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First Income-tax Officer Vs. Bharat H. Patel - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1985)12ITD663(Mum.)
AppellantFirst Income-tax Officer
RespondentBharat H. Patel
Excerpt:
.....two concerns was rs. 39,000 and rs. 25,379, respectively. it was claimed before the ito that the maximum deduction, as laid down in section 16(i) of the income-tax act, 1961 ('the act'), should be worked out separately for each of the two employments, and the assessee was, therefore, entitled to the standard deduction of rs. 7,000 and rs. 3,500. the ito, however, limited the standard deduction, as laid down under section 16(i), to the overall limit of rs. 3,500 prescribed for that year. when the matter went up in appeal, the aac, following the order of the tribunal in the case of rohit j. patel [it appeal no. 3212 (bom.) of 1980], held that the assessee should be allowed the standard deduction under section 16(i) with reference to each employment separately, and, the atsessee is,.....
Judgment:
2. The assessee is an individual and the appeal relates to the assessment year 1975-76. The assessee was in the employment of two concerns, Vijay Flexible Containers (P.) Ltd. and Rathika (P.) Ltd. and the salary from these two concerns was Rs. 39,000 and Rs. 25,379, respectively. It was claimed before the ITO that the maximum deduction, as laid down in Section 16(i) of the Income-tax Act, 1961 ('the Act'), should be worked out separately for each of the two employments, and the assessee was, therefore, entitled to the standard deduction of Rs. 7,000 and Rs. 3,500. The ITO, however, limited the standard deduction, as laid down under Section 16(i), to the overall limit of Rs. 3,500 prescribed for that year. When the matter went up in appeal, the AAC, following the order of the Tribunal in the case of Rohit J. Patel [IT Appeal No. 3212 (Bom.) of 1980], held that the assessee should be allowed the standard deduction under Section 16(i) with reference to each employment separately, and, the atsessee is, therefore, entitled to a further deduction of Rs. 3,500. The revenue was aggrieved and, therefore, came up in appeal before the Tribunal.

3. When the matter came up for hearing before the Tribunal, Bombay Bench 'A', the Bench was of the view that the order of the Tribunal in the case of ITO v. Shrenikbhai Kasturbhai [1983] 5 ITD 242 (Ahd.)(TM) requires reconsideration. A Special Bench was, therefore, constituted for a hearing on this issue and that is how the appeal has come up for consideration before us.

4. The assessee's learned Counsel, Shri Patel, submitted to us that after the Explanation to Section 16(i) inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1975, which covers the assessment year 1975-76 under consideration here, the controversy on this issue has come to an end and no more survives. He, therefore, simply relied on the order of the AAC.5. On the other hand, the learned departmental representative, Shri Raju, referred to the Explanation to Section 16(i), inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1975. He, therefore, submitted that the maximum limit up to which the standard deduction under Section 16(i) can be allowed, has to be worked out with reference to the total amount of the salary, whether it is from one employer or several employers, and in these circumstances, the ITO was justified in allowing the standard deduction of Rs. 3,500 only and the AAC wrongly allowed a further standard deduction of Rs. 3,500.

6. We have carefully considered the rival submissions. It is by now settled law that where a provision of an Act is retrospectively amended by the appropriate legislative authority, all pending assessment or appeal proceedings have to be decided in accordance with the retrospectively amended law in operation at the time of the decision.

Viewed in this context, it cannot be disputed that in view of the Explanation to Section 16(i), inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1975, the maximum limit up to which standard deduction under Section 16(i) can be allowed will in no case exceed the amount specified by Clause (i) of Section 16, whether the assessee was in one employment or more than one employment.

The assessee was, therefore, entitled to the standard deduction of Rs. 3,500 only. The AAC was, therefore, not justified in holding that the assessee was entitled to the maximum deduction, as laid down in Section 16(i) with reference to each of the two employments, and, therefore, the assessee was entitled to a further standard deduction of Rs. 3,500.

On this issue, therefore, the order of the AAC is reversed, while the order of the ITO is restored.


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