ISHWAR DASS GUPTA,HARYANA vs. ITO, HISAR

O R D E R PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 23.12.2015 of CIT(A), Hisar relating to assessment year 2010-11.

4. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 25.03.2011 declaring total income of Rs.3,58,419/-.

The assessee was employee of Choudhary Charan Singh Haryana Agricultural University (in short “CCS, HAU) Hisar and retired from service on 31.08.2007 and received salary i.e. pension and other pensionary benefits during the year under consideration. The assessee in the computation of total income annexed with the return of income furnished details of receipt of arrears of Gratuity amounting to Rs.6,45,480/- and arrears of leave encashment amounting to Rs.91,606/- and claimed the same amounts as exempt u/s 10(10) of the I.T. Act.

The assessee also filed a detailed note on payments of Gratuity, Leave Encashment and LTC etc. on superannuation. Since the assessee, according to the Assessing Officer, had claimed excess Gratuity amounting to Rs.2,95,480/- and leave encashment amounting to Rs.91,606/- as exempt u/s 10(10)(i) of the I.T. Act by treating himself as Government employee, the Assessing Officer reopened the assessment u/s 147 and issued notice u/s 148. After considering the various arguments made by the assessee during the course of assessment proceedings, the Assessing Officer held that the employees of the CCS, HAU, Hisar, cannot be termed as Government employees as neither they are under the control of Haryana Government nor their pay is debited to the consolidated funds of the State Application of CSR, Vol. II does not confer vice-versa status as Government employee under any rule/authority as claimed by the assessee.

He, therefore, held that the university employees are covered u/s 10(10)(iii) of the I.T. Act because neither section 10(10)(ii) applies as they are not receiving gratuity under the payment of Gratuity Act, 1972 nor from the gratuity funds mentioned u/s 10(10)(i) of the I.T. Act. In view of these facts, he held that the exemption allowable to the assessee in respect of gratuity and leave encashment is only 3.5 lacs and Rs.3,00,000/- respectively which has already been claimed/allowed. Thus, the claim of the assessee for exemption of gratuity received in arrear of Rs.2,95,480/- and arrear of leave encashment of Rs.91,606/- being not in order was added back to the income of the assessee.

The Assessing Officer accordingly made addition of Rs.2,95,480/- on account of Gratuity and Rs.91,606/- on account of Leave Encashment.

“1. That on the facts and circumstances of the case, the Ld. Assessing Officer erred in law in initiating the proceedings U/s 147 of the Income Tax Act, 1961.

2. That on the facts and circumstances of the case, the Ld. Assessing Officer erred in Law and facts in disallowing the claim of the appellant in respect of Gratuity and Leave encashment U/s.10(10) of the Income Tax Act treating the appellant as non Govt. employee. The Ld. CIT (Appeal) also erred in Law in upholding the view of the AO.

3. That the Ld. A.O./CIT (Appeal) has erred both in facts and law.

4. That the appellant craves leave to add or alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before the final hearing.”

“3. Briefly stated, the facts of the case are that the assessee was an employee of Chaudhary Charan Singh Haryana Agricultural University, Hisar (hereinafter called CCSU) and retired from service before 24.05.2010. Return for the previous year relevant to the assessment year under consideration declaring total income of Rs.97,940/- was filed, which was processed u/s 143(1) of the Act. The AO initiated reassessment proceedings on the premise that the assessee had wrongly claimed exemption u/s 10(10) in respect of the arrears of gratuity and arrears of leave encashment. He observed that gratuity and leave encashment were exempt up to the limit of Rs.3,50,000/- and Rs.3 lac, respectively, in the case of the assessee, which limit stood exhausted in the earlier year at the time of their receipt. He further noticed that exemption limit was enhanced to Rs.10 lac for the persons retiring from service on or after 24.5.2010. Since the assessee retired before this cutoff date, the AO opined that the extended benefit of exemption was not available to the assessee. He jettisoned the claim of the assessee for exemption u/s 10(10) of the Act and held that the correct sections applicable were 10(10)(iii) and section 10(10AA)(ii). Since the assessee was an employee of CCSU, the AO held that such employees could not be termed as Government employees and, hence, the benefit u/s 10(10)(i) was not available to the assessee. Resultantly, he made addition towards the amount of arrears of gratuity received at Rs.6,50,000/- and the amount of arrears of leave encashment received of Rs.1,89,180/-. The ld. CIT(A) echoed the view taken by the AO that the assessee was not a `holder of civil post under the State Government’ and hence not eligible for exemption u/s 10(10)(i). Further, the assessee was held to be not covered u/s 10(10)(ii) as he did not receive any gratuity under the Payment of Gratuity Act, 1972. That is how, he held that the employees of the CCSU were covered u/s 10(10)(iii) of the Act, for which there is a limit on the exempt gratuity amount, which stood exhausted by the assessee in earlier year. Since the assessee was employed before 24.5.2010, the Notification issued by the CBDT enhancing the limit of Rs.10 lac on gratuity u/s 10(10)(iii) was held to be not applicable. The assessee is aggrieved against the confirmation of denial of exemption made by the ld. CIT(A).