Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 1991 (1) TMI AT This

  • Login
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

1991 (1) TMI 232 - AT - Income Tax

Issues:
Claim for relief under section 89(1) of the Income-tax Act - Computation of relief based on arrears of salary received by the assessee - Interpretation of Rule 21A of the Income-tax Rules regarding the calculation of relief - Recomputation of total income for earlier years for the purpose of relief under section 89(1).

Analysis:
The appeal before the Appellate Tribunal ITAT MADRAS-D involved the claim of the assessee for relief under section 89(1) of the Income-tax Act concerning arrears of salary received. The assessee, an individual working as an officer in the State Bank of India, received arrears of salary for a specific period due to revision of pay scales. The issue arose when the Income Tax Officer (ITO) computed the relief without making consequential adjustments for deductions under sections 16 and 80C, which the assessee contended were necessary. The ITO's decision was upheld on appeal based on Rule 21A of the Income-tax Rules.

In the subsequent appeal, the assessee argued that the Rule did not preclude recomputation of total income for earlier years and that deductions under the Act needed to be revised due to the enhanced salary. On the other hand, the Revenue contended that the Rule only required adding the additional salary to the total income of earlier years without further adjustments. The Tribunal analyzed Rule 21A(2)(b) and (d), which outlined the calculation of tax on additional salary for previous years and concluded that the total income of earlier years must be recomputed after adding the additional salary to determine the relief under section 89(1).

The Tribunal referred to the definition of "total income" in the Act and emphasized that the exercise of adding the salary income to earlier years necessitated consequential adjustments for deductions under sections 16 and 80C. Quoting legal precedent, the Tribunal highlighted that imagining a certain state of affairs required considering the inevitable consequences and incidents. Therefore, the Tribunal accepted the assessee's contention that total income of earlier years must be recomputed after adding the additional salary to calculate the relief accurately. The relief amount was determined to be Rs. 10,390, different from the ITO's calculation of Rs. 6,542, and the Tribunal directed the ITO to grant relief accordingly, allowing the appeal.

In conclusion, the Tribunal's decision clarified the interpretation of Rule 21A and emphasized the necessity of recomputing total income for earlier years to determine relief under section 89(1) accurately, considering consequential adjustments for deductions under sections 16 and 80C. The Tribunal's ruling favored the assessee's position, highlighting the importance of a comprehensive calculation in such cases.

 

 

 

 

Quick Updates:Latest Updates