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Issues:
1. Entitlement to deduction of recovered salary amount for a specific period. Detailed Analysis: The appeal before the ITAT DELHI-E concerned the deduction of a recovered salary amount of Rs. 68,615 by the assessee for the period from 1-4-1967 to 31-3-1969. The assessee, appointed as Managing Director of a company, received excess remuneration which was later recovered based on Company Law Board directives. The Assessing Officer disallowed the deduction in the assessment year 1969-70, citing the matter as sub judice before the Delhi High Court. The High Court's decision on the matter was finalized on 15-4-1971, with no further appeal. The assessee then claimed the deduction in the assessment year 1972-73. The primary contention revolved around whether the assessee should be taxed on income not earned, considering the recovered salary as a refund of previous years' income rather than a claim for deduction. The revenue argued that only statutory deductions under section 17 of the Income-tax Act, 1961 could be allowed, emphasizing the absence of equity in taxation. The ITAT considered the reality and practicality of the situation, emphasizing that tax should be levied on income earned in reality. The excess salary collected but later returned did not constitute income in reality, as it was paid back due to a mistake arising from Company Law Board restrictions. The ITAT concluded that the tax collected on this mistaken salary should not be retained by the revenue, especially after the matter reached finality during the relevant assessment year. Therefore, the ITAT directed the Assessing Officer to allow the deduction claimed by the assessee. In summary, the ITAT allowed the appeal of the assessee, emphasizing the principles of justice and fairness in taxation, and the reality of income earned. The decision highlighted the need to rectify tax collection on income not received in reality, ultimately directing the allowance of the deduction claimed by the assessee.
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