1998 (6) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of the sum received from an approved superannuation fund under premature retirement.
2. Interpretation of Section 10(13) of the Income-tax Act, 1961.
3. Definition and scope of "income" under Section 2(24) of the Income-tax Act.
4. Applicability of Section 17(3) of the Income-tax Act concerning "profits in lieu of salary."
5. Legislative amendments and their retrospective application.

Issue-wise Detailed Analysis:

1. Taxability of the Sum Received from an Approved Superannuation Fund under Premature Retirement:
The primary issue was whether the sum of Rs. 40,264 received by the assessee from Mahindra and Mahindra Ltd. under the superannuation scheme on his premature retirement is liable to be assessed or charged to tax. The Income-tax Officer taxed the amount, excluding contributions made prior to 1961. However, the Appellate Assistant Commissioner and the Tribunal held that the amount received was not taxable as income.

2. Interpretation of Section 10(13) of the Income-tax Act, 1961:
Section 10(13) of the Act provides exemptions for payments from an approved superannuation fund under specific conditions. Sub-clause (iv) of clause (13) exempts payments to the extent of contributions made before the commencement of the Act and any interest thereon. The Revenue argued that only this part is exempt, and the rest is taxable. However, the court observed that the legislative intent and the strict letter of the law must be considered, and only the explicitly exempted part should be taxed.

3. Definition and Scope of "Income" under Section 2(24) of the Income-tax Act:
Section 2(24) defines "income" inclusively, covering various receipts. However, the court emphasized that payments from an approved superannuation fund are not included in this definition. The onus is on the Revenue to prove that a particular receipt constitutes income. The court held that the receipts in question do not fall under the definition of "income" as per the Act.

4. Applicability of Section 17(3) of the Income-tax Act Concerning "Profits in Lieu of Salary":
Section 17(3) defines "profits in lieu of salary," including certain payments from provident or other funds but explicitly excluding payments from an approved superannuation fund. The court noted that the clear language of Section 17(3)(ii) at the material time excluded such payments from being treated as income. Therefore, the receipts from the superannuation fund could not be taxed under this provision.

5. Legislative Amendments and Their Retrospective Application:
The Finance Act, 1995, amended Section 17(3)(ii) to include only payments covered under Section 10(13) within the definition of "profits in lieu of salary." This amendment was effective from April 1, 1996, and applicable to the assessment year 1996-97 and subsequent years. The court observed that for the assessment year in question (1976-77), the payments from the superannuation fund could not be treated as income due to the exclusion in the unamended Section 17(3)(ii).

Conclusion:
The court concluded that the sum received by the assessee from the approved superannuation fund on premature retirement is not liable to be assessed or charged to tax. The judgment was in favor of the assessee and against the Revenue, emphasizing the strict interpretation of fiscal statutes and the exclusion of such receipts from the definition of "income" under the Act. The reference was disposed of with no order as to costs.