S.S.N.RAVI,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

ITA No.933/Mds/2015 :- 2 -: passed u/s 143(3) r.w.s.147 and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).

The assessee has raised only one substantive ground as 2. under:-

‘’To direct the Assessing Officer to delete the addition made of ₹25,00,000/- in the reassessment, on repayment of sign on bonus back to M/s. Barclays Bank, as this receipt does not constitute income.

The Brief facts of the case that assessee is an individual 3. and has disclosed income from salary and filed return of income on 28.07.2008 with total income of �43,54,815/- and as per return of income the assessee is entitled for a refund of �7,72,266/-.

Subsequently the return of income was processed u/s.143(1) of the Act and the ld. Assessing Officer based on the form No. 16 issued by the employer found that the assessee’s salary income is �68,54,815/- were as the assessee has not offered salary income of �25,00,000/- in the return of income. Further notice u/s.148 of the Act was issued and in compliance to notice, the ld. Authorised Representative of the assessee filed return of income on 19.07.2011 and appeared in hearing proceedings from time to time and submitted information for verification. The assessee is a employee of Barclays Bank during the financial year 2007-08 from 01.04.2007 to 31.10.2007 and received

ITA No.933/Mds/2015 :- 3 -: salary income of �13,46,943/- after resignation of service joined Deutsche Bank and received salary of �56,12,481/- were as the assessee has declared salary income in the return of income �43,54,815/-/ The ld. Authorised Representative submitted that the assessee has joined Barclays Bank on 20.11.2006 and as per the terms and conditions with employer dated 10.09.2006, the company has paid a taxable sign-on-bonus of �25,00,000/- with conditional rider that if the employee leaves the company within a period of one year from the date of joining, he shall refund the sign-on-bonus. Considering the facts, the assessee has left Barclays Bank and joined Deutsche Bank and refunded the amount of �25,00,000/- as acknowledged by Barclays Bank on 06.11.2007. The assessee filed return of income for assessment year 2007-08 and offered sign-on-bonus for taxation since the assessee has refunded an amount of �25,00,000/- on 06.11.2007 which falls in the financial year 2007-2008 relevant to assessment year 2008-09 he has reduced �25,00,000/- from his gross salary and filed return of income. The ld. Assessing Officer considered the facts of the assessee on change in employment and is of opinion that there is no provision of the Act were such reduction of salary income is permissible. The ld. Assessing Officer has added �25,00,000/- to the income of the current assessment year and assessed total income of �68,54,820/-. Aggrieved by the order of Assessing Officer, the ITA No.933/Mds/2015 :- 4 -: assessee filed an appeal before Commissioner of Income Tax (Appeals).

In the hearing proceedings, the ld. Authorised 4.

Representative of the assessee argued on the grounds and submitted proofs pertaining to sign-on-bonus. The ld. Commissioner of Income Tax (Appeals) considered written submissions on facts and interpretation of laws and concurred with findings of the Assessing Officer and dismissed the appeal observed at 18 of the order as under:-

“18. In view of the above discussion, I find no infirmity in the action of the Assessing Officer in reassessing the total income of the assessee to bring to tax the amount of ‘sign-on-bonus’ of �25,00,000/- relating to the assessment year 2007-2008 which was tax deducted then and reduced from the assessee’s total income by the assessee himself in the return of income for the subsequent assessment year 2008-09. Since the said amount was forfeited by him due to breach of contract on his part, with his employer’’.

Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee filed an appeal before Tribunal.

Before us, the ld. Authorised Representative vehemently 5. argued and substantiated with documentary evidence. The only

ITA No.933/Mds/2015 :- 5 -: disputed issue being deletion of addition of �25,00,000/- by the ld. Assessing Officer, were the said amount was repaid back to Barclays Bank which fall in current financial year. The ld. Authorised Representative filed paper book, written submissions explaining the circumstances of employment, taxability of income and highlightened on the findings of the Assessing Officer and further produced copies of offer of employment with Deutsche Bank and service certificate by Barclays Bank and supported his arguments with the decision of Delhi High Court and prayed for deleting the addition and allow the appeal.

Contra, the ld. Departmental Representative relied on the 6. orders of the lower authorities and interpretation by the Commissioner of Income Tax (Appeals) on various provisions of law and also filed written submissions and opposed the grounds of the appeal.

We heard the rival submissions, perused the material on 7. record and judicial decisions cited. The ld. Authorised Representative only disputed issue being sign-on-bonus should be allowed as deduction from the gross salary since it was repaid and offered to tax in assessment year 2007-08. The issue revolved around whether the provision of Act permit deduction were the assessee voluntarily resigned from Barclays Bank and joined Deutsche Bank violating the pre-conditions of employment to stay with Barclays Bank for a period

ITA No.933/Mds/2015 :- 6 -: of one year. The ld. Departmental Representative vehemently argued and explained the action of the Assessing Officer and Commissioner of Income Tax (Appeals) are as per the provisions of law. The characteristic of sign in bonus is Revenue receipt and it cannot be considered as compensation of forfeited amount or additional premium prize. The assessee has received the amount during his employment and there exists employer and employee relationship and sign-in- bonus cannot treated as capital receipt. We found on the basis of submissions that the assessee has voluntarily resigned from Barclays Bank and was not a forced termination of employment. As per service certificate of bank referred at page 16 of paper book, the assessee has left the bank on his own accord. The submissions of the Revenue being the amount repaid by the assessee to the Barclays Bank was reimbursed by new employer Deutsche Bank. The assessee joined Deutsche Bank due to attractive pay package and separate amount was provided for refund of sign-on-bonus. On the perusal of provisions of Sec. 17(1) of the Act, there are no explanation were assessee should reduce refund of sign-on-bonus. Considering the apparent facts, terms of employment, characteristic of sign on bonus and the service certificate of Barclays Bank were assessee has voluntarily left the service. We are of the opinion that ld. Commissioner of Income Tax (Appeals) has examined the issue in ITA No.933/Mds/2015 :- 7 -: detail based on the observations of the Assessing Officer and the provisions of law. Therefore, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and uphold the same.

Order pronounced on Friday, the 6th day of May, 2016, at Chennai.