In a significant ruling, the Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that, the amount deducted for Notice period is not liable to be taxed under the head “Salary” under section 16 of the Income Tax Act.
The assesse Mr. Nandinho Rebello is an individual, deriving income from salary, house property and other sources. For the year under consideration, the return of income was filed on 16.03.2011, declaring total income of Rs.11,45,880/-. Subsequently, the case was reopened by issuing notice under Section 148 of the Act on 04.07.2012 on the ground that the assessee has not disclosed the salary received from his previous two employers namely M/s. Videocon Tele Communication Ltd and Reliance Communication Ltd.
During the course of reassessment proceedings, the Assessing Officer observed that the assessee had worked with Reliance Communication Ltd from 01.04.2009 to 09.05.2009, Sistema Shyam Teleservices Ltd from 18.05.2009 to 24.02.2010 and Videocon Tele Communication Ltd from 03.03.2010 to 31.03.2010 and received salary of Rs.1,64,636/-, Rs. 13,95,880/- and Rs.5,46,060/- respectively; out of which the assessee has only shown the salary income of Rs.11,45,880/- received from Sistema Shyam Teleservices Ltd after claiming deduction under Chapter VI-A of the Act.
The Assesse Mr. Nandinho Rebello had claimed Rs.2,76,744/- in the return of income as deduction which was recovered from the salary by assessee’s previous employers as mentioned above. The Ld. CIT(A) was of the view that no such deduction is available under Section 16 of the Act and the salary income is taxable on due basis or on paid basis.
The Tribunal held that, “employers have made deduction from the salary which was paid to the assessee during the year under consideration because of leaving the services as per agreement made by the assessee and the respective employer. This is a case of recovery of the salary which is already made to the assessee for which we have not to refer Section 16 of the Act as mentioned by the ld. CIT(A)”.
The Tribunal bench comprising of Judicial Member S.S Godara and Accountant Member Amarjit Singh observed that, “the assessee has actually received the salary from his previous employers after deducting the notice period as per the job agreement with them. Therefore, in our considered view, the actual salary received by the assessee is only taxable and therefore, we allow this ground of appeal of the assesse”.
Read the full text of the order below.
