Income Tax Appellate Tribunal - Mumbai
S.P. Banerjee vs Deputy Commissioner Of Income-Tax on 22 November, 1989
Equivalent citations: [1990]32ITD514(MUM)
ORDER
F.C. Rustagi, Judicial Member
1. This is an appeal preferred by the assessee under the I.T. Act. The two grounds raised are (1) regarding benefit under Section 10(10-A A) and (2) regarding deduction under Section 80C in respect of investments made in National Savings Certificates.
2. Briefly to state the facts, the assessee, Shri S.P. Banerjee, was an employee of the Reserve Bank of India and subsequently he joined in the National Bank of Agricultural and Rural Development, hereinafter known as NABARD. He retired on 31-10-1984. Butas he accumulated earned leave to his credit, he went on to get salary from 1-11-1984 to 30-4-1985. There is no controversy about the fact that within five days of his retirement, he got the provident fund. The assessing officer and the Dy. C.I.T.(A) denied him the benefit under Section 10(10-AA). Their contention was that it was not on the retirement or superannuation when the assessee got the benefit of leave encashment. Hence, according to them, it could not be exempt under Section 10(10-AA).
3. The learned authorised representative for the assessee submitted that the assessee had actually retired on 31-10-1984 and he got the provident fund within 5 days then. He drew my attention to the certificate placed on page 10 of the paper book. He submitted that benefit of Section 10(10-A A) should not have been denied by the two lower authorities. In the alternative he submitted that in case he does not succeed in the first contention, i.e. regarding exemption of leave encashment under Section 10(10-AA), then benefit of Section 80C should be allowed to the assessee in respect of provident fund for six months, i.e. 1-11-1984 to 30-4-1985. The learned Departmental Representative in respect of this dispute relied on the orders of the two lower authorities. He submitted that the assessee went on to receive the salary for six months after his retirement and, therefore, the benefit contemplated under Section 10(10-AA) will not be available to the assessee.
4. After taking into consideration the rival submissions and looking to the facts available on record, I am unable to confirm the finding of the Dy. C.I.T. (A). There is no controversy about the fact that on attainment of superannuation, i.e. when the assessee completed the age of 58 years, he retired on 31-10-1984 and to that effect there is a certificate given by the assessee's employer in the following words:
11 September 1987.
This is to certify that Shri S.P. Banerjee, Ex-General Manager, retired from the Bank's services on 31 October, 1984 after attaining age of 58 years. He had accumulated leave for six months but not availed of as on the date of his retirement. In terms of Rule 19(4) of NABARD (Staff) Rules, 1982 leave salary for six months (i.e. 1 November 1984 to 30 April 1985) was paid to Shri Banerjee in monthly instalments, at his option, after attaining the age of retirement and he was not on duty after 31 October 1984.
This certificate is issued to Shri Banerjee for submission to the Income-tax Office.
Undoubtedly he went on to get the salary for six months, i.e. from 1-11-1984 to 30-4-1985, but not for a day he worked in the office during this period nor he could be treated as the employee of the bank during this period. To that effect another certificate is also placed as Annexure in the compilation, which was in conformity with the rules of NABARD. The said certificate reads as under:
15 March 1986.
This is to certify that in terms of Rule 19(1) of NABARD (Staff) Rules 1982, an employee in Group A shall retire at 58 years of age. Further, under Rule 19(4) of the said Rules, where an employee has ordinary leave earned but not availed of as on the date of retirement (i.e. date of attaining the age of 58 years), he is permitted at his option, to avail of such leave subject to a maximum of six months after attaining the age of retirement. Accordingly, Shri S.P. Banerjee, ex-General Manager, was permitted to avail of six months leave after attaining the age of 58 years on 31 October 1984 and leave salary was paid to him for six months from 1 November 1984 to 30 April 1985. Income-tax on the amount of leave salary paid up to 31 March 1985 was deducted at source during 1984-85 at the rate applicable in Shri Banerjee's case.
This certificate is issued to Shri Banerjee for submission to the Income-tax Office.
When I go through the two certificates on one hand and looking into Section 10(10-AA) on the other hand, I find that the assessee's claim ought to have been allowed and the Dy. C.I.T.(A) was in error in rejecting the same.
5. The second dispute pertains to deduction under Section 80C in respect of the deposit of Rs. 28,000 made by the assessee on 14-11-1984. Briefly to state the facts in the background of this dispute, the assessee had two bank accounts, in respect one of which he had cheque facility, whereas in respect of the other, where his salary was being deposited, he had no cheque facility. The total gross income of the assessee during the financial year 1984-85, which is relevant for the assessment year 1985-86 under consideration, was Rs. 77,000. The salary from April to October 1984 aggregated to Rs. 38,762. The assessee purchased National Savings Certificates of the value of Rs. 28,000 on 14-11-84. The assessing officer observed that the assessee acquired the National Savings Certificates out of the provident fund received from his employer, which was deposited" in the Canara Bank in which the assessee had the cheque facility. He never made any inquiry about the details of balances held by the assessee in other banks and also other resources.
The Dy. C.I.T(A) also confirmed the findings of the assessing officer denying the assessee the benefit of Section 80C. The learned authorised representative for the assessee submitted that the said amount of Rs. 28,000 was deposited in the National Savings Certificates on 14-11-1984. He drew my attention to pages 22 to 25 of the assessee's compilation. He submitted that even out of salaries the assessee had an amount of Rs. 17,000 lying in one of his bank accounts plus he had Rs. 10,000 as cash in hand, which he withdrew from the bank little before he acquired the National Savings Certificates. He had also withdrawn out of the salary deposited in the Canara Bank. The learned Departmental Representative, on the other hand, relied on the orders of the two lower authorities.
6. After taking into consideration the rival submissions and looking to facts available on the record, I am unable to confirm the finding of the Dy. C.I.T. (A). When I look into the Punjab & Haryana High Court decision in the case of Ravi-Kumar Mehra, a copy of which is placed by the assessee's counsel in the compilation at page 22,1 find that their Lordships had occasion to deal with Section 80C in the said case and had held as under:
The income of the assessee as a HUF was the subject-matter of assessment. Its total income from the two firms mentioned above pertaining to the relevant accounting years was Rs. 1,07,488. The fact that the payment of life insurance premia was made by the assessee out of the amount lying to its credit in the personal account with the company which was formed on 1-7-1972 was not at all a relevant factor and ought not to have weighed with the revenue for disallowing the deduction under Section 80C(1). By making payment of the life insurance premia by withdrawing the amount from its personal account with the said company the credit balance of the assessee in the said account was correspondingly reduced. This in clear terms meant that the income of the assessee after giving deduction of life insurance premia under Section 80C(1) would also be correspondingly reduced. An assessee may make payment of the life insurance premia out of his savings account with a bank where the balance to his credit is available before the commencement of the accounting year. This will in no case mean that the payment of premia so made is not to be deducted out of the total income of the assessee in the relevant accounting year. Such a construction on Section 80C will not be proper nor is intended by the provisions of Section 80C(1).
In the present case there is no controversy about the fact that the assessee earned an amount of Rs. 77,000 and had out of that salary placed Rs. 17,000 in one bank and about Rs. 2,000 in other bank plus Rs. 10,000 were in cash which came to be withdrawn by the assessee from the bank account in which he used deposit the salary a little earlier. He simply issued the cheque from Canara Bank because there he enjoyed the cheque facility. There is no controversy about the fact that the assessee also had not kept water-tight compartment of his resources for meeting his various commitments like family expenses, current repairs and investments eligible for" deduction under Section 80C and investments not eligible for deduction, etc. As a matter of fact, in order to spend his retired life, he had made investments earlier in units introduced by Unit Trust of India in September 1984 from the balance held in his savings bank account with Canara Bank. Simply because technically speaking the money was not withdrawn by the assessee out of the funds accumulated out of salary, it could not militate against the assessee and the benefit under Section 80C was to be allowed. The assessee's contention, therefore, in respect of both the grounds are accepted. The appeal is allowed.