1991 (1) TMI 232

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..... bank had deducted at source the additional provident fund contribution compulsorily payable on the revision of the pay scales as well as the voluntary contribution made by the officer and the income-tax deductible at source. The assessee claimed that in computing the relief available under section 89(1), the total income of the earlier years had to be revised by taking into account the additional deduction available under section 80C in respect of the subscription to the provident fund deducted out of the arrears as well as the additional standard deduction available under section 16 in respect of the enhanced salary for the respective assessment years. The ITO, however, computed the relief by merely adding the additional salary to the res .....

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..... the relevant previous year as reduced by the additional salary, as if the total income so reduced were the total income of the assessee, and the amount by which the tax so calculated falls short of the tax on the total income before such reduction shall, for the purpose of clause (a) be taken to be the tax on the additional salary under this clause. (d) Where the additional salary relates to more than one previous year,- (i) the previous years to which the additional salary relates and the amount relating to each such previous year shall first be ascertained; (ii) tax shall, than, be calculated on the total income of each such previous year as increased by the amount relating to such previous year ascertained under sub-clause (i), as .....

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..... boggle when it comes to the inevitable corollaries of that state of affairs". (East End Dwellings Co. Ltd. v. Finsbury Borough Council 1952 AC 109). In the present case, since the additional salary is considered to be part of the total income of the previous year, the total income has to be recomputed. The addition actually results in a compulsory deduction of provident fund as well as enhancement of the deduction under section 16. When the rule requires that tax is to be calculated after making the addition to the total income, the exercise cannot be completed without making the consequential changes which result in additional deduction under sections 16 and 80C. Therefore, I accept the contention of the assessee that the total income of .....

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