TMI Blog1982 (3) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's hands on the ground that it was not payable to him. It was payable only to his widow. The learned AAC held that the right to receive gratuity had accrued to the deceased and that it was, therefore, rightly included in the assessment made on him through his legal representative. Provisos to section 10(10) clearly implied, according to him, that the gratuity was taxable in the hands of the employee. He also agreed with the ITO that the assessee was not entitled to have a larger deduction as basic pay alone could be reckoned with in ascertaining the eligible deduction. 3. The learned counsel for the assessee reiterated the claim made before the first appellate authority. Since gratuity accrued on his death, it cannot be said to have accrued to him. He pointed out to the rules under which it was payable only to his widow/children. It could not be otherwise. At any rate, he claimed that the deceased could be assessed through the legal representative only on income which he had received or was entitled to receive during his life time. The learned departmental representative referred us to the definition of "salary" in section 17(1) of the Act which specifically included g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these Rules, only on final termination of the service of a member of Supervisory Staff and not from the date on which the member of a Supervisory Staff may proceed on leave preparatory to retirement, but in special cases approved by the Management, the company may advance the whole or a portion of such gratuity to the member of a Supervisory Staff taking leave preparatory to retirement. 15. Gratuity in case of death - In the event of the death of a member of Supervisory Staff whilst in service, the company will pay the gratuity to which he is eligible under these Rules to his widow or widows and/or children in such shares as the company may in its discretion determine. If there be no widow or widows or children as aforesaid, at the direction of the Management a gratuity may be sanctioned and paid to such other dependents of the deceased as the Management may think fit. 16. An application for retiring gratuity under these Rules should be drawn up in the form hereto attached, by the Head of the Department in which the member of the Supervisory Staff was serving at the time of his retirement on behalf of the retiring member of the Supervisory Staff or in the event of his death, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) enables assessment on the legal representative "for making an assessment... of the income of the deceased...." The view that prevailed in relation to the corresponding section 24B of the Indian Income-tax Act, 1922, was that the income received after death but before the end of the accounting year was includible in a single assessment. It is apparently in that view that the ITO assumed that the gratuity paid to the widow became payable to the deceased and the occurrence of the event of death being within the accounting year, both the salary and gratuity could be included in the same assessment. However, the view that prevailed under the old law can no longer hold good in view of section 168(3) of the Act which reads as under: "(3) Separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests." Section 168 which enables assessment on executors had no corresponding provision under the 1922 Act. Section 159 read with section 168 can leave us in no doubt abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable on account of death. It could have been paid only after death. It was not payable to legal heirs or legatees by a will or a nominee nominated during life time. These facts may even give rise to a reasonable inference as to whether it will be includible even in the hands of executor. In fact, the Delhi High Court in the case of Uma Sehgal v. Dwarkadoss Sehgal AIR 1982 Del. 36 has held that even in the case of a nomination under section 39 of the Insurance Act it is not correct to say that the nominee holds the insurance moneys either as trustee or agent on behalf of the legal heirs, but in her own right and that it is her's absolutely. At any rate, all that we have to consider is the question whether the gratuity is includible in the hands of the legal representative under section 159. The very fact that the right arose on death and, therefore, becomes payable thereafter justified the exclusion of the entire gratuity in the assessment. Section 10(10) which provides for exemption of part of whole of gratuity is only complementary to section 17(1) which makes it taxable. Section 10(10) cannot justify the assessment of taxable gratuity in a wrong assessment or wrong hands. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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