Interest from Accumulated PF balance received After Retirement is not Eligible for Exemption: ITAT rejects Techie’s plea [Read Order]

The Income Tax Appellate Tribunal recently ruled that accumulated interest from provident fund received post-retirement of the assessee is not eligible for exemption under section 10(12) of the Income Tax Act, 1961.

The Bangalore bench comprising of judicial member Shri.Sunil Kumar Yadav and accountant member Shri.Jason P Boaz, while both Revenue’s appeal and the asseessee’s Cross-objection clarified that the exemption u/s 10(12) of the Act is limited to the accumulated balance due and payable to an employee upto the date of retirement/end of employment.

This appeal by Revenue is directed against the order of the CIT (A)-1, Bangalore and the assessee has also filed cross objections in this regard.

The assessee, an ex-employee of Wipro and a consultant filed his return of income during the AY 2012-13 declaring income of Rs.1,18,03,300/-. The assessee has ceased to be an employee of Wipro Ltd., in the April, 2002 itself and the accumulated PF amount was withdrawn after a period of 9 years. The assessee hasn’t claimed for a deduction under section 10 (12) during the assessment proceedings.

As on the date of retirement the accumulated provident fund balance of contributions plus interest was 37, 93,588/-. The department refused to allow deduction in respect of accumulated interest received by the assessee.

Aggrieved the order, assessee preferred an appeal before the CIT (A) – 1, Bangalore who disposed the assessee’s appeal by allowing partial relief.

Aggrieved by the order, now the revenue had filed appeal before ITAT and the assessee also filed his cross objections. Revenue contends that the CIT(A) erred in granting relief to the assessee with respect to the withdrawal of the accumulated balance in the PF account as the benefit u/s 10(12) of the Act.

Before the Tribunal, the revenue contended that the interest portion on the maturity amount withdrawn after retirement which becomes taxable in the hands of the assessee under the head ‘income from other sources’ has not been declared and offered to tax by the assessee.

Disposing the matter, the Tribunal held that accumulated interest of Rs.44, 07,195/- post retirement of the assessee on 1/4/2002 is not eligible for exemption u/s 10(12) of the Act. it was, therefore held that the AO was right in holding that the said interest was eligible to tax in the assessee’s hands.

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