TMI Blog2005 (7) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2, respectively, are the Kerala Electricity Officers Federation and the Kerala Electricity Workers Federation, Thiruvananthapuram, represented by their secretaries. Petitioners Nos. 3 and 4 are individuals who are officers of the Kerala State Electricity Board. They seek to quash exhibit P2 communication issued by the 4th respondent, Commissioner of Income-tax, Cochin, to the extent it relates to the computation of income-tax under section 89 and for a declaration that they are entitled to claim relief under section 89 of the Income-tax Act apportioning the arrears of salary compulsorily credited to the GPF account to various previous years to which it relates and to avail of rebate thereon in the computation of tax payable. The relevant assessment year is 1997-98. The pay and allowances of the officers and workers under the Kerala State Electricity Board, the third respondent herein, were revised with effect from August 1, 1993, on a long-term bilateral agreement entered into in 1995. It is stated that as per the said agreement, all the categories of the officers and workers were entitled for cash payment of the revised pay and allowances from February 1, 1995. The revised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Public Relations Officer of the Income-tax Office, Mumbai, has clarified that the investments qualifying for rebate under section 88 can be apportioned to the respective assessment years in case of those employees who opt for relief under section 89(1) for payment of salary in arrears. According to the petitioners, rule 21A(1), (2)(a), (b), (c) and (d) of the Income-tax Rules, 1962, stipulates how the arrears have to be apportioned and to compute the tax for the purpose of relief under section 89. According to them, such computation as per those rules will be incomplete without the working of eligible rebate under section 88 of the Income-tax Act. It is contended that when additional salary is apportioned to various previous years, compulsory contribution made to the GPF from the additional salary shall also be apportioned to various previous years. According to them, in such computations, the apportionment of additional salary to various previous years to work out the relief admissible to the assessee is only imaginary and when such an imaginary apportionment is made, computation of tax thereon is incomplete without apportioning the arrears of salary credited to the GPF acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the PF is concerned, it is a rebate allowable under section 88. As per section 88 of the Income-tax Act, subject to the provisions of the section, an assessee, being an individual shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to (i) in the case of an individual whose gross total income before giving effect to deductions under Chapter VI-A, is one lakh fifty thousand rupees or less, twenty per cent, of the aggregate of the sums referred to in subsection (2). We are not concerned with the actual amount allowable by way of reduction and hence it is not necessary to refer to the same. As per subsection (2) of section 88, "the sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee ..." Thus, such sums which are referred to in sub-section (1) are the sums paid or deposited in the previous year by the assessee. Admittedly, the amount received by way of arrears of salary are deposited only in the previous year relevant to the assessment year 1996-97 and not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed." To what extent the relief is thus granted depends upon the rules prescribing such reliefs. Rule 21A of the Income-tax Rules, 1962, deals with the relief when salary is paid in arrears or in advance, etc. Rule 21A reads thus: "21A. (1) Where, by reason of any portion of an assessee's salary being paid in arrears or in advance or, by reason of any portion of family pension received by an assessee being paid in arrears or, by reason of his having received in any one financial year salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that at which it would otherwise have been assessed, the relief to be granted under sub-section (1) of section 89 shall be- ... (2)(a) In a case referred to in clause (a) of sub-rule (1), the tax payable by the assessee on his total income of the previous year in which the salary is recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid previous years as calculated under sub-clause (ii) exceeds the aggregate amount of tax payable by the assessee in respect of the total income of the said previous years shall, for the purposes of clause (a), be taken to be the aggregate tax on the additional salary or additional family pension, under this clause." As per rule 21AA where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body, is entitled to relief under sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1) of section 192, the particulars specified in Form No. 10E. Annexure I to Form No. 10E contains a table which is also extracted hereunder: Table A --------------------------------------------------- Previous Total Salary Total income year(s) income received in (as increased of the arrears or by salary relevant advance received in previous relating to arrears or year the relevant advance) of the (Rs.) previous relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount, if any, by which the tax on additional salary calculated in the manner specified in clause (b) exceeds tax or aggregate tax on the additional salary calculated in the manner specified in clause (c) or clause (d), as the case may be. As per sub-rule (2)(b) the tax has to be calculated on the total income of 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 purposes of clause (a), be taken to be the tax on the additional salary under this clause. Sub-rule (2)(c) provides that if the additional salary relates to only one previous year, tax shall be calculated on the total income of the said previous year as increased by the additional salary, as if the total income so increased were the total income of the assessee, and the amount by which the tax so calculated exceeds the tax payable by the assessee in respect of the total Income of the said previous year shall, for the purposes of clause (a), be taken to be the tax on the additional salary. As per sub-rule (2)(d) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for in the rules prescribed. Section 89(1) being a provision giving certain reliefs as prescribed, such relief has necessarily to be computed under the rules. If the argument of learned counsel for the assessee is accepted, it would amount to recomputation of the total income of each year. Admittedly, when the PF amount is deposited and paid only in the previous year relevant to the assessment year in question, an assessee cannot by fiction assume that the portion of the amount is deemed to have been deposited in the previous year to which the spread over is made and then to claim the relief under section 88 to work out the tax liability in each such previous years. This will amount to redrafting of the entire rule which is impermissible. When relief under section 88 itself is confined to the amount deposited or paid in the previous year, there is no warrant for applying any fiction in the absence of any express provision contained in the rule and to spread portion of the PF amount in proportion to the additional salary and then to make fictional deductions and to treat that portion as having been paid or deposited for claiming the benefit under section 88. This will be contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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