K.Vijaya Kumar v. The Principal Commissioner of Income-tax, Chennai
[Citation -2020-LL-0226-115]

Citation 2020-LL-0226-115
Appellant Name K.Vijaya Kumar
Respondent Name The Principal Commissioner of Income-tax, Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 26/02/2020
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags computation of capital gain • erroneous and prejudicial • cost of acquisition • claim of exemption • national interest • relevant material • reward
Bot Summary: In any event, and despite the objections raised by the petitioner, the proposal was confirmed by the respondent and at paragraph 8 of the impugned order, the Assessing Authority was directed to allow the claim of exemption under Section 10(17A) only if the assessee were able to produce an order granting approval of exemption by the Government of India under Section 10(17A). The respondent has filed a counter submitting that the petitioner has an efficacious statutory remedy as against the impugned order and on merits pointing out that the stand of the assessee is liable to be accepted only if an approval of the reward by the Central Government is produced. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included any payment made, whether in cash or in kind, in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved by the Central Government in this behalf; or as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest; 12. The Delhi High Court, in a very short judgment, drawing support from the decision of the Patna High Court also negates the claim on a strict interpretation of Section 10(17B) on the ground that approval had not been accorded by the Central Government. None of the aforesaid aspects were considered by the Government or the Public Prosecutors before having recourse to Section 321 Cr.P.C 22. While clause is concerned with an award whether in cash or in kind, instituted in public interest by the Central or any State Government or instituted by any other body and approved by the Central Government in this behalf, clause refers to a reward by the Central or a State Government for such purposes as may be approved by the Central Government in this behalf in public interest. The reward under Section 10(17A)(ii) is specific to certain 'purposes' as may be approved by the Central Government in public interest and the 'purpose' of the reward by the State Government has been echoed and reiterated by the Centre with the presentation of the Gallantry Award to the petitioner in 2005.


W.P.No.17701 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.02.2020 CORAM HONOURABLE DR. JUSTICE ANITA SUMANTH W.P.No.17701 of 2018 and WMP No.20965 of 2018 K.Vijaya Kumar Petitioner Vs Principal Commissioner of Income Tax, Room No.430, 4th Floor, Main Building, 121, Mahatma Gandhi Road, Chennai. Respondent Prayer: PETITION filed under Article 226 of Constitution of India praying for issuance of Writ of Certiorari, calling for records on file of respondent relating to impugned proceedings in C.No.3033/PCIT-3/263 (12)/2017-18 dated 26.03.2018, received by petitioner on 27.03.2018 and quash same. For Petitioner : Mr.AL.Somayaji, Senior Counsel For Mr.V.Perumal For Respondent : Mrs.Hema Muralikrishnan Senior Standing Counsel ORDER petitioner has had distinguished career in Indian Police Service and is presently engaged as Senior Security Advisor to Union Home Ministry. In course of his service, he had been appointed as Chief of Special Task Force (STF) leading Operation Cocoon against forest brigand http://www.judis.nic.in 1/14 W.P.No.17701 of 2018 Veerapan leading to Veerapans fatal encounter on 18.10.2004. In recognition of special and commendable services of STF, Government of Tamil Nadu had issued G.O.Ms.No.364, Housing and Urban Development Department dated 28.10.2004 instituting award in national interest to personnel of STF for valuable services rendered by them as part of team. In consequence thereof, G.O.Ms.No.16, Housing and Urban Development Department dated 12.01.2006 was issued sanctioning sum of Rs.54,29,88,200/- towards cost of 773 plots to be allotted to STF personnel including petitioner against loans sanctioned to Tamil Nadu Housing Board for implementation of various housing schemes. 2. Specifically G.O.Ms.368, Housing and Urban Development dated 29.10.2004 had been issued allotting HIG Plot bearing No.1A-642 at Thiruvanmiyur Scheme to petitioner. Accepting representation of petitioner dated 21.07.2008, G.O.Ms.No.763 Housing and Urban Development Department dated 21.07.2008 had been issued allotting Plot No.1 adjacent to Andaman Guest House at Anna Nagar West Extension in lieu of plot issued earlier. 3. registered deed of sale had been executed on 27.11.2009 whereby Tamil Nadu Housing Board conveyed to petitioners favour land measuring 2 grounds and 8 sq.ft. of land in consideration of Rs.1,08.43,000/- paid by Government of Tamil Nadu on his behalf to Tamil Nadu Housing board. 4. return of income had come to be filed by petitioner in terms of Income Tax Act, 1961, wherein petitioner had initially returned total income of Rs.18,38,791/- for Assessment Year (AY) 2010-11. return was http://www.judis.nic.in 2/14 W.P.No.17701 of 2018 revised thereafter to include short term capital gain of sum of Rs.82,00,400/- arising from sale of plot allotted to him on 15.12.2009 for sum of Rs.1,99,10,900/-. petitioner, it appears, had returned aforesaid gain in his return for subsequent assessment year, ie., AY 2012-13 remitting liability thereupon. In revised return filed for AY 2010-11, perhaps filed since petitioner was advised that incidence of tax would arise in that year, he claimed refund of tax paid for AY 2012-13 and adjustment of same against demand that arose under revised return. 5. assessment for AY 2010-11 had been reopened under Section 147 of Act and after due process, was completed on 02.03.2016. In course of proceedings, award in cash as well as by allotment of plot are stated to have been discussed, though order of assessment is silent in this regard. 6. This was followed by show cause notice dated 26.02.2018 under Section 263 of Act, wherein Commissioner of Income Tax proposed revision of assessment on ground that computation of capital gain was incorrect. petitioner had taken cost of acquisition of property as per sale deed at Rs.1,08.43,000/-. However, according to respondent, if cost as per deed were to be taken, then award granted to petitioner would have to qualify to be reward in terms of Section 10(17A) of Act. Since Assessing Authority had not specifically examined this aspect of matter, respondent was of view that cost of property would have to be taken as nil and order of assessment passed was, in his view, erroneous and prejudicial to interests of revenue. 7. reply was filed on behalf of petitioner as follows: ' said land at Anna Nagar which was sold by assessee during financial year 2009-10 for which Long term Capital Gain was admitted was http://www.judis.nic.in 3/14 W.P.No.17701 of 2018 purchased by assessee on 27th November 2009 from Tamil Nadu Housing Board statutory body of Government of Tamil Nadu vide Registered Sale Deed No.3656/09, dated 27th November 2009 for total consideration of Rs.1,08,43,000/- copy of which is enclosed for your perusal by paying stamp duty of Rs.9,08,000/-. However entire purchase proceeds were met by Government of Tamilnadu which was reward money for nabbing forest brigand Veerapan. As said sale agreement is between assessee and Tamilnadu Housing Board, it was absolute purchase by assessee and land was not gift from Government of Tamilnadu. Only cash money which was paid for purchase of land was only reward and not land. Hence assessee has correctly computed capital gain by taking cost of purchase of Rs.1,08,43,000/- and stamp duty of Rs.9,08,000/- as cost of acquisition for computation of Long Term Capital Gain. above facts have been fully disclosed during course of assessment and according order under Section 143(3) was passed. We request you to kindly do needful and oblige.' 8. Though provisions of Section 10(17A) do not appear to have been specifically adverted to in proceedings for assessment, letter filed by petitioner before Income Tax Officer, dated 26.05.2016, does refer to and rely upon this provision. In any event, and despite objections raised by petitioner, proposal was confirmed by respondent and at paragraph 8 of impugned order, Assessing Authority was directed to allow claim of exemption under Section 10(17A) only if assessee were able to produce order granting approval of exemption by Government of India under Section 10(17A) (ii). 9. respondent has filed counter submitting that petitioner has efficacious statutory remedy as against impugned order and on merits pointing out that stand of assessee is liable to be accepted only if approval of reward by Central Government is produced. Thus, according to them there is no flaw in impugned order and consequently, no merit in Writ Petition. http://www.judis.nic.in 4/14 W.P.No.17701 of 2018 10. issue raised in this writ petition is legal issue and no facts are in dispute. I thus see no reason to relegate petitioner to statutory appellate remedy and hold that writ petition is maintainable. 11. question that arises relates to whether reference to approval in Section 10(17A) will include implied approval or whether such approval has to be express. provisions of Section 10(17A) of Act read thus: Incomes not included in total income. 10. In computing total income of previous year of any person, any income falling within any of following clauses shall not be included (17A) any payment made, whether in cash or in kind, (i) in pursuance of any award instituted in public interest by Central Government or any State Government or instituted by any other body and approved by Central Government in this behalf; or (ii) as reward by Central Government or any State Government for such purposes as may be approved by Central Government in this behalf in public interest; 12. peek into Legislative history of this provision is illuminating. Clause (17A) of Section 10 was substituted for clauses (17A), (17B) and (18) by Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989. Prior to substitution, aforesaid three clauses read as follows: (17A) any payment made, whether in cash or in kind, in pursuance of awards for literary, scientific or artistic work or attainment or for service for alleviating distress of poor, weak and ailing, or for proficiency in sports and games, instituted by Central Government or by any State Government or approved by Central Government in this behalf: Provided that approval granted by Central Government shall have effect for such assessment year or years (including assessment year or years commencing before date on which such approval is granted) as may be specified in order granting approval; (17B) any payment made, whether in cash or in kind, as reward by Central Government or any State Government for such purposes as may be approved by Central Government in this behalf in public interest; (18) any payment made, whether in cash or in kind, by Central Government or any State Government in pursuance of gallantry awards instituted or approved by Central Government. http://www.judis.nic.in 5/14 W.P.No.17701 of 2018 13. Erstwhile Clause (17A) contained proviso that stated that effective date from which approval was granted was to be specified in order of Central Government granting such approval. proviso has been omitted in substituted provision, effective 01.04.1989 onwards. Thus, it appears to me that while enlarging clauses generally, by obviating specific reference to purposes for which awards could be given, legislature has also done away with specification of written approval from Central Government, with effect from 01.04.1989. 14. One may make useful reference in this regard, to decision of Division Bench of this Court in case of Commissioner of Income Tax V. J.G.Gopinath (231 ITR 229) wherein Division Bench considered eligibility of award by Central Government to Income Tax Officer for exemption under Section 10(17B) of Act for meritorious and hard work turned out by him for success of Voluntary Disclosure Scheme. In that case, Tribunal had noted that reward has been granted in public interest and to ensure success of Voluntary Disclosure Scheme floated by Ministry of Finance, Government of India. personnel of Income Tax Department had to work overtime in addition to already existing heavy load that they carried and it was in appreciation of this hard work that Ministry had come forward with offer that special output by staff would not go unnoticed. Government of India thus volunteered to pay cash benefit equivalent to one month basic pay to income tax personnel identified as having contributed, by their hard work, to success of Voluntary Disclosure Scheme. http://www.judis.nic.in 6/14 W.P.No.17701 of 2018 15. After noting aforesaid facts, Division Bench comprising of Justices Sethuraman and N.V.Balasubramanian, while opining that mandate of Section 10(17A) was wholly satisfied in that case held as follows: 5. relevant circumstances under which this reward came to be given have been extracted by Tribunal in I. T. A. No. 1422 (Madras) of 1976- 77, which is also subject of another petition numbered as T. C. P. No. 366 of 1978, that extract is as under : "The Central Government (Ministry of Finance) sponsored voluntary disclosure scheme under provisions of Voluntary Disclosure of Income and Wealth Ordinance, 1975. By this Ordinance, Government offered unique opportunity to public at large that any person who wanted to disclose his black money or suppressed wealth, etc., could come forward with clean breast under certain conditions. Such undisclosed income or wealth would be assessed under concessional rate without going into details or merits of income or wealth. Besides this, person was also immune from penalty or prosecution. object was to bring out suppressed black money in country to bring down inflation in market and also to give opportunity to persons who were afraid to come forward to bring it out on account of high taxation attended with severe consequences. This scheme was extremely successful, with result that large unforeseen revenue flooded into exchequer. At same time, it cannot be forgotten that income- tax wing of Ministry had to work very hard with already existing heavy load carried on. In some quarters of Department, staff had to work round clock particularly at closure of period declared in Ordinance. Appreciating this hard work and extra output Income-tax Department had shouldered, Ministry came forward that special output turned out by staff would not go unnoticed. Therefore, Government volunteered to pay hard work turned out by staff by means of token cash benefit equal to one month's basic pay. Presumably on account of emergency no overtime allowance could be sanctioned. It might perhaps involve larger expenditure. To quote Ministry of Finance letter F. No. 1-11015/1/76 Ad. IX, dated January 16, 1976, first paragraph itself explains circumstances under which it is granted, 'I am directed to state that in appreciation of meritorious work done by income-tax personnel for success of voluntary disclosure schemes, Government have decided to grant them reward of amount equal to one month's basic pay'." 6. above extract makes it clear that such reward was granted in public interest. It would be surprising if Government were to grant rewards for reasons other than public interest. It is, therefore, evident that terms of Section 10(17B) are completely satisfied in present case as circular gives circumstances under which rewards are granted. voluntary disclosure scheme could only have been conceived in public interest as we do not see any other reason for this scheme coming into existence. If any person rendered sincere work to make this scheme success, and if he is rewarded for it, such grant of reward cannot but be in public interest. There is no specific mode of approval indicated in http://www.judis.nic.in 7/14 W.P.No.17701 of 2018 statute. No further approval is necessary or called for. section is clear in its language and does not raise any problem of construction. Therefore, we do not find that any question of law arises out of Tribunal's order. Even assuming that question of law arises, answer is self-evident and, therefore, reference shall be wholly academic and unnecessary. petition is accordingly dismissed. Only because respondent appears in person and not through counsel, we do not award any costs. 16. contra view has been expressed by Patna High Court in Commissioner of Income Tax V. S.N.Singh, Income Tax Officer (192 ITR 306), which view has been followed by Delhi High Court in Commissioner of Income Tax V. J.C.Malhotra (230 ITR 361). 17. In Singhs case, Division Bench of Patna High Court took view directly opposed to view expressed by Madras High Court in J.G.Gopinaths case. This order is dated 19.02.1990, prior to decision of this Court in J.G.Gopinaths case and has not been taken into consideration by Madras High Court. assessee was not represented before Patna High Court and Bench has proceeded on strict interpretation of provision rejecting claim of exemption on ground that though reward by Central Government to assessee is indisputably in public interest, approval by Central Government is mandatory for purpose of exemption under Section 10(17B). 18. Delhi High Court, in very short judgment, drawing support from decision of Patna High Court (supra) also negates claim on strict interpretation of Section 10(17B) on ground that approval had not been accorded by Central Government. order reads as follows: 1. This is reference under s. 256(1) of IT Act, 1961, at instance of Revenue, seeking opinion of High Court on following question : "Whether, on facts and in circumstances of case, Tribunal is correct in law in holding that cash award of Rs. 920 is exempt from taxation under s. 10(17B) ?" http://www.judis.nic.in 8/14 W.P.No.17701 of 2018 2. reward to assessee, who was ITO at relevant time, had been given by Central Government directly in connection with Voluntary Disclosure Scheme. separate approval of Central Government for purpose of exemption under s. 10(17B) of Act was not given. That being position, cl. (17B) of s. 10 of Act was not attracted and reward was not liable to be excluded from computation of income. So is view taken in CIT vs. S. N. Singh, ITO (1991) 192 ITR 306 (Pat) : TC 32R.650. 3. For foregoing reasons, question is answered in negative, i.e., in favour of Revenue and against assessee. 4. No order as to costs. 19. Division Bench has thus referred to Circular issued by Ministry of Finance, deducing therefrom aspect of approval. Sitting in Madras, I am bound by view taken by jurisdictional High Court to effect that approval of Centre may either be express or implied, and in latter, gleaned from surrounding circumstances and events. Thus, this is perspective from which eligibility of petitioner under Section 10(17A) to exemption or otherwise should be tested and decided. 20. activities of Veerapan and his associates, although confined largely to areas of Karnataka and Tamil Nadu, are etched in minds of all Indians. nature of activities and their repercussions have been captured in judgment of three Judge Bench in case of Abdul Karim and others V. State of Karnataka and others ((2000) 8 SCC 710) in context of withdrawal of Public Prosecutor at instance of Government, from proceedings for prosecution. Bench sets out sordid tale of kidnapping of film actor by name Rajkumar and three others and events that follow. Though prosecution was initially initiated, it was sought to be withdrawn in public interest and this came to be challenged. 21. provisions of Section 321 of Criminal Procedure Code dealing with application to be filed by Public Prosecutor for withdrawal of charges, http://www.judis.nic.in 9/14 W.P.No.17701 of 2018 has been discussed in extenso along with relevant case law. While concluding that application and order made under Section 321 were misconceived, Court says in strongest of terms that such application and order was passed without understanding of problem in proper perspective and without consideration of relevant material. At paragraph 45, Court states as follows: 45. application and order under Section 321 is result of panic reaction by overzealous persons without proper understanding of problem and consideration of relevant material, though they may not have any personal motive. It does not appear that anybody considered that if democratically elected governments give impression to citizens of this country of being lawbreakers, would it not breed contempt for law; would it not invite citizens to become law onto themselves. It may lead to anarchy. Governments have to consider and balance choice between maintenance of law and order and anarchy. It does not appear that anyone considered this aspect. It yielded to pressure tactics of those who according to Government are out to terrorise Police force and to overawe elected Governments. It does not appear that anyone considered that with their action people may lose faith in democratic process, when they see public authority flouted and helplessness of Government. aspect of paralysing and discrediting democratic authority had to be taken into consideration. It is executive function to decide in public interest to withdraw from prosecution as claimed. But it is also for Government to maintain its existence. self-preservation is most pervasive aspect of sovereignty. To preserve its independence and territories is highest duty of every nation and to attain these ends nearly all other considerations are to be subordinated. Of course, it is for State to consider these aspects and take conscious decision. In present case, without withdraw consideration of these aspects decision was taken to TADA charges. It is evident from material now placed on record before this Court that Veerapan was acting in consultation with secessionist organisations/groups which had object of liberation of Tamil from India. There is no serious challenge to this aspect. None of aforesaid aspects were considered by Government or Public Prosecutors before having recourse to Section 321 Cr.P.C 22. reading of aforesaid paragraph reiterates enormity of issue faced by Country by virtue of operations carried on by Veerapan and his associates. categoric assertion of Apex Court is that such issues and their repercussions are not to be viewed or taken lightly. Bench has stated unambiguously that Veerapan was acting in consultation with secessionist http://www.judis.nic.in 10/14 W.P.No.17701 of 2018 organizations with object of splitting India. One can hardly lose sight of this position that, in my view, is also vital consideration to decide present lis. 23. object of Section 10(17A) is to reward individual who has been recognized by Centre or State for rendition of services in public interest. While clause (i) is concerned with award whether in cash or in kind, instituted in public interest by Central or any State Government or instituted by any other body and approved by Central Government in this behalf, clause (ii) refers to reward by Central or State Government for such purposes as may be approved by Central Government in this behalf in public interest. No specification or prescription has been set out in terms of how approval is to be styled or even as to whether formal written approval is required. Nowhere in Rules/Forms is there reference to format of approval to be issued in this regard. 24. That apart, one should, in my view, interpret provision and its application in purposive manner bearing in mind spirit and object for which it has been enacted. It is clear that object of such reward is by way of recognition by State of individual s efforts in protecting public interest and serving society in significant manner. Thus, in my considered view, reference to approval in Section 10(17A) does not only connote paper conveying approval and bearing stamp and seal of Central Government but any material available in public domain indicating recognition for such services, rendered in public interest. 25. petitioner has been recognized by Central Government on several occasions for meritorious and distinguished services and from information available in public domain, it is seen that he was awarded http://www.judis.nic.in 11/14 W.P.No.17701 of 2018 Jammu & Kashmir Medal, Counter Insurgency Medal, Police Medal for Meritorius Service (1993) and President s Police Medal for Distinguished Service (1999). Specifically for his role in nabbing Veerapan, he was awarded President s Police Medal for Gallantry on eve of Independence Day, 2005. What more! If this does not constitute recognition by Centre of service in public interest, for same purposes for which State Government has rewarded him, I fail to understand what is. reward under Section 10(17A)(ii) is specific to certain 'purposes' as may be approved by Central Government in public interest and 'purpose' of reward by State Government has been echoed and reiterated by Centre with presentation of Gallantry Award to petitioner in 2005. This aspect of matter is also validated by Supreme Court in Abdul Karim (supra) as can be seen from judgment extracted earlier, where Bench makes observations on notoriety of Veerapan and threat that he posed to Country, as whole. 26. Seen in context of recognition by Centre of petitioners' gallantry as well as observations of Supreme Court in Abdul Karim (supra) and ratio of decision in J.G.Gopinath (supra), approval of Centre in this case, is rendered fait accompli. 27. This Writ Petition is allowed. No costs. Connected Miscellaneous Petition is closed. 26.02.2020 Index : Yes/No Speaking Order/Non speaking Order Sl http://www.judis.nic.in 12/14 W.P.No.17701 of 2018 To Principal Commissioner of Income Tax, Room No.430, 4th Floor, Main Building, 121, Mahatma Gandhi Road, Chennai. http://www.judis.nic.in 13/14 W.P.No.17701 of 2018 DR. ANITA SUMANTH, J. W.P.No.17701 of 2018 and WMP No.20965 of 2018 26.02.2020 http://www.judis.nic.in 14/14 K.Vijaya Kumar v. Principal Commissioner of Income-tax, Chennai
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