KUMARBABU TIPIRNENI v. INCOME TAX OFFICER
[Citation -1985-LL-0411]

Citation 1985-LL-0411
Appellant Name KUMARBABU TIPIRNENI
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 11/04/1985
Assessment Year 1982-83
Judgment View Judgment
Keyword Tags charge of interest • personal qualities
Bot Summary: The assessee s counsel drew our attention to the various achievements of the assessee such as: the assessee being elected as a Fellow of the Institute of British Foundrymen which according to the assessee was a rare honour conferred on only a few Indians in November, 1980: The assessee was a Chairman of Steel, Castings Sectional Committee appointed by Indian Standards Institution, Delhi. The Committee has responsibility and authority to finalise the National Standards applicable to the Steel Foundry Industry in the Country; The assessee s employer who was awarded a certificate by Hindustan Motors Ltd. for supplying castings, complying with standards of TEREX which was a division well known General Motors Co. op. Of U. S. A., and The assessee was given a plaque award as the best Foundry in the country by the Institute of Indian Foundry men. Departmental Representative argued that in this case the payment had been made in the course of employee and employers relation and he drew o u r attention to the words abilities in the resolution and argued that the payment had been made to the assessee because of the abilities and not only personal qualities. The assessee is already paid a certain salary for his normal work. The assessee could have neither foreseen this payment nor could he have expected it. One more ground is that the AAC erred in not considering the assessee s appeal against the charge of interest under s. 217.


assessee was paid amount of Rs. 15,000 by his employer during accounting period. following resolution was passed by employer s Board of Directors: "Resolved that Mr. T. Kumar be paid amount of Rs. 15,000 as testimonial of his personal qualities and abilities and with view to enthuse other employees of company to give best of their abilities and display their personal qualities of leadership, drive and dedication. Board places on record its appreciation of personal qualities and outstanding calibre of Mr. Kumar by which company has benefited phenominally. Board wishes to m d e it expressly clear that amount is not sought to be given as remuneration or salary for services rendered for which he has been adequately remunerated under his terms of employment. amount of Rs. 15,000 to be paid to Mr. Kumar is in token of appreciation of his personal qualities and abilities." ITO taxed this amount as perquisite under s. 17(2)(iii)(c). AAC held it as taxable because it was not exempt under s. 10(3) of IT Act. His reasoning is as follows: "The term used 'Remuneration in s. 10(3)(iii) is wider term than term 'Salary . It means QUID PRO QUO of services rendered by employee. Even if it is argued that this payment is not hit by said sub-cl. (iii) on ground that appellant was already getting salary for services being rendered by him, then said payment is to be treated as covered by sub- cl. (iii) inasmuch as it is receipt arising from exercise of profession or vocation. It is difficult to hold that payment was not altogether connected with services rendered by him or is not INTENDED to confer special benefit on him in appreciation of services rendered so as to increase his earning in exercise of profession or performance of his service. Once we arrive to this conclusion, payment is clearly taxable. Even if it is claimed to be gift pure and simple, very fact that it is gift from employer to employee and debited to P & L A/c of employer leads me to conclude that it is part of salary income, irrespective of whether said payment was made as of right or merely EX-GRATIA." assessee has claimed it as exempt on ground that it is not salary within meaning of term as understood under IT Act and is also not income chargeable to tax. At time of hearing before us assessee s advocate relied upon following authorities: (i) Reed vs. Seymour (11 TC 625) (ii) Cooper vs. Balakiston (5 TC 347) (iii) Moor vs. Griffith (48 TC 338) (iv) P. H. Divencha vs. CIT (1963) 48 ITR 222 (SC) (v) CIT vs. K. K. Roy (1967) 66 ITR 179 (Cal) (vi) Mahesh Anantrai Pattani vs. CIT (1961) 41 ITR 481 (SC) (vii) Parimisetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC) (viii) Sewal Singh Ajit Singh vs. CIT (1980) 18 CTR (P & H) 224: (1980) 126 ITR 732 (P & H). He also relied upon decision of Tribunal, Bangalore Bench in ITA No. 91/Bang-1982 dt. 11th Oct., 1982 where it has been held that amount paid because of personal qualities cannot be taxed. Tribunal also relied upon decision of Delhi High Court in case of Lachhaman Das vs. CIT (1980) 124 ITR 706 (Del) where according to Tribunal it was held that payment made by employer to employee on personal considerations would not fall within s. 17(3) (ii). assessee s counsel drew our attention to various achievements of assessee such as: (a) assessee being elected as Fellow of Institute of British Foundrymen which according to assessee was rare honour conferred on only few Indians in November, 1980: (b) assessee was Chairman of Steel, Castings Sectional Committee appointed by Indian Standards Institution, Delhi. Committee has responsibility and authority to finalise National Standards applicable to Steel Foundry Industry in Country; (c) assessee s employer who was awarded certificate by Hindustan Motors Ltd. for supplying castings, complying with standards of TEREX which was division well known General Motors Co. op. of U. S. A., and (d) assessee was given plaque award as best Foundry in country by Institute of Indian Foundry men. He also pointed out that in resolution of Board of Directors Director representing Gujarat State Financial Corporation and Industrial Investment Corporation was also consenting Gujarat Party. He argued that assessee was already adequately remunerated for his services and this was first time in assessee s service from 1968 that such Ex-gratia amount had been paid to assessee by employer. ld. Departmental Representative argued that in this case payment had been made in course of employee and employers relation and he drew o u r attention to words "abilities" in resolution and argued that payment had been made to assessee because of abilities and not only personal qualities. He also pointed out words "with view to enthuse other employees of company to give best of their abilities and display their personal qualities of leadership, drive and dedication" in said resolution, and argued that this showed that payment has been made for example to other employees which could be for nothing but work as employee. Therefore, according to him that payment had been made for his work as employee. He argued that in Pattani s case payment had been made out of love and affection and similar was case of Sitadevi. In our view, language of resolution is not conclusive although it is one of factors to be taken into account. other facts and circumstances also have to be taken into account. assessee is already paid certain salary for his normal work. This amount is paid to him over and above remuneration paid to him for services rendered by him to his employer. assessee could have neither foreseen this payment nor could he have expected it. He had no legal right to it. This is first payment in 12 years of service. He has shown extra-ordinary talent regarding his work but that cannot be expected in normal course from any employee. Taking all these circumstances into account we are of view that this is payment over and above salary or remuneration and does not fall within that category and consequently cannot be said to be his taxable income under Act. fact that this payment has been made to him by his employer although relevant, is not deciding factor. These conclusions are justified on basis of authorities cited before us. assessee s appeal is allowed on this point. One more ground is that AAC erred in not considering assessee s appeal against charge of interest under s. 217. This matter is restored to AAC to decide this ground. *** KUMARBABU TIPIRNENI v. INCOME TAX OFFICER
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