2018 (8) TMI 746 - AT - Income Tax

Claim of relief u/s 89 - receipt of arrears in lieu of employer s contribution to the newly implemented Defined Contribution Scheme - He has also relied upon the argument that employer s contribution to an approved superannuation fund in respect of an employee had become taxable as a perquisite by the insertion of the provision under section 17(2)(vii) w.e.f. 01.04, 2010 and since the larger part of the arrears received by him pertained to the years prior to 01.04.2010 the relief under section 89 of the Act should be allowed to him. Held that - The ld. CIT(A) has correctly held that section 89 does not talk of perquisite but of inter alia salary whereas the relief claimed by the assessee pertains to perquisite and not salary ; that perquisite within the meaning of section 17(2)(vii) means contribution in excess of one lac rupees to an approved superannuation fund by the employer in respect of an assessee. However the following position appears to have escaped the knowledge of the ld. CIT(A). Section 17(1) defines salary and perquisite separately for the purposes of sections 15 and 16. Section 15 is the charging section qua income from salary whereas section 16 deals with deduction there-from. Section 17(1)(iv) says that salary includes inter alia perquisites. Relief u/s 89 is available in respect of salary and so it is by virtue of section 17(1) (iv) as a natural corollary thereof available qua perquisites. Rule 21A of the Rules pertains to inter alia salary with respect to which section 89 grants relief. Therefore the said Rule does pertain to perquisite as well. Rule 21A(1)(a) states that where inter alia any portion of the assessee s salary is received in arrears or in advance the relief u/s 89 shall be in accordance with the provisions of Rule 21A(2). Section 17(2)(vii) of the Act also treats such a sum as a perquisite. But to hark back as per section 17(1)(iv) perquisite is salary and receipt of salary paid in arrears or in advance is entitled to relief under section 89. It is trite that delegated legislation cannot override the provisions of the Act. Moreover the circular involved herein is not a circular issued by the CBDT but an internal circular of GAIL which is of no consequence over the provisions of the IT Act. Benefit of relief u/s 89 allowed. - Decided in favor of assessee.

Summary

Issues Involved:

1. Whether relief under section 89 of the IT Act is available for arrears received as a 'perquisite.'
2. Interpretation of 'salary' and 'perquisite' under section 17 of the IT Act.
3. Applicability of Rule 21A and Form 10E in relation to the contribution in question.
4. Impact of internal circulars versus statutory provisions.

Issue-wise Detailed Analysis:

1. Relief Under Section 89 for Perquisites:

The main issue is whether relief under section 89 of the IT Act is available for arrears received by the assessee as a 'perquisite.' The assessee received arrears of ?23,56,430/- from his employer GAIL (India) Ltd., which he claimed as relief under section 89. The AO disallowed this claim, stating that section 89 applies to arrears of salary and not perquisites. The CIT(A) upheld this view, stating that relief under section 89 is not available for arrears received as a perquisite.

2. Interpretation of 'Salary' and 'Perquisite':

The CIT(A) and AO interpreted 'salary' under section 17 to exclude perquisites for the purpose of section 89 relief. However, the Tribunal found that section 17(1)(iv) includes perquisites within the definition of salary. Therefore, by virtue of section 17(1)(iv), relief under section 89 is available for perquisites.

3. Applicability of Rule 21A and Form 10E:

The CIT(A) held that Rule 21A and Form 10E do not pertain to the contribution in question. However, the Tribunal noted that Rule 21A pertains to salary, which includes perquisites as per section 17(1)(iv). Therefore, Rule 21A and Form 10E are applicable to the contribution in question. The Tribunal also noted that Rule 21A(1)(a) read with Rule 21A(2) applies to cases where salary, including perquisites, is received in arrears.

4. Impact of Internal Circulars Versus Statutory Provisions:

The CIT(A) relied on an internal circular from GAIL, which stated that contributions over the exemption limit are taxable as perquisites. The Tribunal noted that internal circulars cannot override statutory provisions. Section 17(2)(vii) treats such contributions as perquisites, but section 17(1)(iv) includes perquisites within the definition of salary, making them eligible for relief under section 89.

Conclusion:

The Tribunal concluded that relief under section 89 is available for perquisites, Rule 21A and Form 10E apply to the contribution in question, and internal circulars cannot override statutory provisions. Therefore, the assessee's claim for relief under section 89 was allowed, and the order of the CIT(A) was reversed. The appeal was allowed, and the relief under section 89 was directed to be granted to the assessee.

Order Pronounced:

The appeal was allowed, and the order was pronounced in the open court on 16/07/2018.