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Appeal against order u/s. 263 of the Income-tax Act, 1961 regarding taxability of superannuation fund payment. Analysis: The appeal concerns an individual employed by a company with an approved superannuation scheme, which was later wound up with approval from the Commissioner of Income-tax. The individual received a sum from the trustees of the fund, with tax deducted at the source. The Income Tax Officer initially accepted the claim that the amount was not taxable and refunded the tax. However, the Commissioner of Income-tax later deemed this decision erroneous and prejudicial to revenue, asserting that the payment was taxable. The assessee argued that a similar case decided by the Appellate Tribunal supported their claim of non-taxability. The key issue revolved around whether the payment from a wound-up superannuation fund was taxable. The Tribunal examined the precedent case of G.B. Menon, where it was established that refunds from an approved superannuation fund are excluded from "profits in lieu of salary." The revenue contended that this exclusion applied only to ongoing funds, not those wound up. However, the Tribunal reasoned that the purpose of superannuation funds is to provide tax-free terminal benefits, regardless of when the payment is made. The exemption under section 17(3) indicated that such amounts are capital receipts, not income. Notably, the Tribunal's decision in the earlier case had been finalized by the Department and the High Court, reinforcing the non-taxable nature of such payments even after fund closure. Moreover, the assessee highlighted the discriminatory aspect of the Commissioner's order, as other employees who received similar payments were not taxed. The Commissioner's decision was deemed discriminatory and unreasonable, as it singled out the assessee for taxation based on a class of receipt previously deemed non-taxable by the Tribunal. The concept of judicial discretion mandates impartiality and non-discrimination, especially in the absence of conflicting higher court decisions. Consequently, the Tribunal found the Commissioner's order untenable and canceled it, allowing the appeal in favor of the assessee.
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