2017 (4) TMI 965 - AT - Income Tax

Salary income - Amount received after deducting Notice pay - whether liable to be taxed under the head Salary u/s. 16? - Held that - We find that employers have made deduction from the salary which was paid to the assessee during the year under consideration because of leaving the services as per agreement made by the assessee and the respective employer. We find that this is a case of recovery of the salary which is already made to the assessee for which we have not to refer Section 16 of the Act as mentioned by the ld. CIT(A). It is pertinent to note that the assessee has actually received the salary from his previous employers after deducting the notice period as per the job agreement with them. Therefore, in our considered view, the actual salary received by the assessee is only taxable and therefore, we allow this ground of appeal of the assessee. Undisclosed interest income from bank and interest income - Held that - As at the time of assessment proceedings the assessee had accepted that the interest income from bank and interest income from Reliance Infocom Ltd employee provident fund was remained undisclosed in the return of income. The assessee has not provided supporting evidence that the particular income is exempt from the income tax, therefore we do not find any reason to interfere in the finding of the Ld.CIT(A). Thus, this ground of appeal of the assessee is dismissed.

Summary

Issues:
1. Disallowance of amount received as Notice pay under the head "Salary" u/s. 16 of the IT Act.
2. Addition of interest received on Employees Provident Fund.

Issue 1: Disallowance of Notice Pay:
The case involved the disallowance of &8377; 2,76,744/- received as Notice pay under the head "Salary" u/s. 16 of the IT Act. The Assessing Officer added the undisclosed salary income received from two previous employers to the total income of the assessee. The CIT(A) upheld the additions made by the Assessing Officer, stating that the deduction of notice pay is not provided in Section 16. The CIT(A) referred to the doctrine of real income and case laws to support the taxability of such income. However, the Tribunal found that the deduction made by the employer for the notice period was essentially a recovery of salary already paid to the assessee. The Tribunal held that the actual salary received by the assessee is taxable, allowing the ground of appeal of the assessee.

Issue 2: Addition of Interest on Employees Provident Fund:
Regarding the addition of &8377; 23,310/- as interest received on Employees Provident Fund, the assessee had accepted during assessment proceedings that this income was undisclosed in the return of income. The CIT(A) sustained the addition made by the Assessing Officer. The Tribunal noted that the assessee did not provide supporting evidence that this income was exempt from income tax. Therefore, the Tribunal dismissed this ground of appeal of the assessee.

In conclusion, the Tribunal partly allowed the appeal of the assessee, ruling in favor of the assessee on the disallowance of Notice pay issue but dismissing the appeal on the addition of interest received on Employees Provident Fund.