COMMISSIONER OF INCOME TAX Vs. MEHRA P M

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the Commissioner, the Income -tax Appellate Tribunal, Bombay Bench has referred the following question to us for opinion : 'Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the words 'completed service' occurring in section 10(10) of the Income -tax Act, 1961, should be interpreted to mean an employee's total service under two different employers including the employer other than the one from whose service he retired for the purposes of the calculation of the period of years of his completed service, provided he was not paid gratuity by the former employer ?'

(2.) THE assessee is an individual and the relevant assessment year is 1974 -75. The previous year is the financial year ending on March 31, 1974. During this financial year, the assessee retired from service from the firm of Messrs. Danfoss (India) Limited of which he was an employee for ten years. It is an accepted position that before joining Messrs. Danfoss (India) Limited, he was in the employment of another company, viz., Messrs. Industry and Export Risk Insurance Corporation Private Limited, where he served for eight years. He, however, did not get any gratuity from the said employer as he had put in service of less than ten years. It is also an accepted position that he joined the new employment on the condition that the new employer company would pay gratuity to him on retirement by taking into account the total service that he would have put in under both the companies taken together.

(3.) HOWEVER , on further appeal, the Income -tax Appellate Tribunal accepted the assessee's claim and directed the Income -tax Officer to give exemption in respect of the entire amount of Rs. 17,100 under section 10(10) of the Act. The Tribunal held that the words, each year of completed service used in section 10(10) of the Act cannot be confined to the completed years of service under one employer. It may be under one employer or more than one employer, but the aggregate amount cannot exceed the ceilings mentioned in the Act. The Commissioner applied for reference to this court and the Tribunal has accordingly referred the aforesaid question for opinion under section 256(1) of the Act.