Case Law Details
Asha Ahuja Vs ITO (ITAT Delhi)
Held that an employee holding a civil post under a state is eligible for exemption towards the amount of gratuity received under section 10(10) of the Income Tax Act
Facts- Appellant assessee filed return of income declaring total income of Rs. 8,42,880. AO observed that assessee has claimed excess gratuity of Rs. 6,50,000 u/s. 10(10) of the Income Tax Act and AO was of the view that assessee is not entitled for this claim because as an employee of Hisar Agriculture University, he cannot be considered to be State Government Employees or holder of the civil post under the State.
CIT(A) uphold the order of AO. Being aggrieved, the assessee has preferred the present appeal.
Conclusion- Co-ordinate Bench in ITA No. 3713/Del/2016 has held that as the assessee is found to be an employee holding a civil post under a State, in my considered opinion, the provisions of section 10(10)(i) are fully attracted in this case entitling him to exemption for the amount under consideration.
Held that following the settled proposition of law in regard to class of employees to which assessee also belongs, the Grounds are sustained and the appeal is allowed. The impugned order is set aside. The Ld. AO shall allow exemption u/s 10(10) of the Act, to the disputed amount of gratuity received by the assessee, during the instant year.
FULL TEXT OF THE ORDER OF ITAT DELHI
The assessee has come in appeal against order dated 11.01.2016 in appeal no. 142/HSR/TFR/2013-14 for the assessment year 2011-12 passed by ld. CIT(A), Hisar (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in appeal pending before it arising out of assessment order dated 28.01.2014 passed u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the assessing officer, Income Tax Officer, Ward-1, Hisar (hereinafter referred to as ‘Ld. Assessing officer or in short Ld.AO’).
2. The facts in brief are appellant assessee filed return of income declaring total income of Rs. 8,42,880/-. The Ld. AO observed that assessee has claimed excess gratuity of Rs. 6,50,000/- u/s 10(10) of the Income Tax Act and the ld. AO was of the view that assessee is not entitled for this claim because as an employee of Hisar Agriculture University he cannot be considered to be State Government Employees or holder of the Civil post under the State. In appeal before Ld. CIT(A), the Ld. CIT(A) observed in para 5.10 as below :-
“ 5.10 Considering the above discussion I hold that employees of University are not holders of civil post under a state and are not eligible for exemption u/s. 10(10)(i) of Income Tax Act. They are not covered by Section 10(10)(ii) as they are not receiving gratuity under the payment of gratuity Act, 1972. Hence, employees of the University are covered U/s. 10(10)(iii) of I.T. Act for which there is limit on the gratuity amount allowable. CBDT has approved the notification of Rs. 10 lakhs on the maximum amount of gratuity u/s. 10(10)(iii) of Income Tax Act vide its notification no 43/2010 dated 11.06.2010. This notification is applicable to employees who retire on or after 24.05.2010. Before 24.05.2010 the exemption u/s. 10(10)(ii) was restricted to Rs. 3,50,000/-. Therefore, I hold that the appellant who retired before 24.05.2010 is eligible for exemption on gratuity to the extent of Rs. 3,50,000/- only. The additions made by AO of Rs. 6,50,000/- on account of excess claim of gratuity are upheld. The appeal on this ground is dismissed.
3. The Assessee has come before this Tribunal raising following grounds:-
“1. That the order of the Learned Assessing Officer (hereinafter referred to as Ld. A.O. for brevity) is bad in law, against facts and equity.
2. The Ld. A.O. has allegedly made an addition of Rs.650000.00 on account of arrear of Gratuity, which is neither called for nor justified in the eyes of law.
The employees of the CCS HAU, Hisar are governed under State Rules as contained in Punjab CSR Volume II of the Punjab & Haryana Govt. Further the day-to-day notification/directives/orders of the Haryana Govt, are binding and as such completely followed and implemented. Presently, Haryana Govt, has notified Haryana Civil Services (Revised Pension) Part-ll Rules, 2009 vide Notification No.2/51/2008-1, dated 17-04-2009, effective from 0101-2006. In the said Rule, the maximum limit of Death-cum-retirement Gratuity shall be Rs.10.00 Lakh vide Office Memorandum Govt, of Haryana Finance Department. University Grants Commission has notified the CCS HAU as State University. Thus, CCS HAU is a State University and its employees are treated at par with the State Govt, employees for all purposes.
2.1 At the same time, Part III – Fundamental Rights – Constitution of India under Rule 12, university is included in “other authorities” of “the State”
2.2 “Service gratuity, Death-cum-Retirement Gratuity, Pension and Leave encashment are being paid/admissible as per the corresponding provisions of Punjab CSR Vol. II applicable to Haryana Govt, employees as amended from time to time.” These rules are provided under the Act and Statutes of the Haryana and Punjab Agricultural Universities Act, 1970.
Similar views that employees of the University are treated at par with the employees of the State Govt, were held by the Hon’ble Punjab & Haryana High Court in the case of Yash Pal Dhir Vs. R N Gasain (P & H) 1992. It was held that the question, therefore, is whether holding of an appointment under the university is in connection with the affairs of the State. The official members are senior officers of the State Govt. and, therefore, I have no hesitation in holding that the petitioner who retired as a Comptroller of the University, was holding the appointment in connection with the affairs of the State. Hence, employees of the University are treated at par with the employees of the State Govt.
2.4 Provisions of Gratuity under the Income-tax Act, 1961 [section 10(10)]:
IN CASE OF GOVERNMENT EMPLOYEES: Any death-cum-retirement gratuity received is wholly exempt under section 10(10)(i) of the Act.
a) the Revised Pension Rules of the Central Government; or
b) the Central Civil Services (Pension) Rules, 1972; or
(ii) any similar scheme applicable to (i) the members of civil services of the Union, or
(iii) holders of posts connected with defence or of civil posts under the Union, or the members of all India services, or (iv) the members of civil services of a State, or (v) holders of civil posts under a State, or (vi) the employees of a local authority.
2.5 That appellant was holding the appointment in connection with the affairs of the State and Haryana Civil Services (Revised Pension) Part-ll Rules, 2009 are applicable to the appellant, under which gratuity was received. These rules are effective from 01-012006. In case of Govt, employees, who are holders of civil posts under a State, gratuity is exempt u/s 10(10)(i) of the Income Tax Act, 1961.
3. Any other grounds at the time of hearing of appeal.”
4. Heard and perused the record.
5. It was submitted on behalf of the assessee that the Ld. Tax Authorities below have fallen in error in not appreciating that Chaudhary Charan Singh, Haryana Agriculture University, Hisar ( hereinafter to be referred as CCS HAU) came into existence in 1970 with the assent of the President of India , bifurcating it from the Punjab Agricultural University, Ludhiana . It was submitted that the assessee has cited various instances of such institutes being considered as State University and its employees treated at par with State Government Employees for all purposes upon and the service rules as applicable to the State Government Employees are applicable. Ld. Counsel for the assessee particularly referred to the ITAT order in Delhi SMC-1 Bench order dated 23.02.2017 ITA No. 5379/Del/2016 where another employees who has retired from the same University was subjected to same assessment and based upon another order of ITAT Delhi Benches in ITA No. 3713/Del/2016 , Dharam Jeet Dahiya vs. ITO , Ward-1, Hisar it was held that assessee is an employee holding a civil post under State.
6. Ld. DR however, supported the findings of Ld. CIT(A) submitting that the university is an autonomous body. It was also submitted that only because the employees of said university are treated as government employees they cannot be said to be holding civil post under the state.
7. Giving thoughtful consideration the matter on record. The bench is of considered opinion that Ld. DR was unable to cite any factual distinction or provision of law then one which were considered in the Coordinate Bench’s decisions cited above. In ITA No. 3713/Del/2016, based upon another order in ITA No. 1307/Del/2016 where in it was observed in para no. 4 of ITA No. 3713/Del/2016 as below :
“4. I have heard the rival submissions and perused the relevant material on record. The controversy in this appeal can be viewed separately in respect of receipt of gratuity amount and leave encashment. In so far as the addition on account of gratuity received by the assessee amounting to Rs.6,50,000/- is concerned, it is found that the case of the assessee is that this amount falls u/s 10(10)(i) of the Act. On the contrary, the Revenue has treated it as a case falling u/s
10(10)(iii). In order to appreciate the rival contentions in right perspective, it will be apposite to set out the relevant parts of section 10, as under :-
“(10) (i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) …….
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
…..
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.’
5. A careful perusal of the above provision indicates that if a case falls under clause (i) of section 10(10), the entire amount of death-cum-retirement gratuity becomes exempt. Au contraire, if a case falls under sub-clause (iii) of section 10(10), then, the exemption is limited to the amount as the Central Government may notify in official gazette. It is an accepted position that the Notification u/s 10(10)(iii) issued on 24.5.2010 raised the ceiling of exemption from Rs.3,50,000/- to Rs.10 lac. Since the original amount was received by the assessee during the currency of an earlier year on his retirement, the exemption limit prevalent at that time at Rs.3,50,000/- was used by the assessee. It is nobody’s case that the extended limit of exemption can be applied to the assessee, because of his retirement which took place much before the cut-off date. To be more specific, the question is as to whether the extant case falls under clause (i) or clause (iii) of section 10(10). If a case does not fall under clause (i), it will automatically go to clause (iii). On a specific query from the Bench, the ld. AR submitted that the case of the assessee should be considered under sub-clause (i) of section 10(10) as a ‘holder of civil post under a State.’ In order to construe any person as a holder of civil post under a State, two requirements must be fulfilled viz., first that the employee should be holding a civil post and, second, such civil post must be under a State.
6. The first condition is that the employee should be holding a civil post. The assessee was appointed as a Research Assistant in December, 1971, who eventually rose to the post of Head of Department, Plant Breeding Department at the time of his retirement. Page 32 of the paper book is copy of the assessee’s Pension Payment Order, which depicts the assessee’s designation as Sr. Scientist, Department of Plant Breeding. On the ‘Pensioner’s Portion’ of this document, there is a reference to Rule 10, 11 and note thereunder of Civil Services Rules (CSR) V.II. As the assessee’s pension has been computed under Civil Services Rule, it goes to show that the assessee was holding a ‘civil post’ at the time of his retirement. No other contrary material has been placed on record by the ld. DR to show that the assessee was holding a post other than civil post.
7. The second requirement is that such civil post must be under a State. Page 20 of the paper book is a copy of Haryana and Punjab Agricultural University Act, 1970, which was passed by the Parliament and received the assent of the President on 2n d April, 1970. Under this Act of Parliament, two independent agricultural universities in place of the hitherto Punjab Agricultural University, were established. Section 5 of this Act sets out the name of CCSU as the agricultural university to function within the territories of State of Haryana. This proves that the CCSU was established by an Act of Parliament. Page 29 of the paper book is a document which shows that the assessee is a State University covered under University Grants Commission (UGC). It is undisputed that the entire funding of the CCSU is done by the State Government. Page 25 is a copy of Notification issued by the Haryana Government increasing the maximum limit of death-cum-retirement gratuity at Rs.10 lac, under which the assessee has received the arrears of retirement gratuity under this scheme only. The above facts amply demonstrate that CCSU is covered under the expression ‘State.’ This is further corroborated from Article 12 of the Constitution of India which states that: ‘In this part, unless the context otherwise requires, ‘the State’ includes the Government and Parliament of India and the Government and the legislature of each of the States either local or other authorities within the territory of India or under the control of the Government of India.’ The expression ‘other authorities’ has been interpreted in Umesh v. Singh A 1967 Pat. 3(9) F.B. as including: ‘a Board, a University, the Chief Justice of a High Court, having the power to issue rules, bylaws or regulations having the force of law.’ The above discussion manifests that CCSU is covered within the meaning of ‘State’.
8. As the assessee is found to be an employee holding a civil post under a State, in my considered opinion, the provisions of section 10(10)(i) are fully attracted in this case entitling him to exemption for the amount under consideration. Once a case falls under clause (i) of section 10(10), the same cannot be brought within the purview of clause (iii) of section 10(10). I, therefore, hold that the assessee is entitled to exemption u/s 10(10)(i) in respect of gratuity amount received in total upto Rs.10 lac, which covers a sum of Rs.6,50,000/- received during the year. Overturning the impugned order on this score, I allow exemption u/s 10(10)(i) to the arrears of gratuity received by the assessee at Rs.6,50,000/- during the instant year..”
8. Thus, respectfully following the settled proposition of law in regard to class of employees to which assessee also belongs, the Grounds are sustained and the appeal is allowed. The impugned order is set aside. The Ld. AO shall allow exemption u/s 10(10) of the Act, to the disputed amount of gratuity received by the assessee, during the instant year..
Order pronounced in the open court on 15th June, 2022.
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