioned that the expressions used in the Income-tax Act have to be construed either in the light of definitions given in that Act or in the light of definitions contained in section 3 of the General Clauses Act, 1897. The expressions "Central Government" and "State Government" as used in section 10(17B) have, therefore, to be interpreted in the light of definitions given in section 3 of the General Clauses Act, 1897. The expression "Central Government" has been defined by section 3(8) to mean the President and includes in relation to the Administration of a Union Territory, the Administrator acting within the scope of the authority given to him under Article 239 of the Constitution. Similarly, the expression "State Government" has been defined by section 3(60) to mean, the Governor and in a Union Territory the Central Government. As already held by us, DESU is only a part of the Municipal Corporation of Delhi and is only a local authority. In view of the foregoing, we are unable to hold that DESU, in any way, is attributes of a State Government or for that matter of the Central Government. Insofar as the arguments relating to control of DESU by the Ministry of Energy or by the Central Government or by any wing of the Central Government are concerned, we may mention that the said control is being exercised by the Central Government under the constitutional scheme of administering the Union Territory of Delhi and the same has no bearing, with reference to the legal status of DESU which can only be that of a local authority. It is also observed that the scheme framed by the Additional General Manager (Administration) of DESU on 16-3-1984 is not approved by the Central Government. It is clear from the endorsement at the end of the said scheme at page 32 of the paper book that the copies of this scheme have only been forwarded to certain authorities of DESU. Thus, the assessees have not been able to show us any approval of the Central Government to the Scheme of DESU under which incentives have been paid. It is, not, every kind of reward given by the Government which is exempt under section 10(17B). The reward which is exempt under that provision should be a payment made by the Central Government in this behalf in the public interest. We may also mention that under the Government of India (Allocation of Business) Rules framed under Article 77 of the Constitution, the expression 'Central Government' has to be construed as Central Government in the particular Ministry/Department to which a particular subject has been allocated for being administered. In view of the said Rules the Central Government has used in section 10(17B) would only mean the Department of Revenue in the Ministry of Finance and even if approval to any scheme is granted by any other Department of the Govt. of India without the concurrence of the Department of Revenue in the Ministry of Finance that approval will not be a valid approval for purposes of section 10(17B). In this view of the matter also it cannot be construed that the DESU Scheme has been approved by the Central Government by any stretch of imagination. We may also mention that we have come across the decision of the Tribunal Delhi Bench-A in the case of ITO v. Khillawan [1996] 132 Taxation 142 (Trib.), wherein similar issue has been considered and it has been held that the DESU scheme is not approved by the Central Government and receipts of generation incentive are not exempt under section 10(17B). In view of the foregoing we hold that the generation incentive paid by DESU is not exempt under the provisions of section 10(17B). Accordingly while the order of the ld. DCIT(A) Range-I, New Delhi dated 12-3-1992 in the case of Shri Rajinder Tiku is confirmed, the order of the ld. DCIT(A) Range-II, Delhi dated 22-6-1990 in the case of Shri S.R. Sethi is set aside and the order of the Assessing Officer in that case is restored.