Sankar Prasad Mitra, C.J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the respondent is not appearing. We requested Mr. R. N. Bajoria to appear as amicus curiae. We are grateful to him and to his learned junior, Mr. Samir Chakraborty, for the assistance they have given to us.
2. The assessment year is 1967-68,, corresponding to the accounting year ending on March 31, 1967. According to the statement of the case, the assessee was in the service of M/s. A. W. Heilgers & Co. (P.) Ltd. The ITO found that the assessee joined the above company in Calcultta on February 5, 1957. His services were thereafter lent to M/s. Heilgers (Burma) Ltd., in Burma on and from the 1st September, 1957. He rejoined the Calcutta company on the 22nd February, 1965. He served the Calcutta company for some time and then he resigned and left Calcutta.
3. From the salary certificate, the ITO found that the assessee's salary was paid up to April, 1968. The service agreement entered into on the 20th December, 1956, stipulates that the assessee was to serve the employers for three years and nine months from the date of his arrival. The issue before the ITO related to the rebate on the provident fund contribution and exclusion of the accumulated balance lying in the assessee's provident fund account with the employers from his total income. In this connection, it is relevant to refer to Rule 8 of Part A of Schedule IV to the I.T. Act, 1961. This rule provides as follows :
'8. Exclusion from total income of accumulated balance.--The accumulated balance due and becoming payable to an employee participating in a recognised provident fund shall be excluded from the computation of his total income-
(i) if he has rendered continuous service with his employer for a period of five years or more, or
(ii) if, though he has not rendered such continuous service, the service has been terminated by reason of the employee's ill health, or by the contraction or discontinuance of the employer's business or other cause beyond the control of the employee, or...... '
4. From the materials in the instant case available to the ITO, he concluded that the assessee did not render continuous service for a period of five years or more and in view of the above provisions of rule 8 his services in Burma could not be said to be services rendered to the Calcutta company. The ITO pointed out that it was nowhere mentioned in the service agreement which was executed on the 20th December, 1956, that the assessee's services would be lent to outsiders by the employers. The ITO also observed that the Burma company was not in any way under the management of the Calcutta company. The ITO's finding was that as soon as the assessee left the employers on September 1, 1957, there was termination of the assessee's service with the Calcutta company. In that view of the matter, according to the ITO, the Calcutta company's contribution to the assessee's provident fund account during the period of his absence from India, i.e., from September 1, 1957, to February 21, 1965, was nothing but ah ex gratia payment by the employers. The ITO completed the assessment under Section 143(3) read with Section 174 of the Act, 1961, on a total income of Rs. 1,51,945. He simultaneously completed the assessments for the assessment years 1966-67 and 1967-68.
5. Before the AAC the assessee's representative placed a copy of the employer's letter dated 23rd August, 1967. In this letter, it was suggested to the assessee that due to general recession in the economy of the country and in keeping with the policy of Indianisation he was given the option of resigning from service failing which the employers would have to reluctantly terminate his contract of service. The AAC upon assessing the (acts and circumstances of the case and relying upon the employer's letter of the 23rd August, 1967, construed the circumstances leading to the resignation by the assessee as termination of service because it was beyond the control of the assessee to continue in service after the contents of the employer's letter of the 23rd August, 1967, were made known to him. He accordingly held that the assessee's case should fall within the provisions of Rule 8(ii) of Schedule IV to the I.T. Act, 1961.
6. The matter then went to the Tribunal. The revenue submitted to the Tribunal that the assessee did not render services in India for a period of five years or more and his resignation on the 15th July, 1967, was by no standard to be taken as termination of service beyond the assessee's control. It was urged on behalf of the revenue that the assessee resigned on July 15, 1967, but the employer's letter clarifying the circumstances leading to the resignation was dated the 23rd August, 1967. There was a motive of the employer to assist the assessee in the I.T. assessment. It was also argued before the Tribunal that the AAC did not deal with the TO's finding that the employer's contribution to the assessee's provident fund account during the period from September 1, 1957, to February 21, 1965, was in the nature of an ex gratia payment.
7. Learned counsel for the assessee submitted to the Tribunal that in the Burma company the Calcutta Company was holding 1,700 out of 5,000 shares. The Calcutta company, therefore, was not an independent entity and it was wrong to suggest that the assessee's period of service with the Burma company should not be taken into account as services rendered under the Calcutta company.
8. The Tribunal found that the circumstances leading to the assessee's resignation from his services with M/s. F. W. Heilgers & Co. (P.) Ltd., in Calcutta, should be construed as beyond his control and the assessee was, therefore, entitled to the benefit of Rule 8(ii). The Tribunal rejected the department's contention that there was something mala fide in the employer's letter dated August 23, 1967, in view of the fact that had the employers thought of discharging the assessee, the employers could have done so under Clause 5 of the service agreement whereby the employers had a discretion to determine the service agreement by giving the assessee three months' previous notice in writing or three months' salary in lieu of the notice. On the other hand, the Tribunal found that the assessee was paid salary up to April, 1968, whereas he left the employment in July, 1967. The Tribunal thereafter held that the Burma company was a different entity and the Indian employers were not concerned with its management. The Tribunal directed the ITO to compute accumulated balance in the assessee's provident fund account with reference, to the assessee's period of service in India with M/s. F.W. Heilgers & Co. (P.) Ltd. and to allow necessary benefit under Rule 8 aforesaid.
9. The Tribunal has referred to this court the following question :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to exclusion from total income of his accumulated balance in the provident fund within the meaning of rule 8 of Part A of the Fourth Schedule to the Income-tax Act, 1961 ?'
10. We have already set out the relevant provisions of Rule 8 of Part A of Schedule IV to the I.T. Act, 1961. It appears that under this rule the accumulated balance due and becoming payable to an employee participating in a recognised provident fund is excluded from the computation of his total income, inter alia, if though he has not rendered continuous service for a period of five years or more, his service has been terminated by any cause beyond his control.
11. In the instant case, the Tribunal has found on the facts that the assessee tendered his resignation for reasons recorded in the employer's letter of the 23rd August, 1967. These were reasons beyond the control of the assessee. The Tribunal has also found that the employer wrote this letter bona fide and not for any ulterior purposes. On the basis of these factual findings by the Tribunal, we have to hold that the Tribunal has correctly applied to the instant case the provisions of Rule 8(ii) of Part A of Schedule IV to the I.T. Act, 1961.
12. Our answer to the question referred to us, therefore, is in the affirmative and against the department.
13. We make no order as to costs.
14. I agree.