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TMI Blog2016 (1) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... s been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 27.12.2012 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh (hereinafter referred to as "the Tribunal") in ITA No. 758/CHD/2012 for the assessment year 2008-09. The appeal was admitted by this Court vide order dated 10.3.2014 for determination of the following substantial questions of law:- i. Whether the Hon'ble ITAT Chandigarh Bench 'B', Chandigarh was justified in confirming the order of learned CIT(Appeals) and orders of Assessing Officer making additions of ` 11,002/- on account of Gratuity and ` 37,012/- on account of Leave Encashment claimed exempt by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs under Section 10(10C) of the Act. The case of the assessee was taken up for scrutiny and notice under Section 143(2) of the Act was issued. The Assessing Officer framed the assessment under Section 143(3) of the Act vide order dated 28.12.2010 (Annexure A-1) at a total income of ` 8,41,860/-. The Assessing Officer made additions of ` 5 lacs claimed exempt under Section 10(10C) of the Act being amount of ex-gratia received under the Scheme of Voluntary Retirement from the State Bank of Patiala declaring it as not in conformity with the Rule 2BA of the Income Tax Rules, 1962 (in short "the 1962 Rules"), ` 11,002/- on account of excess amount of gratuity and ` 37,102/- being excess amount of leave encashment both claimed exempt under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of income tax. Under sub-section (10) of Section 10 of the Act, any death-cumretirement gratuity received by the assessee is exempt from payment of income tax to the extent specified therein on fulfillment on conditions enumerated in that provision. Similarly, Section 10(10AA) of the Act prescribes that cash equivalent of leave salary in respect of the period of earned leave is not to be included in his taxable income to the extent specified therein where the assessee fulfills the conditions stated thereunder. According to Explanation appended to Section 10(10) of the Act, "salary" in clauses (10) and (10AA) to Section 10 of the Act shall have the meaning assigned to it in clause (h) of Rule 2 of Part A of the Fourth Schedule of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and made addition of ` 5 lacs by observing that the said scheme was not in conformity with Rule 2BA of the 1962 Rules. The claims of the assessee regarding gratuity and leave encashment under Sections 10(10) and 10(10AA) of the Act were partially disallowed by the Assessing Officer and additions of ` 11,002/- and ` 37,012/- on that account were made. On appeal, the CIT(A) upheld the order of the Assessing Officer except deleting the disallowance of the assessee under Section 10(10C) of the Act made by the Assessing Officer. The partial additions of ` 11,002/- and ` 37,012/- made on account of gratuity and leave encashment were sustained by the CIT(A) by holding that the computation of benefit of gratuity and leave encashment under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al has noticed that the Assessing Officer has included basic pay plus dearness allowance and applied the formula as applicable to the gratuity and leave encashment for working out the eligible amount of gratuity and leave encashment. Further, it was held by the Tribunal that the computation of benefit of gratuity and leave encashment under Section 10(10) and 10(10AA) of the Act are to be governed by the definition of 'salary' contained in Explanation to Section 10(10) of the Act. The Tribunal has recorded as under:- "7. For the purpose of proper appreciation of the relevant statutory provisions of section 10(10) and 10 (AA), it is relevant to reproduce the Explanation to section 10(10) of the Act:- "Explanation - In this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the term 'salary' under Sections 10(10) and 10(10AA) of the Act has held that there is no general definition of the word "salary" applicable for all the provisions of the Act. The Explanation to Section 10(10) provides that "in this clause and in clause (10AA) 'salary' shall have the meaning assigned to it in clause (h) of Rule 2, Part A of Fourth Schedule to the Act. As per clause (h), "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. There was no ambiguity in the said clause and it is the said definition which should be applied while construing Sections 10(10) and 10(10AA) of the Act. It was observed as under:- "15. ......We are unable to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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