2009 (8) TMI 769 - AT - Income Tax

Reward - amount received by a person from Customs authorities as a reward - reward given to the income-tax personnel for the normal work done is exempted under section 10(17B) the reward received by the informer also stands on same footing and is liable to be exempted under section 10(17B) - appeals filed by the revenue dismissed

Summary

Issues:
- Exemption of reward amount received by the assessee as an informer from the Customs
- Approval by Central Government under provisions of section 10(1)(A)(ii)
- Tax exemption for informers as per Customs Manual
- Notification of reward information as exempt from tax under section 10(17A)
- Tax treatment of cash rewards received by the assessee
- Interpretation of rewards as payments for purchase of information
- Impact on life and security of the recipient due to taxing subject receipts
- Definition of 'income' as inclusive in nature
- Exemption under section 10(17B) for rewards granted in public interest
- Taxability of rewards received by informers compared to income-tax personnel

Analysis:
1. The Appellate Tribunal ITAT, Chennai heard four appeals filed by the revenue against the common appellate order of the Commissioner of Income-tax (Appeals)-V, Chennai, related to the exemption of reward amounts received by an informer from the Customs for the assessment years 1986-87, 1989-90, 1990-91, and 1991-92. The appeals were clubbed together for convenience due to identical grounds raised by the revenue.

2. The revenue contended that the CIT(A) erred in deleting the addition of reward amount received by the assessee as an informer, citing non-fulfillment of the prime condition for exemption under section 10(1)(A)(ii) and lack of notification under section 10(17A) of the Income-tax Act.

3. The assessee claimed that the cash rewards received were exempt under section 10(17A) and relied on relevant legal precedents. The Assessing Officer treated the receipts as income, leading to appeal before the CIT(A).

4. The CIT(A) found it improper to tax the subject receipts, emphasizing the importance of maintaining secrecy in informer cases and the nature of rewards as payments for information in the national interest. The appeals of the assessee were fully allowed by the CIT(A).

5. During the hearing, the revenue reiterated their arguments, citing Supreme Court decisions on the inclusive nature of the definition of 'income.' The assessee presented a notification exempting the reward from income tax and relied on relevant case laws supporting exemption for similar rewards.

6. The Tribunal examined the evidence, including the notification and legal precedents, concluding that the reward received by the informer should be exempted under section 10(17A) similar to rewards granted to income-tax personnel under section 10(17B). The appeals filed by the revenue were dismissed based on the findings and legal interpretations presented.

7. The judgment highlighted the importance of public interest in granting rewards and the parallel treatment of rewards for informers and income-tax personnel under relevant sections of the Income-tax Act, leading to the dismissal of the revenue's appeals.

8. Ultimately, the Tribunal dismissed all four appeals filed by the revenue, upholding the exemption of the reward amounts received by the informer from the Customs based on the legal interpretations and precedents discussed during the proceedings.