2022 (6) TMI 748 - AT - Income Tax

Exemption u/s 10(10) - receipt of gratuity amount and leave encashment - whether assessee is found to be an employee holding a civil post under a State ? - CIT(A) submitting that the university is an autonomous body - 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 - HELD THAT - DR was unable to cite any factual distinction or provision of law then one which were considered in DHARAM JEET DAHIYA VERSUS INCOME TAX OFFICER, WARD-1, HISAR based upon another order 2017 (6) TMI 165 - ITAT DELHI 2016 (6) TMI 687 - ITAT DELHI 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..

Summary

Issues Involved:
1. Whether the employees of Chaudhary Charan Singh Haryana Agriculture University (CCS HAU) can be considered as holding civil posts under the State.
2. Eligibility for exemption of gratuity under Section 10(10)(i) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Whether the employees of Chaudhary Charan Singh Haryana Agriculture University (CCS HAU) can be considered as holding civil posts under the State:

The appellant-assessee filed a return of income declaring a total income of Rs. 8,42,880/-. The Assessing Officer (AO) observed that the assessee had claimed excess gratuity of Rs. 6,50,000/- under Section 10(10) of the Income Tax Act. The AO contended that the assessee, as an employee of CCS HAU, could not be considered a State Government employee or a holder of a civil post under the State. The First Appellate Authority (FAA) upheld this view, stating that employees of the University are not holders of civil posts under the State and are not eligible for exemption under Section 10(10)(i) of the Income Tax Act. Consequently, the FAA concluded that the appellant, who retired before 24.05.2010, was only eligible for exemption on gratuity up to Rs. 3,50,000/-.

The Tribunal, however, noted that CCS HAU was established by an Act of Parliament and receives full funding from the State Government. The Tribunal referred to previous ITAT decisions where employees of CCS HAU were considered to be holding civil posts under the State. It was highlighted that the assessee's pension was computed under Civil Services Rules, indicating that the assessee held a civil post. Additionally, CCS HAU was recognized as a State University covered under the University Grants Commission (UGC).

2. Eligibility for exemption of gratuity under Section 10(10)(i) of the Income Tax Act, 1961:

The Tribunal examined whether the assessee's case fell under Section 10(10)(i) or Section 10(10)(iii) of the Income Tax Act. Section 10(10)(i) provides that any death-cum-retirement gratuity received under specified pension rules or schemes applicable to civil services of the Union or State, or holders of civil posts under the Union or State, is wholly exempt from tax. The Tribunal found that the assessee, being an employee holding a civil post under the State, was entitled to full exemption under Section 10(10)(i).

The Tribunal emphasized that if a case falls under clause (i) of Section 10(10), the entire amount of death-cum-retirement gratuity becomes exempt. Conversely, if it falls under clause (iii) of Section 10(10), the exemption is limited to the amount specified by the Central Government. The Tribunal concluded that the assessee's case fell under Section 10(10)(i), entitling him to full exemption for the gratuity amount received.

Conclusion:

The Tribunal allowed the appeal, setting aside the impugned order. It directed the AO to allow exemption under Section 10(10)(i) of the Income Tax Act for the disputed gratuity amount received by the assessee. The Tribunal's decision was based on the recognition that CCS HAU employees hold civil posts under the State and are therefore eligible for full exemption on gratuity received. The order was pronounced in the open court on 15th June, 2022.