COMMISSIONER OF INCOME TAX Vs. GAUTAM SARABHAI

JUDGEMENT

(1.) THIS reference was heard along with ITR Nos. 170/76, 24/77 and the facts have been elaborately dealt with the judgment in those cases, Hence, we need not refer to facts which gave rise to this reference. It is sufficient to state that so far as this reference is concerned, it pertains to the asst. yrs. 1967-68, 1968-69 and 1969-70, the previous years being financial years ended 31st March, 1967, 31st March, 1968 and 31st March, 1969 respectively. In this case also the ITO had come to the conclusion that Gautam Sarabhai was not the employee of the said Company. He, therefore, came to the conclusion that the remuneration received by the assessee was taxable under the head "Income from other sources". The AAC, Ahmedabad confirmed that decision and the matter was carried before the Tribunal. The Tribunal held that the assessee was an employee of Karam Chand Premchand (P) Ltd. It was, therefore, held that the remuneration received by the assessee in each year was taxable as income from salaries and not income from other sources. The assessee had made contributions to a recognised provident fund as the Director of the said Company and in view of his contributions made by him he claimed deduction under s. 80C of the IT Act, 1961. The Company had also made contributions for and on behalf of the recognised provident fund as well as recognised superannuation fund. Interest on the accumulated balance of the provident fund was also credited to the assessee's account. The ITO held that since the assessee was not the employee of the said Company he was not entitled to claim deduction under s. 80C. He further held that the contribution as aforesaid made to the Provident Fund by the said Company and the interest paid on the accumulated balance of the Provident Fund was income of the assessee. He, therefore included this income in the assessee's total income for each of the years under the reference In the appeals preferred by the assessee, the AAC confirmed the ITO's order refusing to allow deduction under s. 80C of the Act. However so far as the contributions made as aforesaid by the said Company and the interest paid on the accumulated balance of the Provident Fund was concerned, the AAC held that the same could not be treated as the assessee's income. He, therefore deleted the addition made by the ITO an amount of such contributions and interest. The assessee preferred appeals to the Tribunal and Tribunal held that in view of its finding that the remuneration received by the assessee from the aforesaid company was assessee as "Income from salaries", the assessee's contribution to the Provident Fund would be includible in the hands of the assessee subject to r. 6 (a) of Part-A of the Fourth Schedule to the Act for the asst. yrs. 1968-69 and 1969-70. Similarly interest on contribution amounting to Rs. 3,807 for the asst. yr. 1969-70 was also held to be includible in the hands of the assessee subject to s. 6 (b) of Part-A of the Fourth Schedule to the Act. The Tribunal, further held that since there was no income chargeable under the head "Salaries" for the asst. yr. 1967-68, the question of inclusion of the employer's contribution in the hands of the assessee did not arise for that year.

(2.) SO far as the employer's contribution to the approved superannuation fund for the asst. yrs. 1968-69 and 1969-70 were concerned, the ITO was directed to reconsider the question of inclusion of the said contribution in the names of the said contributions in the names of the assessee, keeping in mind the finding that the income was chargeable under the head "income from salaries" as also the relevant provisions governing the said contributions by the employers.

(3.) IN view of our decision in ITR 170 of 1976 holding that Gautam Sarabhai was an employee of Karamchand Premchand (P) Ltd. the first six points are required to be answered in favour of Gautam Sarabhai and against the Revenue. We do so.