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K. Shantharama Shenoy Vs. First Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Bangalore
Decided On
Judge
Reported in(1984)10ITD847(Bang.)
AppellantK. Shantharama Shenoy
RespondentFirst Income-tax Officer
Excerpt:
.....brought to tax the said amount. the assessee appealed to the aac. it was urged before him that the assessee retired from service on 31-3-1980 and the gratuity became due and payable during the 12 months next following the retirement. thus, the gratuity became due and payable only on 1-4-1980 and, therefore, the gratuity amount should be brought to tax in the assessment year 1981-82 and not in the assessment year 1980-81. the aac did not accept this submission. he held that the assessee retired on 31-3-1980 and the gratuity became due to him and the amount became taxable during the accounting year relevant to the assessment year 1980-81. thus, he upheld the order of the ito. against the same, the assessee has preferred this appeal.2. the learned counsel for the assessee strongly urged.....
Judgment:
1. The assessee retired from Canara Bank on 31-3-1980. After 1-4-1980, he received a sum of Rs. 30,681 towards gratuity. The ITO brought to tax the said amount. The assessee appealed to the AAC. It was urged before him that the assessee retired from service on 31-3-1980 and the gratuity became due and payable during the 12 months next following the retirement. Thus, the gratuity became due and payable only on 1-4-1980 and, therefore, the gratuity amount should be brought to tax in the assessment year 1981-82 and not in the assessment year 1980-81. The AAC did not accept this submission. He held that the assessee retired on 31-3-1980 and the gratuity became due to him and the amount became taxable during the accounting year relevant to the assessment year 1980-81. Thus, he upheld the order of the ITO. Against the same, the assessee has preferred this appeal.

2. The learned counsel for the assessee strongly urged that since the assessee retired on 31-3-1980, the gratuity payable became due only on 1-4-1980. He referred to Rule 11 (ii) of the Canara Bank Employees Gratuity Fund, according to which the gratuity shall be payable during the 12 months next following the retirement. Thus, he urged that the gratuity under the rule became payable only after 1-4-1980 and is taxable only in the assessment year 1981-82 and not in the assessment year 1980-81. The learned departmental representative submitted that the assessee retired at 5 p.m. on 31-3-1980 and so the gratuity became payable on that date and was rightly taxed by the ITO.3. We have considered the rival submissions. Rule 11(ii) reads as under : The gratuity due to an employee shall be payable during the 12 months next following death, disability, retirement, resignation or termination of service as the case may be.

Under the above rule, the gratuity due to an employee shall be payable during the 12 months next following the retirement. Singe the assessee retired on 31-3-1980, the gratuity became due only from 1-4-1980 and it was payable within 12 months. The assessee is deemed to be in service till 31-3-1980 and it is only from 1-4-1980 that he is no longer in service on account of his retirement from service. The time at which he handed over charge on 31-3-1980 has no bearing on the issue as that is only for the purpose of discharging the official duties, which normally cease after working hours. The superannuation age will be reached only on the midnight of 31-3-1980, as otherwise the officer would have been considered as having served for a fraction of the day before retirement. He will be entitled to gratuity only after reaching the superannuation age on the midnight of 31-3-1980. In our view, under the above rule, gratuity became due and payable only from 1-4-1980 within 12 months following the retirement and is taxable in the assessment year 1981-82 and not in the assessment year 1980-81. Thus, we reverse the order of the AAC and direct the ITO to tax the sum of Rs. 30,681 in the assessment year 1981-82.


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