1975 (1) TMI 27 - HC - Income Tax

Summary

Issues:
1. Inclusion of death-cum-retirement gratuity in taxable income for the assessment year 1957-58.
2. Taxability of arrears of pension for the assessment year 1960-61.
3. Interpretation of Government orders on pension revisions.
4. Application of Income-tax Act provisions on arrears of pension.
5. Benefit under section 89(1) for legal representative of the assessee.

Analysis:
1. The case involved the inclusion of a death-cum-retirement gratuity amount in the taxable income for the assessment year 1957-58. The Income-tax Officer initiated proceedings under section 147 of the Income-tax Act, 1961, to revise the assessment. The Appellate Assistant Commissioner held that the sum had been fully disclosed in the original assessment, thus excluding it from the taxable income.

2. For the assessment year 1960-61, the issue was the taxability of arrears of pension due to a pension revision by the Government. The Income-tax Officer considered the arrears as taxable income, calculating the difference between the original and revised pension amounts. The Tribunal upheld the assessment, leading to a dispute on whether the arrears were assessable in that year.

3. The interpretation of Government orders on pension revisions was crucial in determining the taxability of arrears. The court emphasized that the later Government order dated April 2, 1959, which revised the pension, should be considered independently of the earlier order. The arrears became due and payable to the assessee only after the revision on April 2, 1959.

4. The application of Income-tax Act provisions on arrears of pension was central to the judgment. The court clarified that under section 7 of the Indian Income-tax Act, 1922, and section 15(a) of the Income-tax Act, 1961, arrears are chargeable in the year they become due, regardless of when they are paid. The court rejected the argument that the entire difference in pension amounts should be considered as arrears, directing a recalculation for accurate assessment.

5. Lastly, the judgment addressed the benefit under section 89(1) of the Income-tax Act, 1961, for the legal representative of the assessee. The court confirmed that the representative was entitled to the benefit, and the Income-tax Officers were instructed to provide the applicable relief. The court ruled in favor of the assessee, entitling them to costs and counsel fees.