1. This appeal by the revenue is directed against the order of the AAC dated 11-9-1980 relating to the assessment year 1976-77. The issue before us brought by the revenue is whether, on the facts and in the circumstances of the case, the AAC erred in holding that the sum of Rs. 87,870, constituted of provident fund and gratuity, received by the assessee is exempt under Section 5 of the Wealth-tax Act, 1957 ("the Act"). For determination of this issue, the relevant facts are as under : 2, The assessee, Dr. T.R. Aggarwal, was a professor of medicine, Patiala Medical College, Patiala, which comes under the Director, Research & Medical Education, Punjab. The assessee retired from the service on 29-2-1976. The valuation date for the wealth-tax assessment for the assessment year 1976-77, which is under appeal before us, is 31-3-1976.
3. At the time of his retirement, on 29-2-1976, the assessee was not paid the amounts due to him on account of general provident fund and gratuity. However, provident fund was sanctioned for payment to the assessee by the Deputy Accountant General vide his Letter No. Fds.
III/Mad./75-701/ PTA/505, dated 21-6-1976. The payment of gratuity was sanctioned by the Accountant General, Punjab, on 10-5-1976 vide Letter No. Pen. (1)/T-7/75-76/Amty/B.O. No. 980/Pb/305-08 dated 10-6-1976.
Both these dates are after the valuation, i.e., 31-3-1976, which is the relevant date for determining the net wealth of the assessee for the purpose of the Act.
4. The assessee filed a return of net wealth on 20-3-1980 declaring net wealth of Rs. 95,000 with a note that a sum of Rs. 87,870 received by him by way of general provident fund and gratuity, as noted above, is exempt from wealth-tax as it was not received by him on or before 31-3-1976. However, the WTO held the view that the amount of Rs. 87,870 was a debt due to the assessee. Accordingly, he brought the sum of Rs. 87,870 into the net wealth of the assessee for purposes of tax. This was challenged in appeal and the AAC has deleted the amount because, accordingly to him, the amount of general provident fund and gratuity remained with the Government till the date of its sanction and as such was exempt from wealth-tax. It is this order of his which is under challenge before us.
5. The argument of the 'revenue before us was that the claim of the assessee for exemption of the disputed amount could be considered by the WTO under Section 5(1)(xvii). Under Clause (xvii) of Sub-section (1) of Section 5, the amount standing to the credit of an assessee, being a salaried employee, in any provident fund maintained by his employer to which the Provident Fund Act, 1925 applies or which is recognised provident fund within the meaning of Clause (38) of Section 2 of the Income-tax Act, 1961, is exempt. There is no dispute that this clause is applicable to the case of the assessee in case he is in regular service. The argument projected by the revenue, however, was that since the assessee had retired on 29-2-1976 and as such was not a salaried employee as on 31-3-1976, which is the valuation date, the amount due to him from the Government on his retirement by way of provident fund and gratuity was a debt owed and as such taxable.
However, the learned counsel for the assessee, on the other hand, submitted, that unless the amount of provident fund and gratuity were sanctioned by the Government, the assessee could not have had any right of disposal of such amounts and, therefore, the assessee would not be treated as having those amounts on the valuation date for the purpose of the Wealth-tax Act. It was also submitted that the assessee had factually not received these amounts nor was there any order sanctioning these amounts as on 31-3-1976. Therefore, these amounts were not taxable at all. These were rightly given exemption by the AAC.His order may be upheld.6. We have given careful considerations to the rival submissions and we are of the opinion that the decision taken by the AAC is fully justified on the facts of the case. Though the assessee retired on 29-2-1976, neither the provident fund nor the gratuity had been sanctioned to him till the order for the provident fund sanction was made on 21-6-1976, and for gratuity on 10-5-1976. As per the Government rules, the assessee is entitled to receive them only after an order sanctioning the amount have been made. The orders were made after the valuation date, i.e., 31-3-1976. As on that date nothing had been sanctioned to the assessee and as such, the position with regard to these amounts prior to his retirement, insofar as question of taxation is concerned, continued. The amounts were, therefore, not includible in the net wealth of the assessee.
7. The amount included in the net wealth of the assessee is also factually incorrect because the amount of the provident fund sanctioned by the Deputy Accountant General vide his order dated 21-6-1976, "represents the available balance of the deposits up to 1974-75 in the GPFA/C No. Med/ Pb./1606 with interest calculated thereon up to the 5/76". In other words, it includes the interest amount calculated after 31-3-1976. It is to be noted insofar as gratuity is concerned, it has to be calculated on particular formula provided and unless it is actually calculated and sanctioned it cannot be said to be an asset with the assessee for inclusion in the net wealth of the assessee as on 31-3-1976. Therefore, none of these amounts could be included. The order of the AAC is, therefore, justified.