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2015 (9) TMI 905 - ITAT AHMEDABAD

2015 (9) TMI 905 - ITAT AHMEDABAD - TMI - Addition on account of excess salary paid by the employer in the earlier years but recovered during the present year - Held that:- The employer was well within his powers to make recovery for excess payments made earlier. The excess payment made to the assessee was already detected. The amount which constituted “salary due from an employer” was only the amount net of recovery, which the employer was legally empowered to make, in respect of excess payment .....

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niyal & Ors. vs. State of Uttarakhand [2012 (8) TMI 928 - SUPREME COURT].

Since she was gracious enough to refund the excess salaries received in earlier years, the periodic payments made to her remained the same as normally due. The effect, however, remains the same. The salary due to the assessee this year was only ₹ 2,43,689. However, since she had refunded ₹ 2,13,132 by cheque immediately upon coming to know about excess salary payments to her, she was paid the amount .....

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tion - ITA No. 1512/Ahd/2014 - Dated:- 15-9-2015 - Pramod Kumar AM and S.S. Godara JM , JJ. For the Appellant : Tushar Hemani For the Respondent : James Kurian ORDER Per Pramod Kumar AM: 1. The short issue that we are required to adjudicate, in this appeal, is whether or not, on the facts and in the circumstances of this case, learned CIT(A) was justified in upholding the addition of ₹ 2,13,132 on account of excess salary paid by the employer in the earlier years but recovered during the p .....

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ixation of salary, which is the term used for re-deciding the salary as per revised norms, was a bit more generous than the Fifth Pay Commission Report itself. She was granted three increments in excess. When this error was detected by the auditor, she refunded the excess salary received, during the period April 1998 to November 2006, which worked out to ₹ 2,13,132. It was in this backdrop that the assessee disclosed net salary income of ₹ 2,43,689 as against actual salary received b .....

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nly for the FY 2007-08, which is not true. Actually, the employer computed her salary to the extent of ₹ 4,56,821/- in respect of services rendered by her during the FY 2007-08 and therefore, the assessee was rightly paid gross salary of ₹ 4,56,821/- for FY 2007-08. But, when it was observed by her employer that she was paid excessively in respect of the services rendered by her for earlier periods then only the employer directed her to return the excess salary received by her pertai .....

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hile computing her income which is evident from the fact in para 3 above that she offered interest on NSC on accrual basis. The case laws referred to are also not applicable in case of the instant assessee. In view of the above discussions, it is evident that the assessee had the right to receive the salary of ₹ 4,56,821/- and also received the same in consideration to her services during the FY 2007-08. She has wrongly reduced recovery of earlier period pay from the pay of FY 2007-08 as t .....

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aterial available on record and the judicial pronouncements on the subject. The undisputed facts of this case are that the assessee had drawn excess salary from A.Y. 1998-99 to 2007-08 from her employer and this was detected in A.Y. 2008-09, as a result of an audit objection. The employer, therefore, was obliged to recover the excess salary from the assessee, which he did in A.Y. 2008-09. It is also not disputed that the excess salary which was recovered from the assessee, did not pertain to the .....

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due to her during the financial year 2007-08, relatable to A.Y. 2008-09, is her total salary of ₹ 4,56,821/-, which is liable to be taxed. The lengthy arguments of the A/R relating to accrual or salary becoming due is misconceived and without any basis, more so over, when no amount of the recovery pertained to the period under consideration i.e. F.Y. 2007-08, referable to A.Y. 2008-09. In view of the above discussion, the order of the Assessing Officer in taxing whole of the salary accrued .....

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llowing income shall be chargeable to income-tax under the head "Salaries": (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not ; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to .....

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r the purposes of this section. (Emphasis, by underlining, is supplied by us now) 8. It is thus clear that what can be taxed under section 15 is salary due , whether received or not, as also salary paid or allowed to the assessee whether due or not. Of course, in certain situations, arrears of salary are also taxable under this section, but that aspect of the matter, for the time being, is not relevant for our purpose. Quite interestingly, the expression used in this section is due which represe .....

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be taxed again in the year of being paid or allowed. The net effect of this statutory provision, so far s relevant to us, can be summarised as follows:- The salary received or allowed can be taxed on the basis of it s becoming due or it s being received or allowed - whichever is earlier. - The salary is not to be taxed on the basis of accrual since, in it s conscious choice of words, legislature has chosen the taxability on due basis or payment basis - whichever is earlier. We may add that the .....

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tax in the hands of the assessee. 10. In our considered view, in sharp contrast with the connotation of accrual of an income or of an income arising , which refer to occurrence of an income and to income shaping into a measurable format respectively, such as, money, the connotations of an income becoming due from someone refers to an unqualified right to receive that income from that person. Viewed thus, mandate of section 15(1)(a) provides for taxability of an income only when, and only to the .....

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i.e. net of excess salary adjustment of ₹ 2,13,132/- for earlier years) as claimed by the assessee. In other words, could the assessee be legitimately demanded, as a matter of right, that she should be paid ₹ 4,56,821 whether or not the excess payments made in earlier years are adjusted by the employer or refunded by the assessee. 12. Hon ble Supreme Court, in the case of Chandi Prasad Uniyal & Ors. vs. State of Uttarakhand [(2012) 8 SC 417], reproduced at www.indiankanoon.org/do .....

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y has been paid or not may be due to a bona fide mistake. Possibly, effecting excess payment of public money by Government officers, may be due to various reasons like negligence, carelessness, collusion, favouritism etc. because money in such situation does not belong to the payer or the payee. Situations may also arise where both the payer and the payee are at fault, then the mistake is mutual. Payments are being effected in many situations without any authority of law and payments have been r .....

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rong pay fixation, in the earlier years, from the salary which would have been normally payable after the mistake was detected. 14. In our considered view, in the light of the above discussions, it was not open to the assessee to demand that she should be paid entire amount of ₹ 4,56,821 without any adjustments or refunds of the excess amount received in the earlier years. We hold so in the light of the law liad down by Hon ble Supreme Court which, as is elementary, binds all of us under A .....

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